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, 2004
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM
- ------ to
--------------- --------------
COMMISSION FILE NUMBER 0-18434
REINHOLD INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 13-2596288
- --------------------------------------------------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
12827 East Imperial Hwy, Santa Fe Springs, California 90670
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code (562) 944-3281
Securities registered pursuant to Section 12(b) of the Act:
(Title of each class) (Name of each exchange on which registered)
NONE NONE
- -------------------------------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
CLASS A COMMON STOCK, PAR VALUE $0.01
- --------------------------------------------------------------------------------
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). YES___ NO__X__
The aggregate market value of the voting and non-voting stock held by
non-affiliates of the registrant as of June 30, 2004 was $53,243,000.
The number of shares of common stock outstanding as of March 4, 2005 was
3,251,846.
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, 2004.
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, 2005, which proxy statement will be filed no later than 120 days after
the close of the registrant's fiscal year ended December 31, 2004.
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. A copy
of the Business Ethics and Code of Conduct can be found on the Company's website
at www.reinhold-ind.com.
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 12
PART II
Item 5 - Market For Registrant's Common Equity and Related
Stockholder Matters 13
Item 6 - Selected Financial Data 13
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Item 7A - Quantitative And Qualitative Disclosures About
Market Risk 14
Item 8 - Financial Statements And Supplementary Data 14
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 17
SIGNATURES 23
EXHIBITS 25
CERTIFICATIONS 26
PART I
Item 1. BUSINESS
Reinhold Engineered Plastics, the forerunner to today's
Reinhold Industries, Inc., was founded in 1928. The purpose of the business was
the molding of components from Bakelite, the first commercially available
polymer molding material.
In the 1940's, Reinhold was a pioneer in making some of the earliest
fiberglass plastic components for the aircraft industry such as radomes and
antenna covers.
In the early 1950's, with the advent of the missile industry, Reinhold
moved into the newly created field of ablative composites. Ablative composites
are fiber reinforced polymer structures which absorb, as they decay, the
destructive thermal energy generated by burning rocket propellants or hypersonic
re-entry. This field became Reinhold's core business for decades to come.
In the 1970's, the molding of structures from fiberglass polyester
Sheet Molding Compound (SMC) was a new and growing industry in the Eastern U.S.
Reinhold was convinced that the potential of the SMC material was broad enough
that markets in the West could be found and developed. These markets included
swimming pool filter tanks and in-ground lighting housings.
From the 1950's through the early 1980's, Reinhold went through a
number of ownership and name changes. In June 1984, Reinhold was sold to Keene
Corporation, an operating division of Bairnco Corporation. In 1990, following
Bairnco's spin-off of its Keene Corporation subsidiary to Bairnco's
shareholders, Reinhold became an incorporated (Delaware) entity and a direct
wholly-owned subsidiary of Keene Corporation.
On December 3, 1993, Keene Corporation ("Keene") filed a voluntary
petition for relief under Chapter 11 of Title 11 of the United State Code (the
"Bankruptcy Code") in the United States Bankruptcy Court in the Southern
District of New York (the "Bankruptcy Court"), Case No. 93-B-46090 (SMB).
Keene's Chapter 11 filing came as a direct result of tens of thousands of
asbestos-related lawsuits which named Keene as a party. Reinhold did not file
any petitions for relief under the bankruptcy code and continued to operate in
the normal course of business.
Keene's asbestos-related liabilities stem entirely from its 1968
purchase of Baldwin-Ehret-Hill, Inc. ("BEH"), a manufacturer of acoustical
ceilings, ventilation systems, and thermal insulation products. Over the past 20
years, Keene spent over $530 million (approximately 75% of which has been in the
form of insurance proceeds) in connection with Asbestos-Related Claims asserted
against Keene, all stemming from Keene's ownership, for a period of
approximately five years, of BEH.
By the end of 1992, Keene had exhausted substantially all of its
insurance coverage for Asbestos-Related Personal Injury Claims and by 1993,
Keene had exhausted substantially all of its insurance related to Asbestos In
Building Claims. Therefore, Keene had to bear directly the costs of all Claims.
In May 1993, Keene filed a limited fund, mandatory settlement action
("Limited Fund Action"). This Limited Fund Action sought a declaration that
Keene had only limited funds available to resolve the numerous Asbestos-Related
Claims against it, including Asbestos-Related Claims that might be filed in the
future.
