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: June 30, 2003
[ ] 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.
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(Exact name of small business issuer as specified in charter)
Delaware 13-2596288
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12827 East Imperial Hwy, Santa Fe Springs, CA 90670
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(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 - 2,929,840 shares as of August 4, 2003.
REINHOLD INDUSTRIES, INC.
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 14
PART II - OTHER INFORMATION 22
SIGNATURES 26
EXHIBITS 27
REINHOLD INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended
June 30,
2003 2002
----- -----
Net sales $17,703 $13,331
Cost of goods sold 11,643 9,229
------ ------
Gross profit 6,060 4,102
Selling, general and administrative expenses 3,122 2,883
----- -----
Operating income 2,938 1,219
Interest expense (income), net (11) 70
----- -----
Income before income taxes 2,949 1,149
Income taxes 1,069 449
----- -----
Net income $ 1,880 $ 700
===== =====
Basic earnings per share $ 0.64 $ 0.24
Diluted earnings per share $ 0.61 $ 0.24
Weighted average common shares outstanding - basic 2,926 2,924
Weighted average common shares outstanding - diluted 3,083 2,950
See accompanying notes to condensed consolidated financial statements
REINHOLD INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
Six Months Ended
June 30,
2003 2002
----- -----
Net sales $34,078 $27,261
Cost of goods sold 22,828 19,057
------ ------
Gross profit 11,250 8,204
Selling, general and administrative expenses 5,881 5,541
------ ------
Operating income 5,369 2,663
Interest expense, net 23 185
------ ------
Income before income taxes 5,346 2,478
Income taxes 1,942 954
------ ------
Net income $ 3,404 $ 1,524
Basic earnings per share $ 1.16 $ 0.52
Diluted earnings per share $ 1.11 $ 0.52
Weighted average common shares outstanding - basic 2,927 2,924
Weighted average common shares outstanding - diluted 3,062 2,931
See accompanying notes to condensed consolidated financial statements
REINHOLD INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)
(Unaudited)
June 30, 2003 December 31, 2002
------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $ 5,482 $ 3,037
Accounts receivable 7,957 9,977
Inventories 7,987 5,938
Other current assets 1,970 2,479
------ ------
Total current assets 23,396 21,431
Property, plant and equipment, net 11,325 11,307
Goodwill 3,786 3,786
Other assets 193 210
------ ------
$38,700 $36,734
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings under line of credit $ - $ 3,000
Accounts payable 4,032 4,127
Accrued expenses 4,283 3,660
Current portion - long term debt 149 149
------ ------
Total current liabilities 8,464 10,936
Long-term pension liability 5,596 5,596
Long term debt - less current portion 49 124
Other long term liabilities 325 276
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: 2,929,840 shares
and 2,659,812 shares, respectively 29 27
Additional paid-in capital 24,985 21,213
Retained earnings 5,401 4,873
Accumulated other comprehensive loss (6,149) (6,311)
------ ------
Net stockholders' equity 24,266 19,802
------ ------
$38,700 $36,734
====== ======
See accompanying notes to condensed consolidated financial statements
REINHOLD INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Six Months Ended
June 30,
2003 2002
----- -----
Cash flow from operating activities:
Net income $ 3,404 $ 1,524
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 846 679
Additions to paid-in capital resulting from
tax benefits 863 557
Non-cash compensation 36 -
Changes in assets and liabilities:
Accounts receivable 2,020 (1,496)
Inventories (2,049) (328)
Other current assets 509 84
Accounts payable (95) 836
Accrued expenses 623 932
Other, net 66 42
----- -----
Net cash provided by operating activities 6,223 2,830
Cash flows used in investing activities:
Proceeds from sale of assets - 105
Capital expenditures (864) (1,106)
----- -----
Net cash used in investing activities (864) (1,001)
Cash flows used in financing activities:
Dividends paid (9) (9)
Borrowings against line of credit - 7,221
Repayments on line of credit (3,000) (1,521)
Proceeds from exercise of stock options 8 -
Repayment of long-term debt (75) (9,356)
----- -----
Net cash used in financing activities (3,076) (3,665)
Effect of exchange rate changes on cash 162 157
----- -----
Net increase (decrease) in cash and cash equivalents 2,445 (1,679)
Cash and cash equivalents, beginning of period 3,037 4,105
----- -----
Cash and cash equivalents, end of period $ 5,482 $ 2,426
===== =====
See accompanying notes to condensed consolidated financial statements
REINHOLD INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2003
(Unaudited)
DESCRIPTION OF BUSINESS
Reinhold Industries, Inc. ("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 six
months ended June 30, 2003 and 2002 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, 2002.
