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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE PERIOD ENDED JUNE 30, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-3252
LEXINGTON PRECISION CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 22-1830121
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
767 THIRD AVENUE, NEW YORK, NY 10017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
(212) 319-4657
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS, AND FORMER FISCAL YEAR, IF CHANGED
SINCE LAST REPORT DATE)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 whether the registrant is an accelerated filer (as
defined in rule 12b-2 of the Exchange Act). Yes No X
--- ---
AS OF AUGUST 12, 2003, THERE WERE 4,828,036 SHARES OF COMMON STOCK OF
THE REGISTRANT OUTSTANDING. (INDICATE THE NUMBER OF SHARES OUTSTANDING OF
EACH OF THE ISSUER'S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE)
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LEXINGTON PRECISION CORPORATION
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.............................................1
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................15
Item 3. Quantitative and Qualitative Disclosures about Market Risk......29
Item 4. Controls and Procedures.........................................29
PART II. OTHER INFORMATION
Item 3. Defaults on Senior Securities...................................30
Item 4. Submission of Matters to a Vote of Security Holders.............30
Item 6. Exhibits and Reports on Form 8-K................................31
-i-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LEXINGTON PRECISION CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
----------------------- ------------------------
2003 2002 2003 2002
---- ---- ---- ----
Net sales $ 30,873 $ 32,996 $ 63,256 $ 63,240
Cost of sales 27,587 28,356 56,240 55,632
--------- -------- --------- ---------
Gross profit 3,286 4,640 7,016 7,608
Selling and administrative expenses 2,173 2,349 4,265 4,604
Plant closure costs - 87 - 609
--------- -------- --------- ---------
Income from operations 1,113 2,204 2,751 2,395
Interest expense 1,760 1,967 3,540 3,763
--------- -------- --------- ---------
Income (loss) before income taxes (647) 237 (789) (1,368)
Income tax provision 27 30 54 51
--------- -------- --------- ---------
Net income (loss) $ (674) $ 207 $ (843) $ (1,419)
========= ======== ========= =========
Per share data:
Basic and diluted net income (loss) applicable to
common stockholders $ (0.14) $ 0.04 $ (0.17) $ (0.29)
========= ======== ========= =========
See notes to consolidated financial statements.
- 1 -
LEXINGTON PRECISION CORPORATION
CONSOLIDATED BALANCE SHEET
(THOUSANDS OF DOLLARS)
(UNAUDITED)
JUNE 30, DECEMBER 31,
2003 2002
--------------- -----------------
ASSETS:
Current assets:
Cash $ 1,644 $ 1,753
Accounts receivable, net 19,628 16,411
Inventories, net 9,250 8,841
Prepaid expenses and other current assets 2,848 3,682
Deferred income taxes 2,304 2,304
--------- ----------
Total current assets 35,674 32,991
Property, plant, and equipment, net 46,759 49,029
Goodwill 7,831 7,831
Other assets, net 2,320 2,294
--------- ----------
Total assets $ 92,584 $ 92,145
========= ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT:
Current liabilities:
Accounts payable $ 10,686 $ 10,798
Accrued expenses, excluding accrued interest 7,061 6,256
Accrued interest expense 15,104 12,875
Short-term debt 68,875 69,665
Current portion of long-term debt 708 1,467
--------- ----------
Total current liabilities 102,434 101,061
--------- ----------
Long-term debt, excluding current portion 920 1,117
--------- ----------
Deferred income taxes and other long-term liabilities 2,928 2,836
--------- ----------
Series B preferred stock 330 330
--------- ----------
Stockholders' deficit:
Common stock, $0.25 par value, 10,000,000 shares
authorized, 4,828,036 shares issued 1,207 1,207
Additional paid-in-capital 12,960 12,960
Accumulated deficit (28,195) (27,366)
--------- ----------
Total stockholders' deficit (14,028) (13,199)
--------- ----------
Total liabilities and stockholders' deficit $ 92,584 $ 92,145
========= ==========
See notes to consolidated financial statements
- 2 -
LEXINGTON PRECISION CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(THOUSANDS OF DOLLARS)
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30
---------------------------
2003 2002
---- ----
OPERATING ACTIVITIES:
Net loss $ (843) $ (1,419)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 5,106 5,635
Amortization included in operating expense 296 394
Amortization included in interest expense 273 161
Changes in operating assets and liabilities that
provided (used) cash:
Accounts receivable, net (3,217) (2,687)
Inventories, net (409) (286)
Prepaid expenses and other current assets 642 819
Accounts payable (112) (1,368)
Accrued expenses, excluding interest expense 805 1,353
Accrued interest expense 2,229 2,033
Other long-term liabilities 92 28
Other (5) 469
--------- ---------
Net cash provided by operating activities 4,857 5,132
--------- ---------
INVESTING ACTIVITIES:
Purchases of property, plant, and equipment (2,734) (1,873)
Net decrease (increase) in equipment deposits (35) 39
Expenditures for tooling owned by customers (113) (518)
Other 202 (10)
--------- ---------
Net cash used by investing activities (2,680) (2,362)
--------- ---------
FINANCING ACTIVITIES:
Net increase in loans under revolving line of credit 2,677 2,431
Repayment of term notes and other debt (4,529) (5,069)
Deferred financing charges (434) (239)
--------- ---------
Net cash used by financing activities (2,286) (2,877)
--------- ---------
Net decrease in cash (109) (107)
Cash at beginning of period 1,753 189
--------- ---------
Cash at end of period $ 1,644 $ 82
========= =========
See notes to consolidated financial statements.
- 3 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The unaudited interim consolidated financial statements include the
accounts of Lexington Precision Corporation and its subsidiaries (collectively,
the "Company"). The consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Accordingly, the consolidated financial statements do not include all the
information and footnotes included in the Company's annual consolidated
financial statements. Significant accounting policies followed by the Company
are set forth in Note 1 to the consolidated financial statements in the
Company's annual report on Form 10-K for the year ended December 31, 2002.
Subject to the Company's ability to successfully restructure its
indebtedness as discussed below, in the opinion of management, the unaudited
interim consolidated financial statements contain all adjustments necessary to
present fairly the financial position of the Company at June 30, 2003, and the
Company's results of operations for the three-month and six-month periods ended
June 30, 2003 and 2002, and the Company's cash flows for the six-month periods
ended June 30, 2003 and 2002. All such adjustments were of a normal, recurring
nature.
The results of operations for the three-month and six-month periods ended
June, 2003, are not necessarily indicative of the results to be expected for the
full year or for any succeeding quarter.
The Company's consolidated financial statements have been presented on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company's
ability to refinance, extend, amend, or exchange substantially all of its
outstanding debt, as more fully described below, is subject to risks and
uncertainties. As a result, there is substantial doubt about the Company's
ability to continue as a going concern. The consolidated financial statements do
not include any adjustments to the amounts or classification of assets or
liabilities to reflect this uncertainty.
The Company has been in default on its 12 3/4% senior subordinated notes
since February 1, 2000, when it did not make the payments of principal, in the
amount of $27,412,000, and interest, in the amount of $1,748,000, that were due
on that date. On July 10, 2002, the Company commenced an exchange offer for the
12 3/4% senior subordinated notes. The exchange offer was amended on March 7,
2003. If the amended exchange offer is consummated, at least 99% of the 12 3/4%
senior subordinated notes will be exchanged for new 11 1/2% senior subordinated
notes due August 1, 2007, in a principal amount equal to the principal amount of
the 12 3/4% senior subordinated notes being exchanged plus the accrued and
unpaid interest thereon through the day before the date the amended exchange
offer is consummated, which accrued interest will total $520.979 for each $1,000
principal amount of 12 3/4% senior subordinated notes assuming the amended
exchange offer is consummated on September 2, 2003. Interest on the 11 1/2%
senior subordinated notes will accrue from the date the amended exchange offer
is consummated, and will be payable on each February 1, May 1, August 1, and
November 1. Each $1,000 principal amount of 11 1/2% senior subordinated notes
will be issued with warrants to purchase ten shares of common stock at a price
of $3.50 per share at any time from January 1, 2004, through August 1, 2007. If
the amended exchange offer is consummated, the Company will pay a participation
fee of 3% of the principal amount of 12 3/4% senior subordinated notes that are
exchanged. The Company's senior, secured lenders have waived the cross default
provisions with respect to the default on the senior subordinated notes through
either September 15, 2003, or October 31, 2003, and the holders of the junior
subordinated notes have waived such cross-default provisions through November 1,
2003. The Company plans to
- 4 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
extend the expiration date of the amended exchange offer, which is currently
August 14, 2003. One of the conditions to the consummation of the amended
exchange offer is the tender for exchange of at least 99% of the senior
subordinated notes. As of August 12, 2003, the Company had received tenders of
$27,209,000 principal amount of 12 3/4% senior subordinated notes, or 99.3% of
the notes. There are additional conditions to the consummation of the amended
exchange offer that may not be satisfied by the expiration date.