In November 1993, Keene reached an agreement in principle with the
lawyers representing each subclass with respect to the allocation of Keene's
remaining assets. However, on December 1, 1993, the Court of Appeals for the
Second Circuit issued a decision dismissing the Limited Fund Action on the
grounds of lack of subject matter jurisdiction.
In light of this decision, on December 3, 1993, Keene filed its
voluntary petition for relief under Chapter 11.
On March 28, 1995, Keene, the Official Committee of Unsecured
Creditors' and the Legal Representative for Future Claimants entered into a
stipulation to file a consensual plan of reorganization that would resolve
Keene's Chapter 11 Case.
On March 11, 1996, the Bankruptcy Court approved the Second Amended
Disclosure Statement regarding Keene's Fourth Amended Plan of Reorganization for
solicitation.
On June 12, 1996, the Bankruptcy Court and the U.S. District Court held
a confirmation hearing on Keene's Fourth Amended Plan of Reorganization, as
modified (the "Plan"). The Plan was confirmed by the U.S. District Court by
order entered on June 14, 1996.
On July 31, 1996, Keene's Fourth Amended Plan of Reorganization, as
modified, became effective (the "Effective Date"). On the Effective Date,
Keene's wholly-owned subsidiary, Reinhold Industries, Inc. ("Reinhold") was
merged into and with Keene, with Keene becoming the surviving entity. Pursuant
to the merger, all the issued and outstanding capital stock of Reinhold was
canceled. Keene, as the surviving corporation of the merger, was renamed
Reinhold. On the Effective Date, Reinhold issued 1,998,956 shares of Common
Stock, of which 1,020,000 shares of Class B Common Stock were issued to the
Trustees of a Creditors' Trust (the "Creditors' Trust") set up to administer
Keene's asbestos claims. The remaining 978,956 shares, identified as Class A
Common Stock, were issued to Keene's former shareholders as of record date, June
30, 1996. All of Keene's previously outstanding Common Stock was canceled.
Today, Reinhold Industries, Inc. is a manufacturer of advanced custom
composite components and sheet molding compounds for a variety of applications
in the United States and Europe. Reinhold derives revenues from the defense,
aerospace and other commercial industries. Reinhold is currently organized in
four 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 Aerospace operating segment.
During 2004, Aerospace's sales increased by 9% due primarily to
increased shipments of composite structures related to the Space Shuttle
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 75% of this business unit's
total sales in 2004. 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 2004,
2003 and 2002 totaled approximately $12.7 million, $14.5 million and $12.1
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.
Over 80% of CompositAir's 2004 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 2004,
sales decreased by 10% compared to 2003 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 2004 decreased 6% from 2003 due to lower shipments of water
filtration related products.
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 2004 increased 32% from 2003 due primarily to
additional retrofitting of armored vehicles for the UK Ministry of Defence.
In August 2004, NP Aerospace and King Abdullah II Design and
Development Bureau ("KADDB"), a Jordanian company, entered into a joint venture
agreement to establish a composites manufacturing facility in the country of
Jordan. NP Aerospace Jordan WLL ("NPAJ"), a Jordanian limited liability company,
was created as a result of the agreement. NPAJ is owned 51% by NPA and 49% by
KADDB. In accordance with SFAS 94, " Consolidation of All Majority-Owned
Subsidiaries," the Company is required to consolidate all majority-owned
subsidiaries unless control is temporary or does not rest with the majority
owner. This Statement requires consolidation of a majority-owned subsidiary even
if it has "nonhomogeneous" operations, a large minority interest, or a foreign
location. As of December 31, 2004, the financial statements of NPAJ have been
consolidated into the financial statements of NPA.
Additional information on NP Aerospace is set forth in "Management Discussion
and Analysis of Financial Condition and Results of Operations " on pages 18 - 21
of Reinhold's 2004 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 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.
During the three months ended September 30, 2004, management committed
to a plan of action to sell Bingham. The decision to sell was based on
continuing losses from operations and a negative long-term outlook in the
marketplaces this subsidiary serves. On September 30, 2004, management
determined that the plan of sale criteria in FASB No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," had been met. Accordingly, the
carrying value of its fixed assets was adjusted to its fair value less costs to
sell and goodwill was determined to be impaired in accordance with the criteria
of FASB No 142. Fair value was determined based on the highest offer received
from several potential strategic suitors. The resulting $5.7 million impairment
charge was included in "Loss from operations of discontinued component" in the
statement of operations.