Notes to Condensed Consolidated Financial Statements (Continued)
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):
June 30, 2003 December 31, 2002
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Raw material $5,832 4,625
Work-in-process 1,560 874
Finished goods 595 439
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Total $7,987 5,938
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 and shares to be
issued to Directors.
On April 30, 2003, the Board of Directors approved the distribution of a
10% stock dividend to shareholders of record as of May 16, 2003. As a result, an
additional 265,418 shares were issued on May 29, 2003. 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.
The reconciliations of basic and diluted weighted average shares are as
follows (in thousands, except exercise price data):
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
----- ----- ----- -----
Net income $1,880 $700 $3,404 $ 1,524
Weighted average shares used
in basic computation 2,928 2,924 2,927 2,924
Dilutive effect of stock options 152 26 133 7
Other dilutive shares 3 - 2 -
Weighted average shares used
for diluted calculation 3,083 2,950 3,062 2,931
Stock options outstanding 365 247 365 247
Range of exercise price $5.63-$11.36 $5.63-$7.68 $5.63-$11.36 $5.63-$7.68
Notes to Condensed Consolidated Financial Statements (Continued)
STOCK OPTION PLAN
The Company accounts for its stock-based compensation in accordance with
Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to
Employees", and has adopted the disclosure-only alternative of Statement of
Financial Accounting Standard SFAS No. 123 "Accounting For Stock-Based
Compensation", as amended by SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure."
The following table illustrates the effect on net income and earnings per
share had compensation expense for the employee stock-based plans been recorded
based on the fair value method under SFAS 123 (in thousands except for per share
data):
Three Months Six Months
Ended June 30, Ended June 30,
2003 2002 2003 2002
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Net income as reported $1,880 $ 700 $3,404 $1,524
Deduct, total stock-based employee compensation
expense determined under fair value based
method for all awards, net of related tax effects (53) (33) (56) (67)
- ------------------------------------------------------------------------------------------------
Net income, as adjusted $1,827 $ 667 $3,348 $1,457
====== ===== ====== ======
Earnings per share:
Basic - as reported $ 0.64 $0.24 $ 1.16 $ 0.52
Basic - as adjusted $ 0.62 $0.23 $ 1.14 $ 0.50
Diluted - as reported $ 0.61 $0.24 $ 1.11 $ 0.52
Diluted - as adjusted $ 0.59 $0.23 $ 1.09 $ 0.50
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 June 30, 2003 and 2002 was a gain on foreign currency translation
of $264,000 and $251,000, respectively. The difference between net income and
total comprehensive income during the six months ended June 30, 2003 and 2002
was a gain on foreign currency translation of $162,000 and $157,000,
respectively.
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
In January 2003, the FASB issued Interpretation No. 46 (FIN 46),
"Consolidation of Variable Interest Entities", which expands upon and
strengthens existing accounting guidance concerning when a company should
include in its financial statements the assets, liabilities and activities of
another entity. Prior to the issuance of FIN 46, a company generally included
another entity in its consolidated financial statements only if it controlled
the entity through voting interests. FIN 46 now requires a variable interest
entity, as defined in FIN 46, to be consolidated by a company if that company is
subject to a majority of the risk of loss from the variable interest entity's
activities or entitled to receive a majority of the entity's residual
Notes to Condensed Consolidated Financial Statements (Continued)
returns or both. FIN 46 also requires disclosures about variable interest
entities that the company is not required to consolidate but in which it has a
significant variable interest. The consolidation requirements of FIN 46 apply
immediately to variable interest entities created after January 31, 2003, and to
older entities in the first fiscal year or interim period beginning after June
15, 2003. Certain of the disclosure requirements apply to all financial
statements issued after January 31, 2003, regardless of when the variable
interest entity was established. The company does not believe the adoption of
FIN 46 will have a material impact on the Company's financial position, results
of operations or cash flows.
INCOME TAXES
Income taxes for interim periods are computed using the estimated effective
tax rate to be applicable for the current year.
LONG TERM DEBT
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. 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,
total outstanding debt, minimum net worth and limits on capital expenditures. As
of June 30, 2003, the Company was in compliance with all applicable covenants.
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
(approximately $8,700,000) with a prior bank.
