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, 2003
- ------ 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.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 13-2596288
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
12827 East Imperial Hwy, Santa Fe Springs, California 90670
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code (562) 944-3281
CLASS A COMMON STOCK, PAR VALUE $.01 NASDAQ
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(Title of each class) (Name of each exchange on which registered)
Securities registered under Section 12(g) of the Exchange Act: NONE
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Indicate by check mark whether the registrant (1) filed all reports required to
be filed by section 13 or 15(d) of the 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 27, 2003 was $33,312,000.
The number of shares of common stock outstanding as of March 8, 2004 was
2,936,116.
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, 2003.
Part III incorporates certain information by reference from the registrant's
definitive proxy statement for the annual meeting of shareholders to be held on
May 5, 2004, which proxy statement will be filed no later than 120 days after
the close of the registrant's fiscal year ended December 31, 2003.
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.
The Company has adopted a Code of Ethics that applies to the Chief
Executive Officer, Vice President - Finance and Administration and Controller.
Nasdaq Rule 4350 (n) mandates that the Company adopt a Code of Ethics and
require that it be applicable to all directors, officers and employees. The
Company will provide a copy of its Code of Ethics to any person without charge
upon request by writing to: Investor Relations Department, 12827 E. Imperial
Highway, Santa Fe Springs, CA 90670.
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 14
PART II
Item 5 - Market For Registrant's Common Equity and Related
Stockholder Matters 15
Item 6 - Selected Financial Data 15
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 16
Item 7A - Quantitative And Qualitative Disclosures About
Market Risk 16
Item 8 - Financial Statements And Supplementary Data 16
Item 9A - Controls and Procedures 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 - Principal Accountant Fees and Services 17
PART IV
Item 15 - Exhibits, Financial Statement Schedules And Reports
On Form 8-K 18
SIGNATURES 22
EXHIBITS 24
CERTIFICATIONS 25
3
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.
4
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.
5
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 five 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. On April 20,
2001, Reinhold, purchased certain assets and assumed certain liabilities of
Edler Industries, Inc. ("Edler"). Edler was a manufacturer of structural and
ablative composite components mainly for subcontractors of the U.S. defense
industry. The operation was renamed the "Thermal Insulation" division of
Reinhold. Effective January 1, 2003, the Thermal Insulation operating segment
was consolidated with the Areospace operating segment.
During 2003, Aerospace's sales increased by 16% 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 Alliant
Techsystems, Inc. ("ATK") constituted approximately 87% of this business unit's
total sales in 2003. 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. Sales of
components related to the Minuteman III Propulsion Replacement Program for 2003,
2002 and 2001 totaled approximately $14.5 million, $12.1 million and $4.8
million, respectively.
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.
6
Over 80% of CompositAir's 2003 sales were from one customer. Reinhold's
future prospects will depend on the continued business of that customer and on
Reinhold's continued status as a qualified supplier to that customer. In 2003,
sales decreased by 20% compared to 2002 due to economic problems in the
commercial airline industry.
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 2003 increased 21% from 2002 due to higher shipments of both
in-ground lighting housings and pool filter tanks.
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 2003 increased 45% from 2002 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
pages 20 - 23 of Reinhold's 2003 Annual Report to Stockholders, which is
incorporated herein by reference.
Bingham - 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
7
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 operating segments is set forth in Note 8 to the
Consolidated Financial Statements on pages 47 through 49 and "Management
Discussion and Analysis of Financial Condition and Results of Operations " on
pages 20 through 23 of Reinhold's 2003 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 51 of Reinhold's 2003 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.
8
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
9
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 $425,000,
$314,000, and $348,000 for the years ended December 31, 2003, 2002 and 2001,
respectively.
Employees
At December 31, 2003, Reinhold had 358 full-time employees and 25 part-time
employees. Of these employees, 286 (261 full-time and 25 part-time) were
employed in manufacturing and 97 (all full-time) in administration, product
development and sales. Approximately 35% of the personnel are based at
Reinhold's Santa Fe Springs, California facility, approximately 24% are based at
NP Aerospace located in Coventry, England and approximately 41% are based at the
various manufacturing and administration facilities of Samuel Bingham.
Approximately 43 of the employees in Coventry, England are represented by a
labor union. Certain Samuel Bingham employees, approximately 53, 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.
10
Item 2. PROPERTIES
The following chart lists the principal locations and size of Reinhold's
facilities and indicates whether the property is owned or leased and, if leased,
the lease expiration.
LEASED OR OWNED
LOCATION USE SIZE LEASE EXPIRATION
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Santa Fe Springs, CA Administration and 130,000 sq. ft. Leased (Expires 2016)
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 19,000 sq. ft. Leased (Expires 2005)
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)
Blacklick, PA Manufacturing 22,000 sq. ft. Own
Palmyra, NY Manufacturing 17,000 sq. ft. Leased (Expires 2008)
Mississauga, Ontario, Canada Manufacturing 3,200 sq. ft. Leased (Expires 2005)
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.