On December 17, 2004, Bingham sold certain assets and transferred
certain liabilities to Finzer Roller, L.L.C. for $3.127 million cash, subject to
post-closing adjustments. The assets sold included accounts receivable,
inventories, prepaid expenses, equipment, real property, tangible personal
property, intellectual and other intangible property. Liabilities transferred
include accounts payable, accrued expenses and defined benefit pension plan
obligations. The purchase price will be adjusted based on the computation of
closing date working capital.
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 18
through 21 of Reinhold's 2004 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 2004 Annual Report to
Stockholders, which is incorporated herein by reference.
Distribution
Products are marketed by company sales personnel and sales
representatives in the United States and Europe.
Competition
Reinhold competes with many companies in the sale of ablative and
structural composite products. The markets served by Reinhold are specialized
and competitive. Several of its competitors have greater financial, technical
and operating resources than Reinhold. Although Reinhold has competed
successfully in the critical areas of price, product performance and engineering
support services, there is no assurance that Reinhold will be able to continue
to manufacture and sell its products profitably in competitive markets.
Because a substantial portion of Reinhold's business has been as a
supplier to government contractors, Reinhold has developed a limited number of
customers with which it does significant amounts of business. Reinhold's future
prospects will depend on the continued business of such customers and on
Reinhold's continued status as a qualified supplier to such customers.
Reinhold's success also depends on developing additional commercial composite
products to replace heavier and shape restrictive metals-based products.
Raw Materials and Purchased Components
The principal raw materials for composite fabrication include
pre-impregnated fiber cloth (made of carbon, graphite, aramid or fiberglass
fibers which have been heat-treated), molding compounds, resins (phenolic and
epoxy), hardware, adhesives and solvents. Occasionally, certain raw materials
and parts are supplied by customers for incorporation into the finished product.
Reinhold's principal suppliers of raw materials are Cytec Fiberite, Inc. and
Newport Adhesives and Composites, Inc.
No significant supply problems have been encountered in recent years.
Reinhold uses PAN (polyacrylonitrile) and rayon in the manufacture of
composites. However, the
supply of rayon used to make carbon fiber cloth typically used in ablative
composites is highly dependent upon the qualification of the rayon supplier by
the United States Department of Defense. North American Rayon has ceased
production of the rayon used in Reinhold's ablative products. This could have an
effect on the rayon supply in the coming years.
Also, a European company has become the world's sole supplier of
graphite and carbon, which is used in Reinhold's ablative applications. At this
time, Reinhold cannot determine if there will be any significant impact on price
or supply.
Environmental Matters
Reinhold's manufacturing facilities are subject to regulation by
federal, state and local environmental agencies. Management believes all
facilities meet or exceed all applicable environmental requirements in all
material respects and believes that continued compliance will not materially
affect capital expenditures, earnings or competitive position.
Refer to Item 3 for additional environmental legal proceedings.
Patents and Trademarks
Reinhold, through its wholly-owned subsidiary, NP Aerospace Ltd., owns
nine registered patents with various foreign countries and an additional eight
patents pending. These patents relate primarily with the manufacture and design
of composite ballistic helmets and body armor. NP Aerospace, Ltd. also owns two
registered trademarks in foreign countries and one trademark pending in the
United States.
Research and Development
Research and development expenditures were approximately $497,000,
$425,000, and $314,000 for the years ended December 31, 2004, 2003 and 2002,
respectively.
Employees
At December 31, 2004, Reinhold had 220 full-time employees and 60
part-time employees. Of these employees, 184 (125 full-time and 59 part-time)
were employed in manufacturing and 36 (35 full-time and 1 part time) in
administration, product development and sales. Approximately 49% of the
personnel are based at Reinhold's Santa Fe Springs, California facility and
approximately 51% are based at NP Aerospace located in Coventry, England.
Approximately 43 of the employees in Coventry, England are represented by a
labor union. Reinhold believes its workforce to be relatively stable and
considers its employee relations to be excellent.
Item 2. PROPERTIES
The following chart lists the principal locations and size of
Reinhold's facilities and indicates whether the property is owned or leased and,
if leased, the lease expiration.