The Company has reached an agreement with the holders of its 14% junior
subordinated notes on the terms of a restructuring of those notes. If the
restructuring is completed, the Company will exchange new 12 1/2% junior
subordinated notes due November 1, 2007, for the existing 14% junior
subordinated notes, and the accrued interest on the 14% junior subordinated
notes for the period November 1, 1999, through the day before the restructuring
is consummated, which will total $221,000 assuming the restructuring is
consummated on September 2, 2003, will be converted into shares of the Company's
common stock at a price of $2.27 per share. Interest on the 12 1/2% junior
subordinated notes will accrue from the date the restructuring is consummated,
and will be payable on each February 1, May 1, August 1, and November 1. Each
$1,000 principal amount of 12 1/2% junior subordinated notes will be issued with
warrants to purchase ten shares of common stock at a price of $3.50 per share at
any time from January 1, 2004, through November 1, 2007. If the restructuring is
completed, the Company also will pay a participation fee of 3% of the principal
amount of 14% junior subordinated notes.
The Company has been in default on its senior, unsecured note, since April
30, 2002, when it did not make the payments of principal, in the amount of
$7,500,000, and interest, in the amount of $78,000, that were due on that date.
If the other aspects of the financial restructuring program are completed, the
Company has proposed to repurchase the senior, unsecured note for $5,550,000,
plus interest from November 1, 2002, to the date the amended exchange offer is
consummated, at the prime rate. The Company's senior, secured lenders have
waived the cross default provisions with respect to the default on the senior,
unsecured note through either September 15, 2003, or October 31, 2003, and the
holders of the junior subordinated notes have waived such cross-default
provisions through November 1, 2003.
The Company is currently working with its primary secured lenders on the
documents for a new senior, secured credit facility.
The Company can give no assurance that it will be able to consummate the
amended exchange offer, restructure the senior, unsecured note, or refinance its
senior, secured credit facility on satisfactory terms. If the Company is unable
to do so, it may choose to file a voluntary petition under the federal
bankruptcy code in order to effect a debt restructuring on terms substantially
similar to those discussed above, or on other terms. Representatives of the four
largest holders of the senior subordinated notes, who hold in the aggregate
approximately 75% of the notes, have indicated that, if the documentation for
the new senior, secured credit facility cannot be completed promptly, they may
demand that the Company file a voluntary petition under the federal bankruptcy
code or, in the alternative, they may choose to file an involuntary petition
against the Company in order to accomplish a debt restructuring, in which case
the Company would have twenty days to respond by filing a voluntary petition or
seeking the withdrawal or dismissal of such involuntary petition. Although the
Company believes that such a debt restructuring could be accomplished without
material disruption to its operations, any such proceeding involves considerable
risks and uncertainties and could have a material adverse effect on the
Company's operations and financial position.
- 5 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
RECENTLY ISSUED ACCOUNTING STANDARDS
STATEMENT OF FINANCIAL ACCOUNTING STANDARD NO. 150, ACCOUNTING FOR CERTAIN
FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY
In May 2003, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity" ("FAS 150").
This Statement establishes standards for classifying and measuring as
liabilities certain financial instruments that embody obligations of the issuer
and have characteristics of both liabilities and equity. This Statement is
effective for financial instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. The Company has not yet determined the impact, if
any, that FAS 150 will have on its results of operations or financial position.
NOTE 2 -- INVENTORIES
Inventories at June 30, 2003, and December 31, 2002, are set forth below
(dollar amounts in thousands):
JUNE 30, DECEMBER 31,
2003 2002
---------------- ----------------
Finished goods $ 3,131 $ 3,580
Work in process 3,491 2,493
Raw materials and purchased parts 2,628 2,768
---------- ----------
$ 9,250 $ 8,841
========== ==========
NOTE 3 -- PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment at June 30, 2003, and December 31, 2002, are
set forth below (dollar amounts in thousands):
JUNE 30, DECEMBER 31,
2003 2002
----------------- ----------------
Land $ 2,350 $ 2,314
Buildings 23,075 22,935
Equipment 115,756 113,291
---------- ----------
141,181 138,540
Accumulated depreciation 94,422 89,511
---------- ----------
Property, plant, and equipment, net $ 46,759 $ 49,029
========== ==========
- 6 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 -- ACCRUED INTEREST EXPENSE
At June 30, 2003, and December 31, 2002, accrued interest expense included
$13,689,000 and $11,941,000, respectively, of accrued interest expense on the 12
3/4% senior subordinated notes, and $1,172,000 and $703,000, respectively, of
accrued interest on the senior unsecured notes.
NOTE 5 -- DEBT
Debt at June 30, 2003, and December 31, 2002, is set forth below (dollar
amounts in thousands):
JUNE 30, DECEMBER 31,
2003 2002
----------------- ----------------
Short-term debt:
Revolving line of credit $ 18,112 $ 15,435
Secured, amortizing term notes 15,504 18,971
Senior, unsecured note 7,500 7,500
Senior subordinated notes 27,412 27,412
Junior subordinated notes 347 347
-------- ---------
Subtotal 68,875 69,665
Current portion of long-term debt 708 1,467
-------- ---------
Total short-term debt 69,583 71,132
-------- ---------
Long-term debt:
12% secured term note 1,001 1,119
Unsecured, amortizing term notes 15 643
Other 612 822
-------- ---------
Subtotal 1,628 2,584
Less current portion (708) (1,467)
-------- ---------
Total long-term debt 920 1,117
-------- ---------
Total debt $ 70,503 $ 72,249
======== =========
REVOLVING LINE OF CREDIT
The Company's revolving line of credit is currently scheduled to expire on
September 15, 2003. The Company is currently working with its primary secured
lenders on the documents for a new secured credit facility, which includes an
extension of its revolving line of credit until 2006. The Company can give no
assurance that it will be able to refinance the revolving line of credit.
At June 30, 2003, availability under the revolving line of credit totaled
$1,983,000, before outstanding checks of $1,631,000 were deducted. At June 30,
2003, loans outstanding under the revolving line of credit accrued interest at
one percent over the prime rate, which equated to 5.00%.
The loans outstanding under the Company's revolving line of credit are
collateralized by substantially all of the assets of the Company, including
accounts receivable, inventories, equipment, certain real estate, and the stock
of Lexington Rubber Group, Inc., a subsidiary of the Company.
- 7 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The lenders providing loans under the Company's revolving line of credit
have waived the cross-default provisions with respect to the defaults on the
senior subordinated notes and the senior, unsecured note through September 15,
2003.
SECURED, AMORTIZING TERM LOANS
Secured, amortizing term loans outstanding at June 30, 2003, and December
31, 2002, are set forth below (dollar amounts in thousands):
JUNE 30, DECEMBER 31,
2003 2002
----------- --------------
Term notes payable in equal monthly principal installments based on a 180-month
amortization schedule, final maturities in 2003, prime
rate plus 3/4% $ 1,871 $ 1,988
Term note payable in equal monthly principal installments based on
a 180-month amortization schedule, final maturity in 2003, prime
rate plus 3/4% 924 978
Term note payable in equal monthly principal installments based on
a 180-month amortization schedule, final maturity in 2003, prime
rate plus 3/4% 1,827 1,927
Term note payable in equal monthly principal installments, final
Maturity in 2003, prime rate - 45
Term note payable in equal monthly principal installments, final
Maturity in 2003, prime rate plus 1% - 10(1)
Term note payable in equal monthly principal installments, final
maturities in 2003, LIBOR plus 2 3/4% - 107
Term notes payable in equal monthly principal installments, final
maturities in 2004, LIBOR plus 2 3/4% 309 476
Term note payable in equal monthly principal installments, final
Maturity in 2004, prime rate and LIBOR plus 2 1/2% 250 386
Term notes payable in equal monthly principal installments, final
maturities in 2004, prime rate plus 1% 2,441(1) 3,846(1)
Term note payable in equal monthly principal installments, final
Maturity in 2005, LIBOR plus 2 1/2% 467 579
Term note payable in equal monthly principal installments, final
Maturity in 2005, prime rate plus 1% 488(1) 609(1)
Term note payable in equal monthly principal installments, final
Maturity in 2006, prime rate 228 270
Term notes payable in equal monthly principal installments, final
maturities in 2006, prime rate plus 1% 4,143(1) 4,847(1)
Term notes payable in equal monthly installments, final maturity in
2007, prime rate plus 1% 2,556(1) 2,903(1)
---------- ----------
$ 15,504 $ 18,971
========== ==========
(1) Maturity date can be accelerated by the lender if the Company's revolving
line of credit expires prior to the stated maturity date of the term loan.
The revolving line of credit is currently scheduled to mature on September
15, 2003.
- 8 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
At June 30, 2003, and December 31, 2002, the secured, amortizing term notes
were classified as short-term debt because the Company's lenders had granted
waivers, for a period of less than one year, of the cross-default provisions of
such term notes with respect to the default on the senior subordinated notes and
the senior, unsecured note or because the revolving line of credit was scheduled
to expire in less than one year.
The secured, amortizing term notes are collateralized by substantially all
of the assets of the Company, including accounts receivable, inventories,
equipment, certain real estate, and the stock of Lexington Rubber Group, Inc.
