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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 2001
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 OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 319-4657
----------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $0.25 PAR VALUE
(TITLE OF CLASS)
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 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 the 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. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant at March 18, 2002, was approximately $641,000.
The number of shares outstanding of the registrant's common stock at March 22,
2002, was 4,828,036.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's proxy statement to be issued in connection with its
2002 Annual Meeting of Stockholders (the "Proxy Statement") are incorporated by
reference into Part III. Only those portions of the Proxy Statement which are
specifically incorporated by reference are deemed filed as part of this report
on Form 10-K.
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LEXINGTON PRECISION CORPORATION
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PAGE
----
PART I
Item 1. Business......................................................................................1
Item 2. Properties....................................................................................5
Item 3. Legal Proceedings.............................................................................5
Item 4. Submission of Matters to a Vote of Security Holders...........................................5
PART II
Item 5. Market for Our Common Stock and Other Stockholder Matters.....................................6
Item 6. Selected Financial Data.......................................................................7
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations ........................................................................8
Item 7A. Quantitative and Qualitative Disclosures about Market Risk...................................24
Item 8. Financial Statements and Supplementary Data..................................................25
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure ........................................................................55
PART III
Item 10. Directors and Executive Officers of the Registrant...........................................56
Item 11. Executive Compensation.......................................................................56
Item 12. Security Ownership of Certain Beneficial Owners and Management...............................56
Item 13. Certain Relationships and Related Transactions...............................................56
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.............................57
PART I
ITEM 1. BUSINESS
We were incorporated in Delaware in 1966. Substantially all of our
business is conducted in the continental United States. Through our two
operating segments, the Rubber Group and the Metals Group, we manufacture
engineered rubber and metal components.
In 2001, net sales of the Rubber Group totaled $91,532,000, or 72.5% of
our consolidated net sales. The Rubber Group manufactures connector seals used
in automotive wiring systems and insulators used in automotive ignition wire
sets. We believe that we are the leading manufacturer of these types of
components in North America. During 2001, the Rubber Group's sales to automotive
customers represented approximately 89% of the total net sales of the Rubber
Group. The Rubber Group also manufactures molded rubber components used in a
variety of medical devices, such as drug delivery systems and syringes.
In 2001, net sales of the Metals Group totaled $34,670,000, or 27.5% of
our consolidated net sales. The Metals Group manufactures aluminum die castings
and machines components from aluminum, brass, and steel bars. During 2001, the
Metals Group's sales to automotive customers represented approximately 76% of
the total net sales of the Metals Group.
Financial data and other information about our operating segments can
be found in "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Part II, Item 7, and in Note 10, "Segments," of our
consolidated financial statements in Part II, Item 8.
PRINCIPAL END-USES FOR OUR PRODUCTS
The following table summarizes our net sales during 2001, 2000, and
1999, by the type of product in which our components were utilized (dollar
amounts in thousands):
YEARS ENDED DECEMBER 31
-------------------------------------------------------------------
2001 2000 1999
------------------ ------------------- -------------------
Automobiles and light trucks $ 107,818 85.4% $ 119,572 86.4% $ 114,473 85.2%
Medical devices 9,732 7.7 8,694 6.3 7,787 5.8
Industrial equipment 4,631 3.7 5,097 3.7 6,080 4.5
Other 4,021 3.2 4,939 3.6 6,032 4.5
---------- ------- ---------- -------- ---------- --------
$ 126,202 100.0% $ 138,302 100.0% $ 134,372 100.0%
========== ======= ========== ======== ========== ========
-1-
The following table summarizes net sales of the Rubber Group and the
Metals Group during 2001, 2000, and 1999, by the type of product in which each
segment's components were utilized (dollar amounts in thousands):
YEARS ENDED DECEMBER 31
------------------------------------------------------------
2001 2000 1999
------------------ ------------------- --------------
Rubber Group:
Automobiles and light trucks $ 81,493 89.0% $ 93,073 91.1% $ 90,934 91.9%
Medical devices 9,732 10.7 8,694 8.5 7,785 7.9
Other 307 0.3 404 0.4 250 0.2
--------- ------- ---------- ------ --------- ------
$ 91,532 100.0% $ 102,171 100.0% $ 98,969 100.0%
========= ======= ========== ====== ========= ======
Metals Group:
Automobiles and light trucks $ 26,325 75.9% $ 26,499 73.3% $ 23,539 66.5%
Industrial equipment 4,631 13.4 5,097 14.1 6,080 17.2
Computers and office equipment 1,160 3.3 1,696 4.7 1,889 5.3
Other 2,554 7.4 2,839 7.9 3,895 11.0
--------- ------- ---------- ------ --------- ------
$ 34,670 100.0% $ 36,131 100.0% $ 35,403 100.0%
========= ======= ========== ====== ========= ======
MAJOR CUSTOMERS
Our largest customer is Delphi Corporation. During 2001, 2000, and
1999, our net sales to Delphi totaled $24,388,000, $28,782,000, and $30,360,000,
which represented 19.3%, 20.8%, and 22.6%, respectively, of our net sales. Net
sales of rubber components to Delphi during 2001, 2000, and 1999 represented
25.8%, 27.3%, and 30.6%, respectively, of the Rubber Group's net sales. No other
customer accounted for more than 10% of our net sales during 2001, 2000, or
1999. Loss of a significant amount of business from Delphi or any of our other
large customers would have a material adverse effect on our operations if that
business were not substantially replaced by additional business from existing or
new customers. For information about our contractual arrangements with Delphi
refer to "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Part II, Item 7.