LEASED OR OWNED
LOCATION USE SIZE LEASE EXPIRATION
- --------------------------------------------------------------------------------------------------------
Santa Fe Springs, CA Administration and 130,000 sq. ft. Leased (Expires 2016)
Manufacturing
Oxnard, CA R&D 3,600 sq. ft. Leased (Expires 2005)
Coventry, England Administration and 80,000 sq. ft Own
Manufacturing
Portland, OR Sub-Leased to Third Party 14,000 sq. ft. Leased (Expires 2006)
Construction of a new building and additional improvements at the Santa
Fe Springs location were substantially completed in 2001. Reinhold believes its
facilities are utilized consistent with economic conditions and the requirements
of its operations.
Item 3. LEGAL PROCEEDINGS
The Company has been informed that it may be a potentially
responsible party ("PRP") under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended ("CERCLA"), with respect to
certain environmental liabilities arising at the Valley Forge National
Historical Park Site ("Valley Forge Site") located in Montgomery County,
Pennsylvania and at a site formerly known as the Casmalia Resources Hazardous
Waste Management Facility, located in Santa Barbara County, California
("Casmalia Site"). CERCLA imposes liability for the costs of responding to a
release or threatened release of "hazardous substances" into the environment.
CERCLA liability is imposed without regard to fault. PRPs under CERCLA include
current owners and operators of the site, owners and operators at the time of
disposal, as well as persons who arranged for disposal or treatment of hazardous
substances sent to the site, or persons who accepted hazardous substances for
transport to the site.
Because PRPs' CERCLA liability to the government is joint and
several, a PRP may be required to pay more than its proportional share of such
costs. Liability among PRPs, however, is subject to equitable allocation through
contribution actions.
On June 16, 2000 the U.S. Department of Justice notified the Company
that it may be a PRP with respect to the Valley Forge Site and demanded payment
for past costs incurred by the United States in connection with the site, which
the Department of Justice estimated at $1,753,726 incurred by the National Park
Service ("NPS") as of May 31, 2000 and $616,878 incurred by the United States
Environmental Protection
Agency ("EPA") as of November 30, 1999. Payment of these past costs would not
release the Company from liability for future response costs.
Management believes that in or about 1977, the Company's
predecessor, Keene Corporation ("Keene"), sold to the U.S. Department of
Interior certain real property and improvements now located within the Valley
Forge Site. Prior to the sale, Keene operated a manufacturing facility on the
real property and may have used friable asbestos, the substance which gives rise
to the claim at the Valley Forge Site.
On December 30, 2002, the United States District Court for the
Southern District of New York approved and entered a Consent Decree agreed upon
by the United States and the Company settling the claims asserted by the
National Park Service against the Company. The United States and the Company
stipulated that the EPA will not seek reimbursement of its response costs with
respect to the Valley Forge Site and that the Company's claim for a declaratory
judgment with respect to those costs may be dismissed with prejudice.
Under the terms of the Consent Decree, the Company was obligated to
pay $500,000 to the Department of the Interior. In return, the Company has
received from the United States a covenant not to sue, subject to certain
limited exceptions, for claims under CERCLA Sections 106, 107 and 113 and RCRA
Section 7003 relating to the Site. The payment to the Department of the Interior
was made on January 23, 2003.
Pursuant to the Consent Decree and CERCLA Section 113(f)(2), the
Company's settlement with the United States bars any other party from asserting
claims for contribution for any response costs incurred with respect to the
Valley Forge Site by the United States, any State or other governmental entity,
or any other party.
With respect to the Casmalia Site, on August 11, 2000, the EPA
notified the Company that it is a PRP by virtue of waste materials deposited at
the site. The EPA has designated the Company as a "de minimis" waste generator
at this site, based on the amount of waste at the Casmalia Site attributed to
the Company. The Company is not currently a party to any litigation concerning
the Casmalia Site, and based on currently available data, the Company believes
that the Casmalia Site is not likely to have a material adverse impact on the
Company's consolidated financial position or results of operations.
The Company is involved in various other claims and legal actions
arising in the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material effect on the
Company's financial position, results of operations, or liquidity.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
----------------------------------------------------
The Company did not submit any matters to a vote of security holders
during the fourth quarter of 2004.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
a. Data regarding the market price of Reinhold's common stock is
included in the "Selected Financial Data" on page 1 and under Stockholder
Information on page 55 of Reinhold's 2004 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 4, 2005
-------------- -------------------
Class A Common Stock,
par value $.01 per share 1,305
c. 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.