The lenders providing secured, amortizing term notes have waived the
cross-default provisions with respect to the defaults on the senior subordinated
notes and the senior, unsecured note through September 15 or October 31, 2003.
SENIOR, UNSECURED NOTE
The senior, unsecured note, which matured on April 30, 2002, is senior in
right of payment to the senior subordinated notes and the junior subordinated
notes. The senior, unsecured note currently bears interest at 12 1/2% per annum.
On April 30, 2002, the Company did not make the payments of principal and
interest then due on the senior, unsecured note in the amounts of $7,500,000 and
$78,000, respectively, and the Company has not made any payments on the senior,
unsecured note since that date. At June 30, 2003, the accrued and unpaid
interest on the senior, unsecured note totaled $1,172,000. For more information
about the senior, unsecured note, refer to Note 1.
SENIOR SUBORDINATED NOTES
The senior subordinated notes, which matured on February 1, 2000, are
unsecured obligations of the Company that are subordinated in right of payment
to all of the Company's existing and future secured debt and to the payment of
the senior, unsecured note. The senior subordinated notes currently bear
interest at 12 3/4% per annum. On February 1, 2000, the Company did not make the
payments of principal and interest then due on the senior subordinated notes in
the amounts of $27,412,000 and $1,748,000, respectively, and the Company has not
made any payments on the senior subordinated notes since that date. At June 30,
2003, the accrued and unpaid interest on the senior subordinated notes totaled
$13,689,000. For more information about the senior subordinated notes, refer to
Note 1.
JUNIOR SUBORDINATED NOTES
The junior subordinated notes are due on November 1, 2003, and are
subordinated in right of payment to all existing and future secured debt of the
Company, the senior, unsecured note, and the senior subordinated notes. The
junior subordinated notes bear interest at 14% per annum. The holders of the
junior subordinated notes have deferred until November 1, 2003, the interest
payments that were due on or after February 1, 2000, and have waived the
cross-default provisions with respect to the default on the senior, unsecured
note and the senior subordinated notes. At June 30, 2003, the accrued and unpaid
interest on the junior subordinated notes totaled $221,000. For more information
on the junior subordinated notes, refer to Note 1.
- 9 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
12% SECURED TERM NOTE
The 12% secured term note is payable in sixty equal, monthly installments
of principal and interest that commenced on November 30, 2001. The 12% secured
term note has no cross-default provision with respect to defaults on any of the
Company's other debt.
RESTRICTIVE COVENANTS
Certain of the Company's financing arrangements contain covenants that
require the Company to maintain minimum levels of working capital, net worth,
and cash flow coverage. The covenants also place certain restrictions and
limitations on the Company's business and operations, including the incurrence
or assumption of additional debt, the level of past-due trade accounts payable,
the sale of all or substantially all of the Company's assets, the purchase of
property, plant, and equipment, the purchase of common stock, the redemption of
preferred stock, and the payment of cash dividends. In addition, most of the
Company's financing agreements include cross-default provisions.
From time to time, the Company's lenders have agreed to waive, amend, or
eliminate certain of the financial covenants contained in its various note
agreements in order to maintain or otherwise ensure the Company's current or
future compliance. During 2003, covenants requiring minimum levels of net worth
were amended in two of the Company's three financing agreements. In the event
that the Company is not in compliance with any of its covenants in the future
and its lenders do not agree to amend, waive, or eliminate those covenants, the
lenders would have the right to declare the borrowings owed to them to be due
and payable. For a more detailed discussion of recent amendments to and waivers
under the Company's various debt obligations, refer to Note 1.
NOTE 6 -- SERIES B PREFERRED STOCK
At June 30, 2003, there were outstanding 3,300 shares of the Company's $8
cumulative convertible preferred stock, series B, par value $100 per share. As a
result of the default on the senior subordinated notes, the Company has been
prohibited from making any dividend payments on, or redemptions of, the series B
preferred stock since February 2000. At June 30, 2003, the Company was in
arrears in the payment of fourteen dividends on the series B preferred stock in
the aggregate amount of $92,000 and in the redemption of 1,350 shares of series
B preferred stock for $270,000.
NOTE 7 -- INCOME TAXES
At June 30, 2003, and December 31, 2002, the Company's net deferred income
tax assets were fully offset by a valuation allowance. The income tax provisions
recorded during the three-month and six-month periods ended June 30, 2003 and
2002, consisted of estimated state income taxes payable.
NOTE 8 -- NET INCOME (LOSS) PER COMMON SHARE
The calculations of basic and diluted net income or loss per common share
for the three-month and six-month periods ended June 30, 2003 and 2002, are set
forth below (in thousands, except per share amounts). The pro forma conversion
of the Company's $8 cumulative convertible preferred stock, series B, was not
dilutive for the three-month or six-month periods ended June 30, 2003 and 2002.
As a result,
- 10 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
the calculations of diluted net income or loss per common share set forth below
do not reflect any pro forma conversion.
For purposes of calculating earnings per share, earnings are reduced by (1)
preferred stock dividend payments and (2) the amount by which payments made to
redeem preferred stock exceeded the par value of such shares. During the
three-month and six month periods ended June 30, 2003 and 2002, the Company did
not pay any dividends on, or redeem any shares of, the series B preferred stock.
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------- ---------------------
2003 2002 2003 2002
---- ---- ---- ----
Numerator-- income (loss) applicable to common
stockholders $ (674) $ 207 $ (843) $ (1,419)
======== ======== ======== =========
Denominator-- weighted average common shares 4,828 4,828 4,828 4,828
======== ======== ======== =========
Basic and diluted net income (loss) per common share $ (0.14) $ 0.04 $ (0.17) $ (0.29)
======== ======== ======== =========
- 11 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 9 -- SEGMENTS
Information relating to the Company's operating segments and its corporate
office for the three-month and six-month periods ended June 30, 2003 and 2002,
is summarized below (dollar amounts in thousands):
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------ ----------------------
2003 2002 2003 2002
---- ---- ---- ----
NET SALES:
Rubber Group $ 26,645 $ 26,161 $ 53,367 $ 50,114
Metals Group 4,228 6,835 9,889 13,126
--------- --------- -------- --------
Total net sales $ 30,873 $ 32,996 $ 63,256 $ 63,240
========= ========= ======== ========
INCOME (LOSS) FROM OPERATIONS:
Rubber Group $ 3,020 $ 3,449 $ 5,839 $ 5,939
Metals Group (1,259) (492) (1,842) (2,208)
--------- --------- -------- --------
Subtotal 1,761 2,957 3,997 3,731
Corporate office (648) (753) (1,246) (1,336)
--------- --------- -------- --------
Total income from operations $ 1,113 $ 2,204 $ 2,751 $ 2,395
========= ========= ======== ========
ASSETs:
Rubber Group $ 64,819 $ 68,723 $ 64,819 $ 68,723
Metals Group 21,666 24,843 21,666 24,843
--------- --------- -------- --------
Subtotal 86,485 93,566 86,485 93,566
Corporate office 6,099 4,739 6,099 4,739
--------- --------- -------- --------
Total assets $ 92,584 $ 98,305 $ 92,584 $ 98,305
========= ========= ======== ========
DEPRECIATION AND AMORTIZATION (1):
Rubber Group $ 1,805 $ 1,947 $ 3,680 $ 3,947
Metals Group 816 1,022 1,703 2,050
--------- --------- -------- --------
Subtotal 2,621 2,969 5,383 5,997
Corporate office 10 11 19 32
--------- --------- -------- --------
Total depreciation and amortization $ 2,631 $ 2,980 $ 5,402 $ 6,029
========= ========= ======== ========
CAPITAL EXPENDITURES (2):
Rubber Group $ 1,392 $ 903 $ 2,219 $ 1,566
Metals Group 443 244 619 359
--------- --------- -------- --------
Subtotal 1,835 1,147 2,838 1,925
Corporate office - - 2 -
--------- --------- -------- --------
Total capital expenditures $ 1,835 $ 1,147 $ 2,840 $ 1,925
========= ========= ======== ========
(1) Does not include amortization of deferred financing expenses, which totaled
$130,000 and $125,000 during the three-month periods ended June 30, 2003
and 2002, respectively, and $273,000 and $161,000 during the six-month
periods ended June 30, 2003 and 2002, respectively, which is included in
interest expense in the consolidated financial statements.
(2) Capital expenditures for the six-month period ended June 30, 2003, include
$106,000 of equipment purchased under a capital lease obligation.
- 12 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 10 -- PLANT CLOSURE
During the fourth quarter of 2001, the Company was notified that the Metal
Group's largest customer would cease purchasing components from the Metals Group
after December 31, 2001. As a result of the subsequent reduction in sales at the
Arizona facility, the Company closed the facility in 2002. At June 30, 2003, the
book value of the remaining Arizona assets totaled $1,994,000, including
$1,669,000 for the land and building, which is currently being offered for sale.
The following table sets forth certain operating data of the Arizona
facility for the three-month and six-month periods ended June 30, 2003 and 2002
(dollar amounts in thousands).