MARKETING AND SALES
Our marketing and sales effort is carried out by management personnel
and account managers.
RAW MATERIALS
Our principal raw materials are silicone and organic rubber compounds,
aluminum ingots, and aluminum, steel, and brass bars. Each of our principal raw
materials has been readily available at competitive prices from several major
manufacturers and we anticipate that those materials will continue to be readily
available at competitive prices for the foreseeable future.
PATENTS AND TRADEMARKS
We do not currently hold any patents, trademarks, or licenses that we
consider to be material to the success or operation of our business.
-2-
SEASONAL VARIATIONS
Our business generally is not subject to significant seasonal
variation; however, we generally experience decreased sales during the third
calendar quarter of each year due to plant shutdowns in July for vacations and
new model changeovers. Our fourth quarter sales are also typically adversely
affected by plant shutdowns for vacations and holidays in December.
BACKLOG
Sales of our products are made pursuant to a variety of purchasing
arrangements and practices. Our customers regularly revise release schedules to
correspond to their own production requirements. We believe that the aggregate
value of scheduled releases outstanding on our books at any time cannot be
considered firm backlog because those releases may be revised at any time. We
also believe that increases or decreases in the aggregate value of scheduled
releases are not necessarily indicative of any trend in our net sales.
COMPETITION
The markets we compete in are characterized by intense price
competition and increasing customer requirements for quality and service. We
compete for business in these markets primarily on the basis of quality,
service, engineering capability, and price. We encounter substantial competition
from a large number of manufacturing companies. Our competitors range from small
and medium-sized specialized firms to large diversified companies, many of which
have resources substantially greater than ours. Additionally, some of our
customers have internal manufacturing operations that compete with us.
RESEARCH AND DEVELOPMENT
During 2001, 2000, and 1999, we spent approximately $890,000, $850,000,
and $878,000, respectively, on our research and development activities. Our
research and development activities include the following:
- developing materials that cost less and perform better,
- developing new, more efficient manufacturing processes,
- improving quality and reducing scrap,
- designing components to be easier to manufacture, and
- designing components to perform better in their final
application.
PRODUCT LIABILITY RISKS
We are subject to potential product liability risks inherent in the
manufacture and sale of components. Although there are no claims against us that
we believe will have a material adverse effect upon our business, financial
position, or results of operations, we cannot assure you that any existing or
future claims will not have a material adverse effect on us. Although we
maintain insurance coverage for product liability, we cannot assure you that, in
the event of a claim, the insurance coverage would apply or that, in the event
of an award arising out of a claim, the amount of any applicable insurance
coverage would be sufficient to satisfy the award.
-3-
ENVIRONMENTAL COMPLIANCE
Our operations are subject to numerous laws and regulations controlling
the discharge of materials into the environment or otherwise relating to the
protection of the environment. Although we make expenditures relating to the
protection of the environment, compliance with environmental laws and
regulations has not had a significant impact on our capital spending
requirements, earnings, or competitive position. We cannot assure you that
changes in environmental laws and regulations, or in the interpretation or
enforcement of those laws and regulations, will not require material
expenditures in the future.
EMPLOYEES
We believe that our employee relations are generally good. The
following table shows the number of our employees at December 31, 2001, 2000,
and 1999.
DECEMBER 31
--------------------------------
2001 2000 1999
---- ---- ----
Rubber Group 807 869 886
Metals Group 299 416 374
Corporate Office 7 5 7
------- -------- -------
1,113 1,290 1,267
======= ======== =======
At December 31, 2001, employees at the Rubber Group included 263 hourly
workers at two plant locations that were subject to collective bargaining
agreements. At December 31, 2000 and 1999, employees at the Rubber Group
included 66 and 68 hourly workers, respectively, at one location that was
subject to a collective bargaining agreement.