Data regarding the dividends paid on Reinhold's common stock for 2004
and 2003 is included in the "Selected Financial Data" on page 1 and under
Stockholder Information on page 55 of Reinhold's 2004 Annual Report to
Stockholders, which is incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA
Reference is made to the "Selected Financial Data" on page 1 of
Reinhold's 2004 Annual Report to Stockholders, which is incorporated herein by
reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Reference is made to the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on page 15 of Reinhold's 2004
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, 2004, approximately $28.6
million, was at variable interest rates based on LIBOR plus 2.50% - 3.00%. The
Company had no outstanding bank debt in 2004 prior to December 7th. A
hypothetical 10% change in interest rates would have had a $10,000 impact on
interest expense for the year ended December 31, 2004.
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, 2004 has fluctuated from
1.94 to 1.39, a range of 40%. A hypothetical 10% change in exchange rate would
have had a $0.3 million impact on net income for the years ended December 31,
2004 and 2003, respectively.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information for Item 8 is included in Reinhold's consolidated
financial statements as of December 31, 2004 and 2003 and for each of the three
years in the period ended December 31, 2004 and Reinhold's unaudited quarterly
financial data for the two year period ended December 31, 2004, in the
Consolidated Financial Statements (including the Consolidated Balance Sheet,
Consolidated Statement of Operations, Consolidated Statement of Cash Flows,
Consolidated Statement of Stockholders' Equity (Deficit) and Comprehensive
Income and Notes to Consolidated Financial Statements) and unaudited Quarterly
Financial Data sections of Reinhold's 2004 Annual Report to shareholders, which
are incorporated herein by reference. The report of the independent registered
public accounting firm on Reinhold's consolidated financial statements is on
page 53 of Reinhold's 2004 Annual Report to shareholders and is also
incorporated herein by reference.
Schedule II-A - Valuation and Qualifying Accounts
Allowance for Doubtful Accounts Receivable (in thousands)
Balance at Additions Charged to Balance at
Beginning of Costs and End of
Period Expenses Other Deductions Period
Fiscal Year Ended
- ----------------------------------------------------------------------------------------------------------
December 31, 2002 166 - 179 272 73
- ----------------------------------------------------------------------------------------------------------
December 31, 2003 73 - 40 60 53
- ------------------------------------------------------------------------------------------------------------
December 31, 2004 53 55 - 93 15
- ------------------------------------------------------------------------------------------------------------
Schedule II-B - Valuation and Qualifying Accounts
Inventory Reserves (in thousands)
Balance at Additions Charged to Balance at
Beginning of Costs and End of
Fiscal Year Ended Period Expenses Other Deductions Period
- ----------------------------------------------------------------------------------------------------------
December 31, 2002 1,127 - 38 443 722
- ----------------------------------------------------------------------------------------------------------
December 31, 2003 722 21 46 46 743
- ------------------------------------------------------------------------------------------------------------
December 31, 2004 743 - - 100 643
- -----------------------------------------------------------------------------------------------------------
Schedule II-C - Valuation and Qualifying Accounts
Deferred Tax Valuation Allowance (in thousands)
Balance at Additions Charged to Balance at
Beginning of Costs and End of
Fiscal Year Ended Period Expenses Other Deductions Period
- ---------------------------------------------------------------------------------------------------------
December 31, 2002 10,857 1,862 8,995
- ---------------------------------------------------------------------------------------------------------
December 31, 2003 8,995 2,284 6,711
- ----------------------------------------------------------------------------------------------------------
December 31, 2004 6,711 2,482 4,229
- ----------------------------------------------------------------------------------------------------------
Item 9A. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
As of December 31, 2004, 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.
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 2005 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 2005 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 2005 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 2005 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 2005 Annual Meeting of Stockholders of Reinhold, to be filed
with the Securities and Exchange Commission not later than 120 days after the
end of the fiscal year and is incorporated herein by reference.