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------ ---------------------
2003 2002 2003 2002
---- ---- ---- ----
Net sales $ - $ - $ - $ 332
======== ======== ======== ========
Operating loss before nonrecurring costs $ (156) $ (235) $ (311) $ (936)
-------- -------- -------- --------
Nonrecurring plant closure costs:
Severance and other employee termination costs - - - 246
Asset relocation costs - 43 - 209
Other costs - 44 - 154
-------- -------- -------- --------
Subtotal - 87 - 609
-------- -------- -------- --------
Operating loss $ (156) $ (322) $ (311) $ (1,545)
======== ======== ======== ========
Depreciation included in operating loss $ 49 $ 101 $ 103 $ 366
======== ======== ======== ========
The operating loss recorded during the three-month and six-month periods
ended June 30, 2003, and the three-month period ended June 30, 2002, resulted
primarily from the ongoing cost of maintaining, insuring, protecting, and
depreciating the building and the remaining equipment in the facility. During
the six-month period ended June 30, 2002, the operating loss, excluding the
plant closure costs, resulted primarily from the underabsorption of operating
costs due to minimal sales and poor operating efficiencies while the facility
was being shut down, and, to a lesser extent, from the cost of maintaining,
insuring, protecting, and depreciating the facility and the remaining equipment.
- 13 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 11 -- OTHER COMPREHENSIVE INCOME
Comprehensive income for the three-month and six-month periods ended June
30, 2003 and 2002, net of applicable income tax, if any, is set forth below:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------ ---------------------
2003 2002 2003 2002
---- ---- ---- ----
Net income (loss) $ (674) $ 207 $ (843) $ (1,419)
Other comprehensive income:
Unrealized gain on marketable securities - 303 - 373
-------- -------- -------- --------
Comprehensive income $ (674) $ 510 $ (843) $ (1,046)
======== ======== ======== ========
- 14 -
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Some of our statements in this Form 10-Q, including this item, are
"forward-looking statements," as that term is defined in the Private Securities
Litigation Reform Act of 1995. Forward-looking statements usually can be
identified by our use of words like "believes," "expects," "may," "will,"
"should," "anticipates," "estimates," "projects," or the negative thereof. They
may be used when we discuss strategy, which typically involves risk and
uncertainty, and they generally are based upon projections and estimates rather
than historical facts and events.
Forward-looking statements are subject to a number of risks and
uncertainties that could cause our actual results or performance to be
materially different from the future results or performance expressed in or
implied by those statements. Some of those risks and uncertainties are:
- increases and decreases in business awarded to us by our customers,
- unanticipated price reductions for our products as a result of
competition,
- unanticipated operating results and cash flows,
- increases or decreases in capital expenditures,
- changes in economic conditions,
- strength or weakness in the North American automotive market,
- changes in the competitive environment,
- changes in interest rates and the credit and securities market,
- product warranty claims,
- labor interruptions at our facilities or at our customers' facilities,
- the impact on our operations of the defaults on our indebtedness, and
- our inability to obtain additional borrowings or to refinance our
existing indebtedness.
Because we have substantial borrowings for a company our size and because
those borrowings require us to make substantial interest and principal payments,
any negative event may have a greater adverse effect upon us than it would have
upon a company of the same size that has less debt.
Our results of operations for any particular period are not necessarily
indicative of the results to be expected for any one or more succeeding periods.
The use of forward-looking statements should not be regarded as a representation
that any of the projections or estimates expressed in or implied by those
forward-looking statements will be realized, and actual results may vary
materially. We cannot assure you that any of the forward-looking statements
contained herein will prove to be accurate. All forward-looking statements are
expressly qualified by the discussion above.
Our consolidated financial statements have been presented on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. Our ability to refinance,
extend, amend, or exchange substantially all of its outstanding debt, as more
- 15 -
fully described below, is subject to risks and uncertainties. As a result, there
is substantial doubt about our ability to continue as a going concern. The
consolidated financial statements do not include any adjustments to the amounts
or classification of assets or liabilities to reflect this uncertainty.
RESULTS OF OPERATIONS-- SECOND QUARTER OF 2003 VERSUS SECOND QUARTER OF 2002
The following table sets forth our consolidated operating results for
the three-month periods ended June 30, 2003 and 2002, and the reconciliation of
income from operations to earnings before interest, taxes, depreciation, and
amortization, which is commonly referred to as EBITDA (dollar amounts in
thousands):
THREE MONTHS ENDED JUNE 30
----------------------------------
2003 2002
--------------- ---------------
Net sales $30,873 100.0% $32,996 100.0%
Cost of sales 27,587 89.4 28,356 85.9
------- ----- ------- -----
Gross profit 3,286 10.6 4,640 14.1
Selling and administrative expenses 2,173 7.0 2,349 7.1
Plant closure costs (1) -- -- 87 0.3
------- ----- ------- -----
Income from operations 1,113 3.6 2,204 6.7
Add back: depreciation and amortization (2) 2,631 8.5 2,980 9.0
------- ----- ------- -----
EBITDA (3) $ 3,744 12.1% $ 5,184 15.7%
======= ===== ======= =====
Net cash provided by operating
activities (4) $ 4,467 14.5% $ 3,522 10.7%
======= ===== ======= =====
(1) In 2002, we closed our metal machining facility in Casa Grande, Arizona. In
connection with the closing, we recorded plant closing costs of $87,000
during the second quarter of 2002. For more information, refer to the
discussion of the results of operations of the Metals Group in this
section.
(2) Does not include amortization of deferred financing expenses, which totaled
$130,000 and $125,000 during the second quarters of 2003 and 2002,
respectively, and which is included in interest expense in the consolidated
financial statements.
(3) EBITDA is not a measure of performance under accounting principles
generally accepted in the United States and should not be considered in
isolation or used as a substitute for income from operations, net income,
net cash provided by operating activities, or other operating or cash flow
statement data prepared in accordance with generally accepted accounting
principles. We have presented EBITDA here and elsewhere in this Form 10-Q
because this measure is used by investors, as well as our own management,
to evaluate the operating
-16-
performance of our business, including its ability to incur and to service
debt. Our definition of EBITDA may not be the same as the definition of
EBITDA used by other companies.
(4) The calculation of net cash provided by operating activities is detailed in
the consolidated statement of cash flows that is part of our consolidated
financial statements in Part I, Item 1.
Our net sales for the second quarter of 2003 were $30,873,000, compared
to net sales of $32,996,000 for the second quarter of 2002, a decrease of
$2,123,000, or 6.4%. The decrease in net sales was principally the result of
decreased net sales of diecast components and machined metal components, offset,
in part, by increased sales of rubber components. EBITDA for the second quarter
of 2003 was $3,744,000, or 12.1% of net sales, compared to EBITDA of $5,184,000,
or 15.7% of net sales, for 2002. The decrease in EBITDA was primarily a result
of a $973,000 decrease in EBITDA at our Metals Group.
Cash flows from operations for the second quarter of 2003 totaled
$4,467,000, compared to $3,522,000 for the second quarter of 2002. Please refer
to the Consolidated Statement of Cash Flows in Part I, Item 1 for a comparison
of the changes in our individual operating activities and to our discussion of
operating activities under the caption "Liquidity and Capital Resources" in this
Part I, Item 2.
The discussion that follows sets forth our analysis of the operating
results of the Rubber Group, the Metals Group, and the corporate office for the
three-month periods ended June 30, 2003 and 2002.
RUBBER GROUP
The Rubber Group manufactures silicone and organic rubber components
primarily for automotive industry customers. Any significant reduction in the
level of activity in the automotive industry may have a material adverse effect
on the results of operations of the Rubber Group and on our company taken as a
whole.
The following table sets forth the operating results of the Rubber
Group for the three-month periods ended June 30, 2003 and 2002, and the
reconciliation of the Rubber Group's income from operations to its EBITDA
(dollar amounts in thousands):
THREE MONTHS ENDED JUNE 30
----------------------------------
2003 2002
--------------- ---------------
Net sales $26,645 100.0% $26,161 100.0%
Cost of sales 22,472 84.3 21,515 82.2
------- ----- ------- -----
Gross profit 4,173 15.7 4,646 17.8
Selling and administrative expenses 1,153 4.3 1,197 4.6
------- ----- ------- -----
Income from operations 3,020 11.3 3,449 13.2
Add back depreciation and amortization 1,805 6.8 1,947 7.4
------- ----- ------- -----
EBITDA $ 4,825 18.1% $ 5,396 20.6%
======= ===== ======= =====
-17-
During the second quarter of 2003, net sales of the Rubber Group
increased by $484,000, or 1.9%, compared to the second quarter of 2002. This
increase was primarily due to increased unit sales of insulators for automotive
ignition wire sets and medical components, offset, in part, by reduced sales of
connector seals for automotive wiring systems and by price reductions on certain
automotive components.
Cost of sales as a percentage of net sales increased during the second
quarter of 2003 to 84.3% of net sales from 82.2% of net sales during the second
quarter of 2002, primarily because of increased costs for sorting and repair,
which were caused by quality problems encountered in the manufacture of a
certain type of connector seal. In July of 2003, we started to implement
improved manufacturing processes and automated inspection and repair equipment.