11
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.
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.
12
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 2003.
13
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY 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 54 of Reinhold's 2003 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 2, 2004
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Class A Common Stock,
par value $.01 per share 1,384
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.
A 10% stock dividend was declared on April 30, 2003 payable to shareholders
of record as of May 16, 2003. The dividend was paid on May 30, 2003. Fractional
shares were paid in cash. Fractional share cash payments totaled $9,327.96.
Item 6. SELECTED FINANCIAL DATA
Reference is made to the "Selected Financial Data" on page 1 of Reinhold's
2003 Annual Report to Stockholders, which is incorporated herein by reference.
14
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 19 of Reinhold's 2003 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 was at variable interest
rates based on LIBOR plus 2.50%. A hypothetical 10% change in interest rates
would have had a $0.04 million impact on interest expense for the year ended
December 31, 2002.
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, 2003 has fluctuated from
1.79 to 1.39, a range of 22%. A hypothetical 10% change in exchange rate would
have had a $0.3 million and $0.1 million impact on net income for the years
ended December 31, 2003 and 2002, respectively.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information for Item 8 is included in Reinhold's consolidated financial
statements as of December 31, 2003 and 2002 and for each of the three years in
the period ended December 31, 2003 and Reinhold's unaudited quarterly financial
data for the two year period ended December 31, 2003, 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 2003 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 2003 Annual Report to
shareholders and is also incorporated herein by reference.
15
Schedule II-A - Valuation and Qualifying Accounts
Allowance for Doubtful Accounts Receivable (in thousands)
- --------------------------------------------------------------------------------
Balance at Additions Charged to Balance at
Beginning of Costs and End of
Period Expenses Other Deductions Period
Fiscal Year Ended
- --------------------------------------------------------------------------------
December 31, 2001 165 105 104 166
- --------------------------------------------------------------------------------
December 31, 2002 166 179 272 73
- --------------------------------------------------------------------------------
December 31, 2003 73 40 60 53
- --------------------------------------------------------------------------------
Schedule II-B - Valuation and Qualifying Accounts
Inventory Reserves (in thousands)
- --------------------------------------------------------------------------------
Balance at Additions Charged to Balance at
Beginning of Costs and End of
Period Expenses Other Deductions Period
Fiscal Year Ended
- --------------------------------------------------------------------------------
December 31, 2001 1,183 56 1,127
- --------------------------------------------------------------------------------
December 31, 2002 1,127 38 443 722
- --------------------------------------------------------------------------------
December 31, 2003 722 21 46 46 743
- --------------------------------------------------------------------------------
Item 9A. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
As of December 31, 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-15 and 15d-15. 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.
16
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 2004 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 2004 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 2004 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 2004 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. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by Item 14 is included in the definitive proxy
statement for the 2004 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.
17
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 2003 Annual Report to shareholders:
Report of Independent Auditors
Consolidated Statements of Operations for the years ended December 31, 2003,
2002 and 2001
Consolidated Balance Sheets at December 31, 2003 and 2002
Consolidated Statements of Cash Flows for the years ended December 31, 2003,
2002 and 2001
Consolidated Statement of Stockholders' Equity and Comprehensive Income
(Loss) for the years ended December 31, 2003, 2002 and 2001
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
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 dated September 30, 2002 on Form 10-K
filed with the Commission on March 28, 2003
13 Certain portions of 2003 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 2003 Annual Report
to shareholders is not deemed to be filed as a part of this report)
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 Consent of Independent Auditors
31.1 Certification Of CEO Pursuant To Section 302 Of The Sarbanes-Oxley
Act Of 2002
31.2 Certification Of CFO Pursuant To Section 302 Of The Sarbanes-Oxley
Act of 2002
32.1 Certification Of CEO Pursuant To Section 906 Of The Sarbanes-Oxley
Act Of 2002
32.2 Certification Of CFO Pursuant To Section 906 Of The Sarbanes-Oxley
Act Of 2002
b) REPORTS ON FORM 8-K
NONE
21
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 30, 2004 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 30, 2004
Michael T. Furry- President and Director
(Principal Executive Officer)
/s/ Ralph R. Whitney, Jr. March 30, 2004
Ralph R. Whitney, Jr.- Chairman
/s/ Andrew McNally, IV March 30, 2004
Andrew McNally, IV- Director
/s/ Glenn Scolnik March 30, 2004
Glenn Scolnik- Director
22
/s/ Thomas A. Brand March 30, 2004
Thomas A. Brand- Director
/s/ Richard A. Place March 30, 2004
Richard A. Place- Director