PART IV
Item 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 2004 Annual Report to shareholders:
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Operations for the years ended December 31, 2004,
2003 and 2002
Consolidated Balance Sheets at December 31, 2004 and 2003
Consolidated Statements of Cash Flows for the years ended December 31, 2004,
2003 and 2002
Consolidated Statement of Stockholders' Equity (Deficit) and Comprehensive
Income for the years ended December 31, 2004, 2003 and 2002
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
Schedule II - C - 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.
3.6 Amended and restated By-Laws of Reinhold Industries, Inc. on form 8-K
filed with the Commission on August 31, 2004.
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 incorporated by
reference to Exhibit 10.1 to the Company's Report 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 incorporated by reference to Exhibit
10.2 to the Company's Report 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 incorporated by
reference to Exhibit 10.3 to the Company's Report 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 incorporated by
reference to Exhibit 10.9 to the Company's Report on Form 10-Q filed
with the Commission on May 9, 2002.
10.10 Amended and Restated Reinhold Industries, Inc. Stock Incentive
Plan, incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-8, filed with the Commission on
December 1, 2002. **
10.11 Directors Deferred Stock Plan dated September 30, 2002
incorporated by reference to Exhibit 10.11 to the Company's Report
on Form 10-K filed with
the Commission on March 28, 2003. **
10.12 Asset Purchase Agreement by and among Reinhold Industries, Inc.,
Samuel Bingham Enterprises, Inc., and Finzer Roller, L.L.C.
incorporated by reference to Exhibit 2 to the Company's Report on
Form 8-K filed with the Commission on December 17, 2004.
10.13 Amended and Restated Credit Agreement dated as of December 8, 2004
among Reinhold Industries, Inc., NP Aerospace Limited, as borrowers,
and LaSalle Bank National Association as filed herewith.
13 Certain portions of 2004 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 2004 Annual Report
to shareholders is not deemed to be filed as a part of this report)
21 Subsidiaries of the registrant
1) NP Aerospace Limited (organized under the laws of the United
Kingdom)
23 Consent of Independent Registered Public Accounting Firm
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
** Management compensation plans and agreements
b) REPORTS ON FORM 8-K
Form 8-K was filed on December 28, 2004 announcing that the Registrant completed
payment of the special dividend of $11.75 per share declared by its Board of
Directors on December 7, 2004
Form 8-K was filed on December 17, 2004 announcing that the Company entered into
an agreement to sell and sold substantially all of the assets of its subsidiary,
Samuel Bingham Enterprises, Inc. ("Bingham") to Finzer Roller, L.L.C., an
Illinois limited liability company, for $3,127,000 in cash plus the assumption
of certain liabilities of Bingham.
Form 8-K was filed on December 8, 2004 announcing that the Company and its
wholly-owned subsidiary NP Aerospace Limited entered into an Amended and
Restated Credit Agreement with LaSalle Bank National Association and other
participating lenders, pursuant to which the lenders made available to the
borrowers a term loan in the maximum principal amount of $24.5 million and a
revolving loan in the maximum principal amount of $12 million. The loans are
available to the Company to pay a special cash distribution approved by the
Board of Directors of the Company on December 7, 2004, for working capital
purposes, for certain capital expenditures and for other general business
purposes.
Form 8-K was filed on November 1, 2004 announcing the third quarter 2004
financial results and the declaration of a $0.50 per share cash dividend payable
on November 24, 2004 to shareholders of record as of November 12, 2004.
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, 2005 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, 2005
--------------------------------------
Michael T. Furry- President and Director
(Principal Executive Officer)
/s/ Ralph R. Whitney, Jr. March 30, 2005
---------------------------------------
Ralph R. Whitney, Jr.- Chairman
/s/ Andrew McNally, IV March 30, 2005
-------------------------------------
Andrew McNally, IV- Director
/s/ Glenn Scolnik March 30, 2005
-------------------------------------------
Glenn Scolnik- Director
/s/ Thomas A. Brand March 30, 2005
-----------------------------------------
Thomas A. Brand- Director
/s/ Richard A. Place March 30, 2005
-------------------------------------------
Richard A. Place- Director
/s/ C. Miles Schmidt, Jr. March 30, 2005
----------------------------------------
C. Miles Schmidt, Jr.- Director
/s/ Richard C. Morrison March 30, 2005
---------------------------------------
Richard C. Morrison - Director
/s/ Matthew C. Hook March 30, 2005
---------------------------------------
Matthew C. Hook - Director