As a result, we anticipate that the additional sorting and repair costs will
start to abate during the third quarter of 2003. These increased costs were
offset, in part, by reduced depreciation and amortization expenses.
Selling and administrative expenses as a percentage of net sales were
unchanged during the second quarter of 2003, compared to the second quarter of
2002.
During the second quarter of 2003, income from operations totaled
$3,020,000, a decrease of $429,000, or 12.4%, compared to the second quarter of
2002. EBITDA for the second quarter of 2003 was $4,825,000, or 18.1% of net
sales, compared to $5,396,000, or 20.6% of net sales, during the second quarter
of 2002.
METALS GROUP
The Metals Group manufactures aluminum die castings and machines
components from aluminum, brass, and steel bars, primarily for automotive
industry customers. Any material reduction in the level of activity in the
automotive industry may have a material adverse effect on the results of
operations of the Metals Group and on our company taken as a whole.
The following table sets forth the operating results of the Metals
Group for the three-month periods ended June 30, 2003 and 2002, and the
reconciliation of the Metals Group's income from operations to its EBITDA
(dollar amounts in thousands):
THREE MONTHS ENDED JUNE 30
-------------------------------------
2003 2002
---------------- ----------------
Net sales $ 4,228 100.0% $ 6,835 100.0%
Cost of sales 5,115 121.0 6,841 100.1
------- ----- ------- -----
Gross profit (loss) (887) (21.0) (6) (0.1)
Selling and administrative expenses 372 8.8 399 5.8
Plant closure costs -- -- 87 1.3
------- ----- ------- -----
Income (loss) from operations (1,259) (29.8) (492) (7.2)
Add back depreciation and amortization 816 19.3 1,022 15.0
------- ----- ------- -----
EBITDA $ (443) (10.5) $ 530 7.8%
======= ===== ======= =====
-18-
During the second quarter of 2003, net sales of the Metals Group
decreased by $2,607,000, or 38.1%, compared to the second quarter of 2002. The
decrease resulted from reduced sales of diecast and machined metal components,
primarily due to the off-shore sourcing of certain diecast components and the
loss of a high-volume machined metal component because the customer converted
the part to a stamped metal component.
Cost of sales, as a percentage of net sales increased to 121.0% of net
sales during the second quarter of 2003 from 100.1% of net sales during the
second quarter of 2002, primarily because of the affect of fixed, or partially
fixed, manufacturing expenses during a period of low sales volume. During the
second quarter of 2003, the impact of the fixed, or partially fixed,
manufacturing costs was offset, in part, by reduced depreciation and
amortization expenses.
Selling and administrative expenses as a percentage of net sales
increased during the second quarter of 2003 compared to the second quarter of
2002, primarily because of the reduced sales levels.
During the fourth quarter of 2001, we were notified that the Metal
Group's largest customer would cease purchasing components from the Metals Group
after December 31, 2001. As a result of the reduction in sales at the Arizona
facility, we closed the facility in 2002. At June 30, 2003, the book value of
the remaining Arizona assets totaled $1,994,000, including $1,656,000 for the
land and building, which is currently being offered for sale.
The following table sets forth certain operating data of the Arizona
facility for the three-month periods ended June 30, 2003 and 2002 (dollar
amounts in thousands):
THREE MONTHS ENDED
JUNE 30
--------------
2003 2002
------ -----
Net sales $ -- $--
====== =====
Operating loss before plant closure costs $ (156) $(235)
------ -----
Nonrecurring plant closure costs:
Severance and other employee termination costs -- --
Asset relocation costs -- 43
Other costs -- 44
------ -----
Subtotal -- 87
------ -----
Operating loss $ (156) $(322)
====== =====
Depreciation included in operating loss $ 49 $ 101
====== =====
During the second quarters of 2003 and 2002, the operating loss,
excluding plant closure costs, if any, resulted primarily from the ongoing cost
to maintain, insure, protect, and depreciate the building and the remaining
equipment in the facility.
During the second quarter of 2003, the loss from operations was
$1,259,000 compared to a loss from operations of $492,000 during the second
quarter of 2002. EBITDA for the second quarter of 2003 was a negative $443,000,
or 10.5% of net sales, a decrease of $973,000, compared to the second quarter of
2002.
-19-
PLANT CLOSURE COSTS
For a discussion of plant closure costs please refer to our discussion
of the Metals Group above.
CORPORATE OFFICE
Corporate office expenses, which are not included in the operating
results of the Rubber Group or the Metals Group, represent administrative
expenses incurred primarily at our New York and Cleveland offices. Corporate
office expenses are consolidated with the selling and administrative expenses of
the Rubber Group and the Metals Group in our consolidated financial statements.
The following table sets forth the operating results of the corporate
office for the three-month periods ended June 30, 2003 and 2002, and the
reconciliation of the loss from operations to EBITDA (dollar amounts in
thousands):
THREE MONTHS ENDED
JUNE 30
--------------
2003 2002
----- -----
Loss from operations $(648) (753)
Add back depreciation and amortization 10 11
----- -----
EBITDA $(638) $(742)
===== =====
During the second quarter of 2003, corporate office expenses decreased
compared to the second quarter of 2002, primarily because of reduced accruals
for incentive compensation.
INTEREST EXPENSE
During the second quarters of 2003 and 2002, interest expense totaled
$1,760,000 and $1,967,000, respectively, which included amortization of deferred
financing expenses of $130,000 and $125,000, respectively.
INCOME TAX PROVISION
At June 30, 2003, and December 31, 2002, our net deferred income tax
assets were fully offset by a valuation allowance. The income tax provisions
recorded during the three-month periods ended June 30, 2003 and 2002, consisted
of estimated state income taxes payable.
-20-
RESULTS OF OPERATIONS-- FIRST SIX MONTHS OF 2003 VERSUS FIRST SIX MONTHS OF 2002
The following table sets forth our consolidated operating results for
the six-month periods ended June 30, 2003 and 2002 and the reconciliation of
income from operations to earnings before interest, taxes, depreciation, and
amortization, which is commonly referred to as EBITDA (dollar amounts in
thousands):
SIX MONTHS ENDED JUNE 30
------------------------------------
2003 2002
---------------- ----------------
Net sales $63,256 100.0% $63,240 100.0%
Cost of sales 56,240 88.9 55,632 88.0
------- ------ ------- ------
Gross profit 7,016 11.1 7,608 12.0
Selling and administrative expenses 4,265 6.7 4,604 7.3
Plant closure costs (1) -- -- 609 0.9
------- ------ ------- ------
Income from operations 2,751 4.4 2,395 3.8
Add back depreciation and amortization (2) 5,402 8.5 6,029 9.5
------- ------ ------- ------
EBITDA (3) $ 8,153 12.9% $ 8,424 13.3%
======= ====== ======= ======
Net cash provided by operating activities (4) $ 4,857 7.7% $ 5,132 8.1%
======= ====== ======= ======
(1) During the first quarter of 2002, we closed our metal machining facility in
Casa Grande, Arizona. During the first six months of 2002, we incurred
charges of $609,000 to close the facility. For more information, refer to
the discussion of the results of operations of the Metals Group in this
section.
(2) Does not include amortization of deferred financing expenses, which totaled
$273,000 and $161,000 during the first six months of 2003 and 2002,
respectively, and which is included in interest expense in the consolidated
financial statements.
(3) EBITDA is not a measure of performance under accounting principles
generally accepted in the United States and should not be considered in
isolation or used as a substitute for income from operations, net income,
net cash provided by operating activities, or other operating or cash flow
statement data prepared in accordance with generally accepted accounting
principles. We have presented EBITDA here and elsewhere in this Form 10-Q
because this measure is used by investors, as well as our own management,
to evaluate the operating performance of our business, including its
ability to incur and to service debt. Our definition of EBITDA may not be
the same as the definition of EBITDA used by other companies.
(4) The calculation of net cash provided by operating activities is detailed in
the consolidated statement of cash flows that is part of our consolidated
financial statements in Part I, Item 1.
-21-
Our net sales for the first six months of 2003 were $63,256,000,
compared to net sales of $63,240,000 for the first six months of 2002, an
increase of $16,000. EBITDA for the first six months of 2003 was $8,153,000, or
12.9% of net sales, compared to $8,424,000, or 13.3% of net sales, for the first
six months of 2002.
The discussion that follows sets forth our analysis of the operating
results of the Rubber Group, the Metals Group, and the corporate office for the
six-month periods ended June 30, 2003 and 2002.
RUBBER GROUP
The Rubber Group manufactures silicone and organic rubber components
primarily for automotive industry customers. Any material reduction in the level
of activity in the automotive industry may have a material adverse effect on the
results of operations of the Rubber Group and on our company taken as a whole.