On March 21, 2003, the Company amended the credit facility to extend the
termination date to June 20, 2003. No changes were made to any other terms and
conditions.
On June 20, 2003 the Company amended the credit facility to extend the
termination date to June 20, 2004. The line of credit under the facility has
been reduced from $10,000,000 to $8,000,000.
On June 19, 2003 the Company paid off the remaining outstanding balance
pertaining to the LaSalle credit facility.
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.
Notes to Condensed Consolidated Financial Statements (Continued)
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.
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 five operating segments: Aerospace, CompositAir, Commercial, 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. 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.
Prior to January 1, 2003, the Company generated revenues from six operating
segments. Due to the similarity of customer base and markets served, on January
1, 2003, the Thermal Insulation and Aerospace operating segments were combined.
Prior year information has been changed to conform with the current
presentation.
The information in the following tables is derived directly from the
segment's internal financial reporting for corporate management purposes (in
thousands).
Notes to Condensed Consolidated Financial Statements (Continued)
Three Months Ended June 30, Six Months Ended June 30,
2003 2002 2003 2002
- ----------------------------------------------------------------------------------------------------------------
Net sales
Aerospace $ 6,355 $ 4,441 $10,727 $ 8,200
CompositAir 1,519 1,569 3,275 3,281
Commercial 832 607 1,571 1,257
NP Aerospace 4,820 2,723 9,916 5,647
Bingham 4,177 3,991 8,589 8,876
- ----------------------------------------------------------------------------------------------------------------
Total sales $17,703 $13,331 $34,078 $27,261
- ----------------------------------------------------------------------------------------------------------------
Income before income taxes
Aerospace $ 2,091 $ 1,481 $ 3,479 $ 2,657
CompositAir 145 102 397 25
Commercial 27 39 34 91
NP Aerospace 1,107 252 2,280 584
Bingham (151) (273) (317) (114)
Unallocated corporate expenses (270) (452) (527) (765)
- ----------------------------------------------------------------------------------------------------------------
Total income before income taxes $ 2,949 $ 1,149 $ 5,346 $ 2,478
June 30, 2003 December 31, 2002
- ----------------------------------------------------------------------------------------------------------------
Total assets
Aerospace $11,997 $10,436
CompositAir 2,721 2,749
Commercial 1,439 1,220
NP Aerospace 9,464 8,504
Bingham 10,168 10,311
Unallocated corporate 2,911 3,514
- -----------------------------------------------------------------------------------------------------
Total assets $38,700 $36,734
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.
Notes to Condensed Consolidated Financial Statements (Continued)
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 were 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.
REINHOLD INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
June 30, 2003
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, 2002.
Reinhold Industries, Inc. ("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
In accordance with Statement of Financial Accounting Standard SFAS No. 142
and Statement of Financial Accounting Standard SFAS No. 144, we assess the fair
value and recoverability of our long-lived assets, including goodwill, whenever
events and circumstances indicate the carrying value of an asset may not be
recoverable from estimated future cash flows expected to result from its 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 and goodwill 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 and goodwill 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.
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."
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.
Management's Discussion and Analysis (cont'd)
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 $728,000 and
$890,000 that were included as part of "accumulated other comprehensive loss"
within our balance sheets at June 30, 2003 and December 31, 2002, 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.
Comparison of Second Quarter 2003 to 2002
In the second quarter of 2003, net sales increased by $4.4 million, or 33%
to $17.7 million compared to second quarter 2002 sales of $13.3 million. Sales
in the Aerospace business unit increased by $1.9 million (43%) to $6.4 million
due to increased shipments of components related to the Minuteman III Propulsion
Replacement Program. Sales in the CompositAir business unit were down slightly
(3%) to $1.5 million. Sales increased $0.2 million (37%) to $0.8 million in the
Commercial business unit due to greater shipments of pool filter tanks and
in-ground lighting housings. Sales at NP Aerospace surged by $2.1 million (77%)
to $4.8 million due to a rise in shipments of body armor and other personal
protection products. Sales for the Bingham business unit increased by $0.2
million (5%) to $4.2 million.
Gross profit margin in the second quarter increased from 31% in 2002 to 34%
in 2003. Gross profit margin for Aerospace increased from 44% to 45% due to
increased sales and the resulting absorption of fixed overhead expenses. Gross
profit margin for CompositAir increased from 19% to 25% due to the elimination
of labor inefficiencies that resulted from our 2001 consolidation of production
facilities in Santa Fe Springs, California. Gross profit margin for Commercial
decreased from 22% to 21% due to higher material and overhead expenses. Gross
profit margin for NP Aerospace increased from 27% to 34%. due to increased sales
and the resulting absorption of fixed overhead expenses. Gross profit margin for
Bingham was unchanged at 24%.