-4-
ITEM 2. PROPERTIES
The following table shows the location and square footage of our
manufacturing facilities at December 31, 2001:
SQUARE
LOCATION FEET
------------------------------ --------
Rubber Group:
Jasper, Georgia 101,000
LaGrange, Georgia 77,000
North Canton, Ohio 41,000
Vienna, Ohio 60,000
Rock Hill, South Carolina 60,000
-------
Total Rubber Group 339,000
-------
Metals Group:
Casa Grande, Arizona 64,000
Lakewood, New York 91,000
Rochester, New York 60,000
-------
Total Metals Group 215,000
-------
Total Company 554,000
=======
All of our facilities, except those in Jasper, Georgia, and Rochester,
New York, are encumbered by mortgages. All of our plants are general
manufacturing facilities suitable for our operations. We believe that our
facilities are adequate to meet our current operating needs. During February
2002, we made a decision to close our 64,000 square foot manufacturing facility
in Casa Grande, Arizona, during the first half of 2002. For more information,
refer to "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Part II, Item 7.
We occupy, in the aggregate, 6,000 square feet of office space for
corporate executive and administrative purposes. We lease an office in
Cleveland, Ohio, and reimburse an affiliate for the cost of leasing an office in
New York City.
ITEM 3. LEGAL PROCEEDINGS
We are subject to various claims and legal proceedings covering a wide
range of matters that arise in the ordinary course of our business activities.
It is our policy to record accruals for claims and legal proceedings when we
consider a loss to be probable and we can reasonably estimate the amount of that
loss. The various actions to which we are or may in the future be a party are at
various stages of completion. Although we cannot assure you as to the outcome of
existing or potential litigation, we currently believe, based upon the
information currently available to us, that the outcome of those actions will
not have a material adverse effect upon our financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We did not submit any matters to a vote of security holders during the
fourth quarter of 2001.
-5-
PART II
ITEM 5. MARKET FOR OUR COMMON STOCK AND OTHER STOCKHOLDER MATTERS
Our common stock is traded in the over-the-counter market. At March 22,
2002, there were approximately 795 holders of record of our common stock.
Trading in shares of our common stock is limited. During 2001 and 2000, trading
data for our stock was available on the OTC Bulletin Board operated by the
National Association of Securities Dealers, Inc. (NASD). The following table
sets forth prices at which transactions in our common stock were reported on the
OTC Bulletin Board:
YEARS ENDED DECEMBER 31
-----------------------------------------------
2001 2000
---------------------- ----------------------
HIGH LOW HIGH LOW
---------- --------- ---------- ---------
First quarter $0.88 $0.75 $1.31 $1.05
Second quarter $0.70 $0.40 $1.25 $0.75
Third quarter $0.68 $0.45 $1.13 $0.97
Fourth quarter $0.50 $0.30 $1.22 $0.78
We are not able to determine whether retail markups, markdowns, or
commissions were included in the above prices. We believe that twelve brokerage
firms currently make a market in our common stock, although both bid and asked
quotations may be limited.
We have not paid dividends on our common stock since 1979, and we have
no current plans to reinstate the payment of dividends. In addition, we are
currently restricted from paying cash dividends on our common stock and on our
series B preferred stock and from redeeming any shares of series B preferred
stock because a payment default exists on our senior subordinated notes. We are
currently in arrears with respect to the payment of nine quarterly dividends on
the series B preferred stock and with respect to the redemption of 450 shares of
series B preferred stock that we did not redeem on each of November 30, 2001 and
2000, at an aggregate redemption price of $180,000. Because we are in arrears
with respect to more than five dividend payments on the series B preferred
stock, the holders of the series B preferred stock are entitled to elect two
persons to serve on our Board of Directors until the annual meeting of
stockholders following the date on which all such arrearages have been paid in
full. We have received correspondence from a holder of our Series B preferred
stock seeking the election of two directors by the holders of the series B
preferred stock. Subsequent to our receipt of this correspondence, the holder
passed away. We are in the process of determining whether the holder's estate
wishes to continue to seek the election of the two directors.
-6-
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data for
each of the years in the five-year period ended December 31, 2001 (dollar
amounts in thousands, except per share amounts). The financial data has been
derived from our consolidated financial statements, which have been audited by
Ernst & Young LLP, independent certified public accountants. This information is
not necessarily indicative of the results of future operations and should be
read in conjunction with, and is qualified by, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Part II, Item 7,
and our consolidated financial statements in Part II, Item 8.