The following table sets forth the operating results of the Rubber
Group for the six-month periods ended June 30, 2003 and 2002, and the
reconciliation of the Rubber Group's income from operations to its EBITDA
(dollar amounts in thousands):
SIX MONTHS ENDED JUNE 30
------------------------------------
2003 2002
---------------- ----------------
Net sales $53,367 100.0% $50,114 100.0%
Cost of sales 45,241 84.8 41,851 83.5
------- ------ ------- ------
Gross profit 8,126 15.2 8,263 16.5
Selling and administrative expenses 2,287 4.3 2,324 4.6
------- ------ ------- ------
Income from operations 5,839 10.9 5,939 11.9
Add back depreciation and amortization 3,680 6.9 3,947 7.8
------- ------ ------- ------
EBITDA $ 9,519 17.8% $ 9,886 19.7%
======= ====== ======= ======
During the first six months of 2003, net sales of the Rubber Group
increased by $3,253,000, or 6.5%, compared to the first six months of 2002. This
increase was primarily due to increased unit sales of insulators for automotive
ignition wire sets and components for medical devices, offset, in part, by price
reductions on certain automotive components.
Cost of sales as a percentage of net sales increased during the first
six months of 2003 to 84.8% of net sales from 83.5% of net sales for the first
six months of 2002, primarily because of increased costs for sorting and repair,
which were caused by quality problems encountered in the manufacture of a
certain type of connector seal. In July 2003, we started to implement improved
manufacturing processes and automated inspection and repair equipment. As a
result, we anticipate that the additional sorting and repair costs will start to
abate during the third quarter of 2003. During the first six months of 2003,
increased costs for sorting and repair were offset, in part, by reduced
depreciation and amortization expenses.
-22-
Selling and administrative expenses as a percentage of net sales
decreased during the first six months of 2003, compared to the first six months
of 2002, primarily because these expenses are fixed or partially fixed in
nature.
During the first six months of 2003, income from operations totaled
$5,839,000, a decrease of $100,000, or 1.7%, compared to the first six months of
2002. EBITDA for the first six months of 2003 was $9,519,000, or 17.8% of net
sales, compared to $9,886,000, or 19.7% of net sales, for the first six months
of 2002.
METALS GROUP
The Metals Group manufactures aluminum die castings and machines
components from aluminum, brass, and steel bars, primarily for automotive
industry customers. Any material reduction in the level of activity in the
automotive industry may have a material adverse effect on the results of
operations of the Metals Group and on our company taken as a whole.
The following table sets forth the operating results of the Metals
Group for the six-month periods ended June 30, 2003 and 2002, and the
reconciliation of the Metals Group's income from operations to its EBITDA
(dollar amounts in thousands):
SIX MONTHS ENDED JUNE 30
-----------------------------------------
2003 2002
------------------ ------------------
Net sales $ 9,889 100.0% $ 13,126 100.0%
Cost of sales 10,999 111.2 13,781 105.0
-------- ------ -------- ------
Gross profit (loss) (1,110) (11.2) (655) (5.0)
Selling and administrative expenses 732 7.4 944 7.2
Plant closure costs -- -- 609 4.6
-------- ------ -------- ------
Income (loss) from operations (1,842) (18.6) (2,208) (16.8)
Add back depreciation and amortization 1,703 17.2 2,050 15.6
-------- ------ -------- ------
EBITDA $ (139) (1.4)% $ (158) (1.2)%
======== ====== ======== ======
As previously discussed, during the fourth quarter of 2001, we were
notified that the Metal Group's largest customer would cease purchasing
components from the Metals Group after December 31, 2001. As a result of the
reduction in sales at the Arizona facility we closed the facility in 2002.
-23-
The following table sets forth certain operating data of the Arizona
facility for the first six months of 2003 and 2002 (dollar amounts in
thousands):
SIX MONTHS ENDED
JUNE 30
------------------
2003 2002
------- -------
Net sales $ -- $ 332
======= =======
Operating loss before plant closure costs $ (311) $ (936)
------- -------
Plant closure costs:
Severance and other employee termination costs -- 246
Asset relocation costs -- 209
Other costs -- 154
------- -------
-- 609
------- -------
Operating loss (311) (1,545)
Add back depreciation and amortization 103 366
------- -------
EBITDA $ (208) $(1,179)
======= =======
During 2002, operating losses other than plant closure costs resulted
primarily from the underabsorption of operating costs incurred due to minimal
sales and poor operating efficiencies while the facility was being shut down,
and, to a lesser extent, from the cost of maintaining, insuring, protecting, and
depreciating the facility and the equipment remaining in the facility. The
operating loss during the first six months of 2003, resulted primarily from the
ongoing cost to maintain, insure, protect, and depreciate the building and the
remaining equipment in the facility.
During the first six months of 2003, net sales of the Metals Group
decreased by $3,237,000, or 24.7%, compared to the first six months of 2002. The
decrease resulted from reduced sales of diecast and machined metal components,
primarily due to the off-shore sourcing of certain diecast components and the
loss of a high-volume machined metal component because the customer converted
the part to a stamped metal component.
Cost of sales as a percentage of net sales increased during the first
six months of 2003 to 111.2% of net sales from 105.0% of net sales during the
first six months of 2002, primarily due to the affect of fixed, or partially
fixed, manufacturing expenses during a period of low sales volume. During the
first six months of 2003, the impact of fixed, or partially fixed, manufacturing
costs was offset, in part, by reduced depreciation and amortization expenses.
Selling and administrative expenses as a percentage of net sales
increased during the first six months of 2003 compared to the first six months
of 2002, primarily because of the reduced sales level.
During the first six months of 2003, the loss from operations was
$1,842,000, compared to a loss from operations of $2,208,000 during the first
six months of 2002. Excluding the entire loss incurred at the Arizona facility
during the first six months of 2003, the loss from operations during the first
six months of 2003 was $1,531,000.
-24-
CORPORATE OFFICE
Corporate office expenses, which are not included in the operating
results of the Rubber Group or the Metals Group, represent administrative
expenses incurred primarily at our New York and Cleveland offices. Corporate
office expenses are consolidated with the selling and administrative expenses of
the Rubber Group and the Metals Group in our consolidated financial statements.
The following table sets forth the operating results of the corporate
office for the six-month periods ended June 30, 2003 and 2002, and the
reconciliation of the loss from operations to EBITDA (dollar amounts in
thousands):
SIX MONTHS ENDED
JUNE 30
-------------------
2003 2002
------- -------
Loss from operations $(1,246) $(1,336)
Add back depreciation and amortization 19 32
------- -------
EBITDA $(1,227) $(1,304)
======= =======
During the first six months of 2003, corporate office expenses
decreased compared to the first six months of 2002, primarily because of reduced
accruals for incentive compensation.
INTEREST EXPENSE
During the first six months of 2003 and 2002, interest expense totaled
$3,540,000 and $3,763,000, respectively, which included amortization of deferred
financing expenses of $273,000 and $161,000, respectively. The decrease in
interest expense was caused primarily by lower rates of interest on our floating
rate indebtedness and a reduction in the average amount of outstanding
indebtedness.
INCOME TAX PROVISION
At June 30, 2003, and December 31, 2002, our net deferred income tax
assets were fully offset by a valuation allowance. The income tax provision
recorded during the six-month periods ended June 30, 2003 and 2002 consisted of
estimated state income taxes payable.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES
During the first six months of 2003, our operating activities provided
$4,857,000 of cash. Accounts receivable increased by $3,217,000. The increase
was caused primarily by an increase in net sales during May and June 2003
compared to November and December 2002, and, at December 31, 2002, a payment by
one customer of approximately $450,000 of invoices in advance of their scheduled
due dates. Prepaid expenses and other current assets decreased by $642,000,
primarily because of a reduction in the amount of unbilled tooling being
manufactured or purchased by us for sale to our customers. Accrued interest
expense increased by $2,229,000, reflecting additional interest accrued during
the first six months of 2003 on our senior, unsecured note, our senior
subordinated notes, and our junior subordinated notes.
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INVESTING ACTIVITIES
During the first six months of 2003, our investing activities used
$2,680,000 of cash, primarily for capital expenditures. Capital expenditures
attributable to the Rubber Group, the Metals Group, and the corporate office
totaled $2,113,000, $619,000, and $2,000, respectively, primarily for the
purchase of equipment. We presently project that capital expenditures during
2003 will total approximately $6,791,000, substantially all of which will be for
the purchase of equipment. Capital expenditures for the Rubber Group, the Metals
Group, and the corporate office are projected to total approximately $5,770,000,
$1,015,000, and $6,000, respectively, during 2003. At June 30, 2003, we had
outstanding commitments to purchase property, plant, and equipment of
approximately $946,000.
FINANCING ACTIVITIES
During the first six months of 2003, our financing activities used
$2,286,000 of cash. During the first six months of 2003, we made payments on our
amortizing term notes totaling $4,529,000, and we increased the net borrowings
under our revolving line of credit by $2,677,000.
LIQUIDITY
We finance our operations with cash from operating activities and a
variety of financing arrangements, including term loans and loans under our
revolving line of credit. Our ability to borrow under our revolving line of
credit is subject to certain availability formulas based on the levels of our
accounts receivable and inventories. Our revolving line of credit is currently
scheduled to expire on September 15, 2003. At August 12, 2003 the aggregate
principal amount outstanding under our revolving line of credit was $15,829,000.