Selling, general and administrative expenses for the second quarter 2003
were $3.1 million (18% of sales) compared to $2.9 million (22% of sales) for the
same quarter of 2002. The increase is due to higher pension expenses and
estimated year-end management incentive compensation.
Interest income, net of $0.01 million was realized in the second quarter of
2003 compared to interest expense, net of $0.07 million in the second quarter of
2002 due to lower outstanding debt and lower effective interest rates.
Management's Discussion and Analysis (cont'd)
A tax provision of $1,069,000 was recorded in the second quarter of 2003 as
compared to $449,000 in the second quarter of 2002. 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 Six Months 2003 to 2002
In the first six months of 2003, net sales increased $6.8 million, or 25%,
to $34.1 million, compared to 2002 sales of $27.3 million. Sales in the
Aerospace business unit increased by $2.5 million (31%) to $10.7 million due to
increased shipments of components related to the Minuteman III Propulsion
Replacement Program. Sales in the CompositAir business unit were flat at $3.3
million. Sales increased $0.3 million (25%) to $1.6 million in the Commercial
business unit due to increased shipments of pool filter tanks and in-ground
lighting housings. Sales at NP Aerospace rose $4.3 million (76%) to $9.9 million
due to increased shipments of body armor and other personal protection products.
Sales for the Bingham business unit decreased by $0.3 million (3%) to $8.6
million due to soft market conditions.
Gross profit margin in the first six months increased from 30% in 2002 to
33% in 2003. Gross profit margin for Aerospace increased from 44% to 45% due to
increased sales and the resulting absorption of fixed overhead expenses. Gross
profit margin for CompositAir increased from 13% to 26% due to the elimination
of labor inefficiencies that resulted from our 2001 consolidation of production
facilities in Santa Fe Springs, California. Gross profit margin for Commercial
decreased from 23% to 19% due to higher overhead expenses. Gross profit margin
for NP Aerospace increased from 27% to 33% due to increased sales and the
resulting absorption of fixed overhead expenses. Gross profit margin for Bingham
decreased from 26% to 23% due to higher overhead expenses.
Selling, general and administrative expenses for the first six months of
2003 were $5.9 million (17% of sales) compared to $5.5 million (20% of sales)
for the first six months of 2002. The increase is due to higher pension expenses
and estimated year-end management incentive compensation.
Interest expense, net in the first six months of 2003 decreased by $0.16
million due to lower outstanding debt and lower effective interest rates.
Management's Discussion and Analysis (cont'd)
Income before income taxes increased to $5.3 million (16% of sales) in the
first six months of 2003 from $2.5 million (9% of sales) in the same period of
2002 due to higher revenues. Income before income taxes for Aerospace was $3.5
million (32% of sales) in 2003 compared to $2.7 million (32% of sales) in 2002
due to increased shipments of components related to the Minuteman III Propulsion
Replacement Program. Income before income taxes for CompositAir was $0.4 million
in 2003 compared to breakeven in 2002 due to the elimination of labor
inefficiencies that resulted from our 2001 consolidation of production
facilities in Santa Fe Springs, California. Income before income taxes for
Commercial decreased to $0.03 million (2% of sales) from $0.09 million (7% of
sales) due to higher manufacturing overhead expense. Income before income taxes
for NP Aerospace rose to $2.3 million (23% of sales) from $0.6 million (10% of
sales) due to increased sales. The loss before income taxes for Bingham
increased to $0.3 million (-3% of sales) from $0.1 million (-1% of sales) due to
generally poor economic conditions and higher overhead costs.
A tax provision of $1,942,000 was recorded in the first six months of 2003
as compared to $954,000 in the first six months of 2002. 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, 2002, the Company had net operating loss carryforwards for
Federal income tax purposes of approximately $21.2 million. 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 2002 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 June 30, 2003, working capital was $14.9 million, up $4.4 million
from December 31, 2002. Cash and cash equivalents of $5.5 million held at June
30, 2003 were $2.4 million higher than cash and cash equivalents held at
December 31, 2002 primarily due to the increased profitability of the Company.