YEARS ENDED DECEMBER 31
----------------------------------------------------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
SUMMARY OF OPERATIONS:
Net sales $ 126,202 $ 138,302 $ 134,372 $ 120,598 $ 111,771
Cost of sales 109,055 120,726 111,598 102,394 92,562
---------- ---------- ---------- ---------- ----------
Gross profit 17,147 17,576 22,774 18,204 19,209
Selling and administrative expenses 9,911 10,923 12,153 11,006 11,425
Impairment of long-lived assets 2,047 - 335 - -
Income from insurance company
demutualization 1,274 - - - -
---------- ---------- ---------- ---------- ----------
Income from operations 6,463 6,653 10,286 7,198 7,784
Interest expense 8,534 9,913 9,632 9,772 9,065
Other income - - - - 425
Income tax provision (benefit) 80 (161) 133 132 672
Extraordinary gain on repurchase of
debt, net of applicable income taxes - - 1,542 - -
---------- ---------- ---------- ---------- ----------
Net income (loss) $ (2,151) $ (3,099) $ 2,063 $ (2,706) $ (1,528)
========== ========== ========== ========== ==========
Net income (loss) per diluted common
share $ (0.45) $ (0.65) $ 0.46 $ (0.65) $ (0.38)
========== ========== ========== ========== ==========
OTHER DATA:
Depreciation and amortization included
in operating expense $ 13,103 $ 13,490 $ 12,728 $ 11,451 $ 9,838
Net cash provided by operating
activities $ 17,561 $ 22,136 $ 5,624 $ 8,013 $ 7,529
Adjusted earnings before interest, taxes,
depreciation, and amortization $ 20,339 $ 20,143 $ 23,349 $ 18,649 $ 17,622
Capital expenditures $ 6,408 $ 13,936 $ 10,328 $ 14,877 $ 15,790
DECEMBER 31
----------------------------------------------------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
FINANCIAL POSITION:
Current assets $ 34,146 $ 36,968 $ 37,503 $ 32,198 $ 31,828
Current liabilities 107,074 117,147 116,460 40,228 36,003
---------- ---------- ---------- ---------- ----------
Net working capital deficit $ (72,928) $ (80,179) $ (78,957) $ (8,030) $ (4,175)
========== ========== ========== ========== ==========
Total assets $ 99,877 $ 110,289 $ 111,327 $ 108,325 $ 104,124
Long-term debt, excluding current portion $ 2,000 $ 104 $ 116 $ 74,953 $ 72,622
Series B preferred stock $ 330 $ 330 $ 330 $ 375 $ 420
Total stockholders' deficit $ (11,659) $ (9,536) $ (7,463) $ (9,451) $ (6,667)
-7-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Some of our statements in this section 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,
- the possibility of product warranty or other liability claims,
- labor interruptions at our facilities or at our customers'
facilities,
- the impact on our operations of the defaults on our
indebtedness and the delays in paying our accounts payable,
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.
-8-
RESULTS OF OPERATIONS -- COMPARISON OF 2001, 2000, AND 1999
The following table sets forth our consolidated operating results
for 2001, 2000, and 1999 (dollar amounts in thousands):
YEARS ENDED DECEMBER 31
-------------------------------------------------------------------
2001 2000 1999
------------------- ------------------ --------------------
Net sales $ 126,202 100.0% $ 138,302 100.0% $ 134,372 100.0%
Cost of sales 109,055 86.4 120,726 87.3 111,598 83.1
----------- ------- ---------- ------- ---------- --------
Gross profit 17,147 13.6 17,576 12.7 22,774 16.9
Selling and administrative expenses 9,911 7.9 10,923 7.9 12,153 9.0
Impairment of long-lived assets(1) 2,047 1.6 - - 335 0.2
Income from insurance company
demutualization(2) 1,274 1.0 - - - -
----------- ------- ---------- ------- ---------- --------
Income from operations 6,463 5.1 6,653 4.8 10,286 7.7
Add back: depreciation and
amortization(3) 13,103 10.4 13,490 9.8 12,728 9.5
----------- ------- ---------- ------- ---------- --------
Earnings before interest, taxes,
depreciation, and amortization
(EBITDA)(4) 19,566 15.5 20,143 14.6 23,014 17.2
Proforma adjustments for certain nonrecurring
income and expense:
Impairment of long-lived assets(1) 2,047 1.6 - - 335 0.2
Income from insurance company
demutualization(2) (1,274) (1.0) - - - -
----------- ------- ---------- ------- ---------- --------
Adjusted EBITDA $ 20,339 16.1% $ 20,143 14.6% $ 23,349 17.4%
=========== ======= ========== ======= ========== ========
Net cash provided by operating
activities (5) $ 17,561 13.9% $ 22,136 16.0% $ 5,624 4.2%
=========== ======= ========== ======= ========== ========
(1) In 2001, we recorded a provision of $2,047,000 to write down the value of
the assets of our manufacturing facility in Casa Grande, Arizona. In 1999,
we wrote down the value of the assets of our manufacturing facility in
Manchester, New York. For more information, refer to the discussion of the
results of operations of the Metals Group in this section.
(2) During December 2001, we received 53,103 shares of common stock of
Principal Financial Group, Inc. (Principal) as a result of the
demutualization of Principal Mutual Holding Company, a mutual insurance
company and predecessor to Principal. For more information, refer to the
discussion of the results of operations of the Corporate Office in this
section.