We are currently working with our primary secured lenders on the documents for a
new secured credit facility, which include an extension of our revolving line of
credit until 2006. We can give no assurance, however, that we will be able to
refinance the revolving line of credit on favorable terms, or at all. At June
30, 2003, availability under our revolving line of credit totaled $1,938,000
before outstanding checks of $1,631,000 were deducted.
Substantially all of our assets are pledged as collateral for various
of our borrowings. A number of our financing arrangements contain covenants that
require us to maintain minimum levels of working capital, net worth, and cash
flow coverage and other covenants that place certain restrictions on our
business and operations, including covenants relating to the incurrence or
assumption of additional debt, the level of past-due trade accounts payable, the
sale of all or substantially all of our assets, the purchase of property, plant,
and equipment, the purchase of common stock, the redemption of preferred stock,
and the payment of cash dividends. In addition, substantially all of our
financing arrangements include cross-default provisions.
From time to time, our lenders have agreed to waive, amend, or
eliminate certain of the financial covenants contained in our various financing
agreements in order to maintain or otherwise ensure our current or future
compliance. During 2003, covenants requiring minimum levels of net worth were
amended in two of our three financing agreements. In the event that we are not
in compliance with any of our covenants in the future and our lenders do not
agree to amend, waive, or eliminate those covenants, the lenders would have the
right to declare the borrowings under their financing agreements to be due and
payable.
We are in default in the payment of our senior subordinated notes and
our senior, unsecured note, which have outstanding principal amounts of
$27,412,000 and $7,500,000, respectively, and accrued interest, as of June 30,
2003, of $13,689,000 and $1,172,000, respectively. In addition, our revolving
line
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of credit is currently scheduled to expire on September 15, 2003, we have
$347,000 of junior subordinated notes that are scheduled to mature during 2003,
and we have $7,656,000 of scheduled principal payments on our secured,
amortizing term notes during the last six months of 2003. We estimate that, at
existing contractual and market rates, the interest expense on all of our debt
during 2003 will be approximately $7,000,000. Interest paid during the first six
months of 2003 and 2002 totaled $1,310,000 and $1,730,000, respectively.
We had a net working capital deficit of $66,760,000 at June 30, 2003,
compared to a net working capital deficit of $68,070,000 at December 31, 2002.
The net working capital deficit exists primarily because the majority of our
debt is in default or subject to short-term waivers of cross defaults. As
discussed in more detail below, we are in the process of negotiating extensions
or refinancings of all of our matured and maturing debt, although there can be
no assurance that we will be successful in this effort. If our debt were
refinanced on the terms that are set forth below, we estimate that our monthly
cash interest expense would be approximately $610,000.
We have been in default on our 12 3/4% senior subordinated notes since
February 1, 2000, when we did not make the payments of principal, in the amount
of $27,412,000, and interest, in the amount of $1,748,000, that were due on that
date. On July 10, 2002, we commenced an exchange offer for the 12 3/4% senior
subordinated notes. The exchange offer was amended on March 7, 2003. If the
amended exchange offer is consummated, at least 99% of the 12 3/4% senior
subordinated notes will be exchanged for new 11 1/2% senior subordinated notes
due August 1, 2007, in a principal amount equal to the principal amount of the
12 3/4% senior subordinated notes being exchanged plus the accrued and unpaid
interest thereon through the day before the date the amended exchange offer is
consummated, which accrued interest will total $520.979 for each $1,000
principal amount of 12 3/4% senior subordinated notes, assuming the amended
exchange offer is consummated on September 2, 2003. Interest on the 11 1/2%
senior subordinated notes will accrue from the date the amended exchange offer
is consummated, and will be payable on each February 1, May 1, August 1, and
November 1. Each $1,000 principal amount of 11 1/2% senior subordinated notes
will be issued together with warrants to purchase ten shares of common stock at
a price of $3.50 per share at any time from January 1, 2004, through August 1,
2007. If the amended exchange offer is consummated, we will pay a participation
fee of 3% of the principal amount of 12 3/4% senior subordinated notes that are
exchanged. Our senior, secured lenders have waived the cross default provisions
with respect to the default on the senior subordinated notes through either
September 15, 2003, or October 31, 2003, and the holders of the junior
subordinated notes have waived such cross-default provisions through November 1,
2003. We plan to extend the expiration date of the amended exchange offer, which
is currently August 14, 2003. One of the conditions to the consummation of the
amended exchange offer is the tender for exchange of at least 99% of the senior
subordinated notes. As of August 12, 2003, we had received tenders of
$27,209,000 principal amount of 12 3/4% senior subordinated notes, or 99.3% of
the notes. There are additional conditions to the consummation of the amended
exchange offer that may not be satisfied by the expiration date.
We have reached an agreement with the holders of our 14% junior
subordinated notes on the terms of a restructuring of those notes. If the
restructuring is completed, we will exchange new 12 1/2% junior subordinated
notes due November 1, 2007, for the existing 14% junior subordinated notes, and
the accrued interest on the 14% junior subordinated notes for the period
November 1, 1999, through the day before the restructuring is consummated, which
will total $221,000, assuming the restructuring is consummated on September 2,
2003, will be converted into shares of our common stock at a price of $2.27 per
share. Interest on the 12 1/2% junior subordinated notes will accrue from the
date the restructuring is consummated, and will be payable on each February 1,
May 1, August 1, and November 1. Each $1,000 principal amount of 12 1/2% junior
subordinated notes will be issued with warrants to purchase ten shares of common
stock at a price of $3.50 per share at any time from
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January 1, 2004, through November 1, 2007. If the restructuring is completed, we
will also pay a participation fee of 3% of the principal amount of 14% junior
subordinated notes.
We have been in default on our senior, unsecured note since April 30,
2002, when we did not make the payments of principal, in the amount of
$7,500,000, and the interest, in the amount of $78,000, that were due on that
date. If the other aspects of the financial restructuring program are completed,
we have proposed to repurchase the senior, unsecured note for $5,550,000 in cash
plus interest on that amount from November 1, 2002, to the date the amended
exchange offer is consummated, at the prime rate. Our senior, secured lenders
have waived the cross default provisions with respect to the default on the
senior, unsecured note through either September 15, 2003, or October 31, 2003,
and the holders of the junior subordinated notes have waived such cross-default
provisions through November 1, 2003.
We are currently working with our primary secured lenders on the
documents for a new senior, secured credit facility.
We can give no assurance that we will be able to consummate the amended
exchange offer, restructure the senior, unsecured note, or refinance our senior,
secured credit facility on satisfactory terms. If we are unable to do so, we may
choose to file a voluntary petition under the federal bankruptcy code in order
to effect a debt restructuring on terms substantially similar to those discussed
above, or on other terms. Representatives of the four largest holders of the
senior subordinated notes, who hold in the aggregate approximately 75% of the
notes, have indicated that, if the documentation for the new senior, secured
credit facility cannot be completed promptly, they may demand that we file a
voluntary petition under the federal bankruptcy code or, in the alternative,
they may choose to file an involuntary petition against us in order to
accomplish a debt restructuring, in which case we would have twenty days to
respond by filing a voluntary petition or seeking the withdrawal or dismissal of
such involuntary petition. Although we believe that such a debt restructuring
could be accomplished without material disruption to our operations, any such
proceeding involves considerable risks and uncertainties and could have a
material adverse effect on our business, results of operations, cash flows, and
financial position. The consolidated financial statements do not include any
adjustments to the amounts or classifications of assets or liabilities to
reflect those risks.
RECENTLY ISSUED ACCOUNTING STANDARDS
STATEMENT OF FINANCIAL ACCOUNTING STANDARD NO. 150, ACCOUNTING FOR CERTAIN
FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY
In May 2003, the Financial Accounting Standards Board issued statement
of Financial Accounting Standard No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity" ("FAS 150").
This Statement establishes standards for classifying and measuring as
liabilities certain financial instruments that embody obligations of the issuer
and have characteristics of both liabilities and equity. This Statement is
effective for financial instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. We have not yet determined the impact, if any,
that FAS 150 will have on the company's results of operations or financial
position.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not invest in or trade market risk sensitive instruments. We also
do not have any foreign operations or any significant amount of foreign sales
and, therefore, we believe that our exposure to foreign currency exchange rate
risk is minimal.
At June 30, 2003, we had $33,715,000 of outstanding floating-rate debt
at interest rates equal to either LIBOR plus 2 1/2%, LIBOR plus 2 3/4%, the
prime rate, the prime rate plus 3/4%, or the prime rate plus 1%. Currently we do
not purchase derivative financial instruments to hedge or reduce our interest
rate risk. As a result, changes in either LIBOR or the prime rate affect the
rates at which we borrow funds under these agreements.
At June 30, 2003, we had $36,788,000 of outstanding fixed-rate,
long-term debt with a weighted-average interest rate of 12.7%, of which
$34,912,000 has matured. We have received tenders of over 99% of our 12 3/4%
senior subordinated notes in exchange for new 11 1/2% senior subordinated notes
due August 1, 2007, in a principal amount equal to the principal amount of the
existing 12 3/4% senior subordinated notes being exchanged plus the accrued and
unpaid interest thereon through the day before the date the exchange is
effected, which accrued interest will total $520.979 for each $1,000 principal
amount of 12 3/4% senior subordinated notes exchanged, if the exchange offer is
consummated on September 2, 2003. The holders of our 14% junior subordinated
notes have agreed to exchange the $347,000 principal amount of those notes for
new 12 1/2% junior subordinated notes due November 1, 2007, and to convert the
accrued interest on the notes into shares of common stock. If the other aspects
of the financial restructuring are completed, we have proposed to repurchase our
$7,500,000 senior, unsecured note for $5,550,000 plus interest on that amount
from November 1, 2002, to the date of repurchase, at the prime rate.