Net cash provided by operating activities totaled $6.2 million for the six
months ended June 30, 2003. Net cash provided by operating activities totaled
$2.8 million for the comparable period in 2002. 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 six months ended June 30,
2003 totaled $0.9 million and consisted of capital expenditures. Net cash used
in investing activities for the six months ended June 30, 2002 totaled $1.0
million and consisted of capital expenditures and proceeds from sale of assets.
Net cash used in financing activities for the six months ended June 30,
2003 totaled $3.1 million and consisted of repayment of the $3.0 million line of
credit balance and repayment of long-term debt of $0.1 million. Net cash used in
financing activities for the six months ended June 30, 2002 totaled $3.7 million
and consisted of borrowings against the line of credit of $7.2 million less
subsequent repayments of $1.5 million and repayments of long-term debt of $9.4
million.
Management's Discussion and Analysis (cont'd)
Expenditures in 2003 and 2002 related to investing and financing activities
were financed by existing cash and cash equivalents and proceeds from the
LaSalle line of credit.
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. 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,
total outstanding debt, minimum net worth and limits on capital expenditures. As
of June 30, 2003, the Company was in compliance with all applicable covenants.
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 a
prior bank.
On March 21, 2003, the Company amended the credit facility to extend the
termination date to June 20, 2003. No changes were made to any other terms and
conditions.
On June 20, 2003 the Company amended the credit facility to extend the
termination date to June 20, 2004. The line of credit under the facility has
been reduced from $10,000,000 to $8,000,000.
On June 19, 2003 the Company paid off the remaining outstanding balance
pertaining to the LaSalle credit facility.
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 June 30, 2004.
Stock Dividend
On April 30, 2003, the Board of Directors approved the distribution of a
10% stock dividend to shareholders of record as of May 16, 2003. As a result, an
additional 265,418 shares were issued on May 29, 2003. 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.
Management's Discussion and Analysis (cont'd)
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.
2003 Outlook
The Aerospace business unit should outperform 2002 results due mainly to
Minuteman III PRP component shipments and additional sales of rocket nozzles.
The CompositAir business unit may be unable to match 2002 results due to the
impact of the continued slowdown experienced in the commercial airline industry.
The Commercial business unit should generate financial results comparable to
2002. NP Aerospace has experienced a significant increase in sales of personal
protection products (military helmets and body armor). Future sales of these
products are largely dependent on unpredictable foreign government spending. At
Bingham, our financial performance continues to suffer due to poor economic
conditions in the printing marketplace. Additional cost reduction efforts are
continuing. This business unit continues to receive the highest levels 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, 2002.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
As of June 30, 2003, 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 II - OTHER INFORMATION
Item 1. Legal Proceedings
The information required in this section is included in Part I under
the heading "LEGAL PROCEEDINGS".
Item 4. Results of Votes of Security Holders
On April 30, 2003, the Annual Meeting of Stockholders of the
Corporation was convened at its offices in Santa Fe Springs, CA. for
the following purposes:
1) To elect six members of the Board of Directors for Class A Common
Stockholders; and
2) To ratify the Amended and Restated Reinhold Industries Stock
Incentive Plan.
Results of the voting for election of directors were as follows:
NAME FOR WITHHELD
RALPH R. WHITNEY, JR. 1,866,380 3,701
ANDREW McNALLY, IV 1,866,343 3,738
MICHAEL T. FURRY 1,867,084 2,997
GLENN SCOLNIK 1,866,485 3,596
THOMAS A. BRAND 1,862,924 7,157
RICHARD A. PLACE 1,867,005 3,076
Results of the voting for the ratification of the Amended and
Restated Reinhold Industries Stock Incentive Plan were as follows:
FOR AGAINST ABSTAIN
1,848,377 19,860 1,844
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.
10.10 Amended and Restated Reinhold Industries, Inc. Stock Incentive Plan,
on Form S-8, filed with the Commission on December 1, 2002.
10.11 Directors Deferred Stock Plan, on Form 10-K filed with the Commission
on March 28, 2003.
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.
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
Form 8-K was filed on May 7, 2003 announcing a 10% stock dividend
payable to shareholders of record as of May 16, 2003, to be paid on
or about May 30, 2003 under Item 5 - Other Events.
REINHOLD INDUSTRIES, INC.
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: August 14, 2003
By: /S/ Brett R. Meinsen
Brett R. Meinsen
Vice President - Finance and Administration,
Treasurer and Secretary
(Principal Financial Officer)
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 or not 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
August 14, 2003
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 or not 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
August 14, 2003