-9-
(3) Does not include amortization of deferred financing expenses, which
totaled $192,000, $216,000, and $234,000, in 2001, 2000, and 1999,
respectively, and which is included in interest expense in the
consolidated financial statements.
(4) Earnings before interest, taxes, depreciation and amortization, which is
commonly referred to as 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 use the term Adjusted EBITDA
to refer to EBITDA adjusted to exclude nonrecurring items of income and
expense. During 2001, Adjusted EBITDA excludes the nonrecurring, non-cash
provision for asset impairment and the nonrecurring income from the
demutualization of an insurance company. During 1999, Adjusted EBITDA
excludes the $335,000 non-cash provision for asset impairment associated
with the closing of our manufacturing facility in Manchester, New York. We
have presented EBITDA and Adjusted EBITDA here and elsewhere in this Form
10-K because we believe that these measures are used by investors as
supplemental information to evaluate the operating performance of a
business, including its ability to incur and to service debt. In addition,
our definition of EBITDA and Adjusted EBITDA may not be the same as the
definition of EBITDA and Adjusted EBITDA used by other companies.
(5) 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 II, Item 8.
The discussion that follows sets forth our analysis of the operating
results of the Rubber Group, the Metals Group, and the Corporate Office.
RUBBER GROUP
The Rubber Group manufactures silicone and organic rubber components
primarily for automotive industry customers. During 2001, 2000, and 1999,
automotive industry customers of the Rubber Group represented 89.0%, 91.1%, and
91.9%, respectively, of the Rubber Group's net sales. Any significant reduction
in the level of activity in the automotive industry could have a material
adverse effect on the results of operations of the Rubber Group and on our
company as a whole.
The three largest customers of the Rubber Group accounted for 46.7%,
49.1%, and 50.1% of the Rubber Group's net sales during 2001, 2000, and 1999,
respectively. Loss of a significant amount of business from any of the Rubber
Group's large customers would have a material adverse effect upon the Rubber
Group and upon our company as a whole if that business were not substantially
replaced by additional business from existing or new customers.
-10-
The following table sets forth the operating results of the Rubber
Group for 2001, 2000, and 1999 (dollar amounts in thousands):
YEARS ENDED DECEMBER 31
-----------------------------------------------------------------
2001 2000 1999
------------------- ------------------ ------------------
Net sales $ 91,532 100.0% $ 102,171 100.0% $ 98,969 100.0%
Cost of sales 75,949 83.0 85,750 83.9 78,410 79.2
---------- ------- --------- ------- --------- -------
Gross profit 15,583 17.0 16,421 16.1 20,559 20.8
Selling and administrative expenses 5,194 5.7 5,937 5.8 6,235 6.3
---------- ------- --------- ------- --------- -------
Income from operations 10,389 11.3 10,484 10.3 14,324 14.5
Add back: depreciation and amortization 8,484 9.3 8,554 8.3 8,096 8.2
---------- ------- --------- ------- --------- -------
Earnings before interest, taxes,
depreciation, and amortization
(EBITDA) $ 18,873 20.6% $ 19,038 18.6% $ 22,420 22.7%
========== ======= ========= ======= ========= =======
During 2001, net sales of the Rubber Group decreased by $10,639,000, or
10.4%, compared to 2000. This decrease was primarily due to decreased unit sales
of insulators for automotive ignition wire sets, which resulted primarily from a
reduction in the level of activity in the automotive industry, and price
reductions on certain automotive components, offset, in part, by increased unit
sales of components for medical devices.
Delphi Corporation is the Rubber Group's largest customer. During 2001,
the Rubber Group's net sales to Delphi totaled $23,660,000, which represented
25.8% of the Rubber Group's net sales. Substantially all of the Rubber Group's
sales to Delphi are connector seals for automotive wiring systems. For the last
four years, most of the connector seals that we sold to Delphi were subject to a
multi-year agreement that was scheduled to expire on December 31, 2001. In July
2001, Delphi and the Rubber Group entered into a new agreement that will govern,
through December 31, 2004, the purchase of many of the component parts that we
currently sell to Delphi. Under the terms of that agreement, we provided Delphi
with significant price reductions effective July 16, 2001, and our selling
prices will be further reduced by agreed-upon percentages in each of the years
covered by the agreement. The price reductions granted to Delphi on July 16,
2001, reduced net sales for 2001 by $2,588,000.
Cost of sales as a percentage of net sales decreased during 2001 to
83.0% of net sales from 83.9% of net sales during 2000, primarily because our
insulators division improved operating efficiencies and reduced scrap and
because $1,013,000 of expenses related to the services of a consulting firm that
was retained during 2000 to assist the management team of the insulators
division in implementing improved operating systems were not incurred during
2001.