If the financial restructuring is completed on the terms currently
negotiated, we estimate that our monthly cash interest expense would be
approximately $610,000 and that a one percentage point increase or decrease in
the applicable short-term rate would increase or decrease our monthly cash
interest expense by approximately $34,000.
For further information about our indebtedness, we recommend that you
also read Notes 1 and 5 of our consolidated financial statements in Part I, Item
1.
ITEM 4. CONTROLS AND PROCEDURES
An evaluation was performed under the supervision, and with the
participation, of our management, including one of our co-principal executive
officers and our chief financial officer, of the effectiveness of the design and
operation of our disclosure controls and procedures as of June 30, 2003. Based
on that evaluation, the co-principal executive officer and our chief financial
officer concluded that our disclosure controls and procedures are effective to
provide us with timely notice of material information required to be disclosed
in periodic reports filed with the U.S. Securities and Exchange Commission. We
also reviewed our internal controls, and there have been no significant changes
in our internal controls or in other factors that could significantly affect our
internal controls subsequent to the date of our previous evaluation.
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PART II. OTHER INFORMATION
ITEM 3. DEFAULTS ON SENIOR SECURITIES
(a) We are in default in respect of our 12 3/4% senior subordinated
notes because we did not make the payments of principal, in the amount of
$27,412,000, and interest, in the amount of $1,748,000, that were due on
February 1, 2000. For more information regarding the default in respect of the
12 3/4% senior subordinated notes, refer to "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity," in Part
I, Item 2, which is incorporated herein by reference.
We are in default in respect of our senior, unsecured note because we
did not make the payments of principal, in the amount of $7,500,000, and
interest, in the amount of $78,000, that were due on April 30, 2002. For more
information regarding the default in respect of the senior, unsecured note,
refer to "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity," in Part I, Item 2, which is incorporated
herein by reference.
(b) We did not pay dividends on our $8 cumulative convertible preferred
stock, series B, during the three-month or six-month periods ended June 30,
2003, in the aggregate amount of $6,600 and $13,200, respectively. As of August
13, 2003, the Company was in arrears in the payment of dividends in the amount
of $92,000 and in the making of mandatory redemptions in the amount of $270,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company was held on May 20,
2003.
The matters voted upon at the Annual Meeting and the results of the
voting on each matter are set forth below:
(1) A proposal to elect six directors (Messrs. William B. Conner,
Warren Delano, Kenneth I. Greenstein, Michael A. Lubin, and
Joseph A. Pardo, and Ms. Elizabeth Ruml).
Mr. Conner:
Votes for Mr. Conner 4,567,646
Votes withheld from Mr. Conner 18,827
Mr. Delano:
Votes for Mr. Delano 4,562,417
Votes withheld from Mr. Delano 24,056
Mr. Greenstein:
Votes for Mr. Greenstein 4,562,422
Votes withheld from Mr. Greenstein 24,051
Mr. Lubin:
Votes for Mr. Lubin 4,562,472
Votes withheld from Mr. Lubin 24,001
Mr. Pardo:
Votes for Mr. Pardo 4,568,263
Votes withheld from Mr. Pardo 18,210
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Ms. Ruml:
Votes for Ms. Ruml 4,568,664
Votes withheld from Ms. Ruml 17,809
(2) The ratification of Ernst & Young LLP as independent auditors of
the Company for the year ending December 31, 2003.
Votes for Ernst & Young LLP 4,558,635
Votes against Ernst & Young LLP 5,102
Abstentions 22,736
There were no broker non-votes in respect of the foregoing matters.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
The following exhibits are filed herewith:
10-1 Agreement relating to 14% Junior Subordinated Notes dated as of
July 31, 2003, between Lexington Precision Corporation ("LPC")
and Michael A. Lubin
10-2 Agreement relating to Junior Subordinated Convertible Increasing
Rate Note dated as of July 31, 2003, among LPC, Michael A. Lubin,
and Warren Delano
10-3 Agreement dated as of May 21, 2003, between LPC and Congress
Financial Corporation ("Congress")
10-4 Agreement dated as of May 21, 2003, between Lexington Rubber
Group, Inc. ("LRGI") and Congress
10-5 Agreement dated as of May 21, 2003 among LPC, LRGI, and Congress
10-6 Agreement dated as of July 9, 2003, between LPC and Congress
10-7 Agreement dated as of July 9, 2003, between LRGI and Congress
10-8 Agreement dated as of July 9, 2003 among LPC, LRGI, and Congress
10-9 Agreement dated as of August 11, 2003, between LPC and Congress
10-10 Agreement dated as of August 11, 2003, between LRGI and Congress
10-11 Agreement dated as of August 11, 2003 among LPC, LRGI, and
Congress
10-12 Agreement dated July 31, 2003, between LPC and CIT
Group/Equipment Financing, Inc. ("CIT")
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10-13 Thirteenth Amendment Agreement dated as of May 21, 2003, between
LPC, LRGI, and Bank One, NA ("Bank One")
10-14 Fourteenth Amendment Agreement dated as of July 11, 2003,
between LPC, LRGI, and Bank One
10-15 Fifteenth Amendment Agreement dated as of August 11, 2003,
between LPC, LRGI, and Bank One
10-16 Agreement dated as of July 11, 2003, between LPC, LRGI, and Bank
One
10-17 Agreement dated as of August 11, 2003, between LPC, LRGI, and
Bank One
10-18 Amendment No. 9 to Loan and Security Agreement dated as of May
31, 2003, between LPC and CIT
31-1 Certification of Michael A. Lubin, Chairman of the Board and
Co-Principal Executive Officer of the registrant, pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31-2 Certification of Warren Delano, President and Co-Principal
Executive Officer of the registrant, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31-3 Certification of Dennis J. Welhouse, Chief Financial Officer and
Principal Financial Officer of the registrant, pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32-1 Certification of Michael A. Lubin, Chairman of the Board and
Co-Principal Executive Officer of the registrant, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32-2 Certification of Warren Delano, President and Co-Principal
Executive Officer of the registrant, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32-3 Certification of Dennis J. Welhouse, Chief Financial Officer and
Principal Financial Officer of the registrant, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) REPORTS ON FORM 8-K
On April 3, 2003, we filed a report on Form 8-K that included a
press release dated April 3, 2003, stating that we were extending the expiration
date of our offer to exchange our senior subordinated notes from April 3, 2003,
to 12 midnight, New York City Time on April 24, 2003, unless further extended.
On April 24, 2003, we filed a report on Form 8-K that included a
press release dated April 24, 2003, stating that we were extending the
expiration date of our offer to exchange our senior subordinated notes from
April 24, 2003, to 12 midnight, New York City Time on May 15, 2003, unless
further extended.
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On May 15, 2003, we filed a report on Form 8-K that included a
press release dated May 15, 2003, stating that we were extending the expiration
date of our offer to exchange our senior subordinated notes from May 15, 2003,
to 12 midnight, New York City Time on June 5, 2003, unless further extended.
On June 5, 2003, we filed a report on Form 8-K that included a
press release dated June 5, 2003, stating that we were extending the expiration
date of our offer to exchange our senior subordinated notes from June 5, 2003,
to 12 midnight, New York City Time on June 27, 2003, unless further extended.
On June 27, 2003, we filed a report on Form 8-K that included a
press release dated June 27, 2003, stating that we were extending the expiration
date of our offer to exchange our senior subordinated notes from June 27, 2003,
to 12 midnight, New York City Time on July 11, 2003, unless further extended.
On July 11, 2003, we filed a report on Form 8-K that included a
press release dated July 11, 2003, stating that we were extending the expiration
date of our offer to exchange our senior subordinated notes from July 11, 2003,
to 12 midnight, New York City Time on July 31, 2003, unless further extended.
On July 31, 2003, we filed a report on Form 8-K that included a
press release dated July 31, 2003, stating that we were extending the expiration
date of our offer to exchange our senior subordinated notes from July 31, 2003,
to 12 midnight, New York City Time on August 14, 2003, unless further extended.
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LEXINGTON PRECISION CORPORATION
FORM 10-Q
JUNE 30, 2003
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LEXINGTON PRECISION CORPORATION
(Registrant)
August 13, 2003 By:/s/ Michael A. Lubin
- --------------- ---------------------------
Date Michael A. Lubin
Chairman of the Board
August 13, 2003 By:/s/ Warren Delano
- --------------- --------------------------
Date Warren Delano
President
August 13, 2003 By:/s/ Dennis J. Welhouse
- --------------- --------------------------
Date Dennis J. Welhouse
Senior Vice President and
Chief Financial Officer
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