Selling and administrative expenses as a percentage of net sales
decreased during 2001 compared to 2000, primarily because wages and employee
benefits, selling and office supply expenses, and depreciation expense all
decreased when compared to 2000. These increases were offset, in part, by a
-11-
$163,000 increase in bad debt expense related to the filing of a chapter 11
bankruptcy petition by one of the Rubber Group's customers.
During 2001, income from operations was $10,389,000, a decrease of
$95,000, or 0.9%, compared to 2000. EBITDA decreased to $18,873,000 from
$19,038,000 while EBITDA as a percentage of net sales increased to 19.5% from
18.0%.
During 2000, net sales of the Rubber Group increased by $3,202,000, or
3.2%, compared to 1999. This increase was primarily due to increased unit sales
of connector seals for automotive wiring systems and, to a lesser extent,
increased unit sales of components for medical devices, offset, in part, by
reduced sales of insulators for automotive ignition wire sets and price
reductions on certain automotive components.
Cost of sales as a percentage of net sales increased during 2000 to
83.9% of net sales from 79.2% of net sales during 1999, primarily due to reduced
operating efficiencies and increased levels of scrap at our insulators division
and higher employee benefit costs. In an attempt to improve operating
performance at the insulators division, a number of management changes were
effected during 2000 and a consulting firm was retained to assist the management
team of the insulators division in implementing improved operating systems. Cost
of sales for 2000 included $1,013,000 of expenses related to the consulting
firm's services.
During 2000, income from operations totaled $10,484,000, a decrease of
$3,840,000, or 26.8%, compared to 1999. EBITDA decreased to $19,038,000, or
18.6% of net sales, in 2000 from $22,420,000, or 22.7% of net sales, in 1999.
METALS GROUP
The Metals Group manufactures aluminum die castings and machines
components from aluminum, brass, and steel bars. During 2001, 2000, and 1999,
net sales to automotive industry customers represented 75.9%, 73.3%, and 66.5%,
respectively, of the Metals Group's net sales. Any material reduction in the
level of activity in the automotive industry could have a material adverse
effect on the results of operations of the Metals Group and on our company as a
whole.
The three largest customers of the Metals Group accounted for 45.9%,
50.9%, and 50.7% of the Metals Group's net sales during 2001, 2000, and 1999,
respectively. Loss of a significant amount of business from any of the Metals
Group's large customers would have a material adverse effect upon the Metals
Group and upon our company as a whole if that business were not substantially
replaced by additional business from existing or new customers.
-12-
The following table sets forth the operating results of the Metals
Group for 2001, 2000, and 1999 (dollar amounts in thousands):
YEARS ENDED DECEMBER 31
----------------------------------------------------------------
2001 2000 1999
----------------- ----------------- ------------------
Net sales $ 34,670 100.0% $ 36,131 100.0% $ 35,403 100.0%
Cost of sales 33,106 95.5 34,976 96.8 33,188 93.7
-------- ------- --------- ------- --------- --------
Gross profit 1,564 4.5 1,155 3.2 2,215 6.3
Selling and administrative expenses 2,587 7.5 2,741 7.6 3,472 9.8
Impairment of long-lived assets 2,047 5.9 - - 335 0.9
-------- ------- --------- ------- --------- --------
Loss from operations (3,070) (8.9) (1,586) (4.4) (1,592) (4.4)
Add back: depreciation and
amortization 4,531 13.1 4,849 13.4 4,585 12.9
-------- ------- --------- ------- --------- --------
Earnings before interest, taxes,
depreciation, and amortization
(EBITDA) 1,461 4.2 3,263 9.0 2,993 8.5
Proforma adjustments for certain
nonrecurring expenses:
Impairment of long-lived assets 2,047 5.9 - - 335 0.9
-------- ------- --------- ------- --------- --------
Adjusted EBITDA $ 3,508 10.1% $ 3,263 9.0% $ 3,328 9.4%
======== ======= ========= ======= ========= ========
During 2001, net sales of the Metals Group decreased by $1,461,000, or
4.0%, compared to 2000. This decrease resulted primarily from a planned
reduction in low-volume business during 2001.
Cost of sales as a percentage of net sales decreased during 2001 to
95.5% of net sales from 96.8% of net sales during 2000, primarily due to
improved operating efficiencies, reduced indirect labor costs, reduced operating
and repair costs, and lower depreciation and amortization expenses, offset, in
part, by startup costs on certain new products and a provision of $362,000 for
inventory losses related to the departure of the Group's largest customer, which
is discussed more fully below.
During the fourth quarter of 2001, we learned that the Metals Group's
largest customer would cease purchasing components from the Metals Group after
December 31, 2001. During 2001, this customer purchased $5,937,000 of machined
metal components, which were manufactured primarily at our Casa Grande, Arizona,
manufacturing facility. As a result of the reduction in volume at the Casa
Grande facility, during February 2002, we decided to close the facility and to
consolidate the balance of
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the Casa Grande production into our other metal machining facility in Rochester,
New York. In accordance with Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," we recorded, as of December 31, 2001, an impairment
charge of $2,047,000 to reduce to fair market value the carrying value of the
Casa Grande facility's land and building and certain metal machining equipment
currently idled by the loss of this business. Our estimate of fair market value
is based on appraisals of the assets. We anticipate that the land, building, and
equipment that is not being held for future use, which have an estimated fair
value of approximately $2,502,000, will be sold during 2002 or the first half of
2003. Machinery and equipment currently idled by the loss of business that is
currently being held by us for anticipated future use has an estimated fair
market value of $862,000. Excluding operating losses incurred by the Arizona
facility during the first quarter of 2002, we currently estimate that the costs
to be incurred during 2002 in connection with the closing of the Casa Grande
facility will total approximately $738,000, consisting of severance and other
employee related costs of $215,000, asset relocation costs of $211,000, ongoing
costs to support and maintain the facility while it is being held for sale of
$207,000, and other plant closure costs of $105,000.
Selling and administrative expenses as a percentage of net sales
decreased during 2001 compared to 2000, primarily due to reduced employee
recruitment and relocation expenses, lower office expenses, and reduced
consulting fees related to the installation of new computer systems, which were
offset, in part, by a $220,000 increase in bad debt expense related to the
filing of chapter 11 bankruptcy petitions by two of the Metals Group's
customers.
During 2001, the loss from operations was $3,070,000 compared to a loss
from operations of $1,586,000 during 2000. Excluding the provision for asset
impairment, the loss from operations during 2001 was $1,023,000. Adjusted
EBITDA, which excludes the provision for asset impairment, increased to
$3,508,000, or 10.1% of net sales, in 2001 from $3,263,000, or 9.0% of net
sales, in 2000.
During 2000, net sales of the Metals Group increased by $728,000 or
2.1%, compared to 1999. This increase resulted primarily from an increase in
sales of higher-volume components, partially offset by a reduction in low-volume
business and the shutdown of a small die casting facility in Manchester, New
York.
The Metals Group recorded a loss from operations of $1,586.000 during
2000, compared to a loss from operations of $1,592,000 during 1999. The loss for
2000 included a loss of $325,000 on the disposal and write-down of assets held
for sale, which was charged to cost of sales. The loss for 1999 included a loss
from operations of $186,000 and closure costs of $553,000 related to the
Manchester facility. Excluding the $325,000 loss on the disposal and write-down
of assets held for sale during 2000, and $507,000 of Manchester closure expenses
that were charged to cost of sales during 1999, cost of sales as a percentage of
net sales increased from 92.3% during 1999 to 95.9% during 2000, primarily due
to higher employee compensation costs, higher costs for production supplies, and
increased depreciation expense.
Selling and administrative expenses as a percentage of net sales
decreased during 2000 compared to 1999, primarily due to reduced consulting fees
related to the installation of new computer systems, the elimination of certain
expenses as a result of the shutdown of the Metals Group's facility in
Manchester, New York, and reduced incentive compensation.
Adjusted EBITDA, which excludes the provision for asset impairment,
decreased to $3,263,000, or 9.0% of net sales, in 2000 from $3,328,000, or 9.4%
of net sales in 1999.
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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 2001, 2000, and 1999 (dollar amounts in thousands):
YEARS ENDED DECEMBER 31
-------------------------------------
2001 2000 1999
---- ---- ----
Administrative expenses $ 2,130 $ 2,245 $ 2,446
Income from insurance company
demutualization 1,274 - -
--------- -------- --------
Loss from operations (856) (2,245) (2,446)
Add back: depreciation and
amortization(1) 88 87 47
--------- -------- --------
Earnings before interest, taxes,
depreciation and amortization
(EBITDA) (768) (2,158) (2,399)
Proforma adjustments for certain
nonrecurring income:
Income from insurance company
demutualization (1,274) - -
--------- -------- --------
Adjusted EBITDA $ (2,042) $ (2,158) $ (2,399)
========= ======== ========
(1) Excludes amortization of deferred financing expenses, which totaled
$192,000, $216,000, and $234,000, in 2001, 2000, and 1999,
respectively, and which is included in interest expense in the
consolidated financial statements.
During December of 2001, a mutual insurance company, Principal Mutual
Holding Company, underwent a demutualization and converted to a stock company,
Principal Financial Group, Inc., (Principal). We were a member of the mutual
insurance company as a policyholder and received 53,103 shares of common stock
of Principal as a result of the demutualization. In accordance with Financial
Accounting Standards Board Emerging Issue Task Force Bulletin 99-4, "Accounting
for Stock Received from the Demutualization of a Mutual Insurance Company" (EITF
99-4), we recorded these shares at fair value by using the published closing
price for the stock on December 31, 2001.
-15-
Excluding the income from the insurance company demutualization,
Corporate Office expenses declined by 5.1% in 2001, primarily because of a
reduction in state franchise taxes and reduced salary and office expenses.
INTEREST EXPENSE
During 2001, 2000, and 1999, interest expense totaled $8,534,000,
$9,913,000, and $9,632,000, respectively. During 2001, 2000, and 1999, interest
expense included amortization of deferred financing expenses of $192,000,
$216,000, and $234,000, respectively. The decrease in interest expense in 2001
was caused primarily by lower rates of interest on our floating rate
indebtedness and a reduction in the amount of borrowings outstanding.
EXTRAORDINARY GAIN
During 1999, we recorded an extraordinary gain, net of the related
income tax provision, of $1,542,000 on the repurchase of $4,308,000 principal
amount of our senior subordinated notes.
INCOME TAX PROVISION (BENEFIT)
During 2001, the income tax provision consisted of state income taxes.
During 2000, the income tax benefit consisted primarily of the refund
of federal income tax expensed in a prior period.
During 1999, the income tax provision was $526,000, of which $133,000
related to our income from operations and $393,000 related to the extraordinary
gain on the repurchase of debt. During 1999, the income tax provision consisted
primarily of federal alternative minimum taxes.
For additional information concerning income taxes and related matters,
see Note 9 to our consolidated financial statements in Part II, Item 8.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES
During 2001, our operating activities provided $17,561,000 of cash.
Accounts receivable decreased by $1,159,000, primarily as a result of
lower sales.
Inventories decreased by $2,616,000 during 2001, primarily as a result
of lower sales, the elimination of short run business, and efforts to reduce
inventory levels at certain of our locations.
Accounts payable decreased by $4,916,000, primarily because during
2001, we converted $3,239,000 of past due accounts payable into unsecured,
amortizing term notes, and because materials and supplies purchased during
December 2001 decreased compared to December 2000. At March 18, 2002,
approximately $1,719,000 of accounts payable remained outstanding beyond normal
industry terms.
Our ability to continue to delay the payment of accounts payable is
dependent upon the continued willingness of certain vendors to continue to
provide us with goods and services despite delays in payment. We currently do
not have funds available to make significant reductions in the level of accounts
-16-
payable. Any effort by significant trade creditors to collect past due accounts
payable could force us to seek relief from our creditors under the federal
bankruptcy code. Unwillingness of significant vendors to continue to provide us
with goods and services could cause us to be unable to meet the requirements of
our customers. Either of the foregoing events could have a material adverse
effect on our results of operations and financial position.
Accrued expenses increased by $3,428,000 during 2001, primarily due to
an increase in accrued interest of $3,544,000, reflecting unpaid interest on our
senior subordinated notes and our junior subordinated notes.
INVESTING ACTIVITIES
During 2001, our investing activities used $6,717,000 of cash,
primarily for capital expenditures. The following table sets forth capital
expenditures for the Rubber Group, the Metals Group, and the corporate office
during 2001, 2000, and 1999 (dollar amounts in thousands):
YEARS ENDED DECEMBER 31
------------------------------------
2001 2000 1999
---- ---- ----
Rubber Group:
Equipment $ 5,092 $ 9,160 $ 7,201
Land and buildings 24 1,195 307
--------- -------- ---------
5,116 10,355 7,508
--------- -------- ---------
Metals Group:
Equipment 1,264 3,542 2,542
Land and buildings 17 38 169
--------- -------- ---------
1,281 3,580 2,711
--------- -------- ---------
Corporate office:
Equipment 11 1 109
Land and buildings - - -
--------- -------- ---------
11 1 109
--------- -------- ---------
Total company:
Equipment 6,367 12,703 9,852
Land and buildings 41 1,233 476
--------- -------- ---------
$ 6,408 $ 13,936 $ 10,328
========= ======== =========
We presently project that capital expenditures will total $5,328,000 in
2002, primarily for equipment. Capital expenditures for the Rubber Group, the
Metals Group, and the Corporate Office, are projected to total $3,798,000,
$1,526,000, and $4,000, respectively, during 2002. We project that approximately
$1,300,000 will be expended to rebuild or replace existing equipment, and
approximately $4,000,000 will be expended to effect cost reductions and expand
productive capacity.
At December 31, 2001, we had outstanding commitments to purchase plant
and equipment of approximately $1,327,000.
-17-
FINANCING ACTIVITIES
During 2001, our financing activities used $10,720,000 of cash. During
2001, we made payments on our long-term debt totaling $9,263,000, and we
obtained new term loans in the aggregate amount of $2,000,000, which refinanced
loans outstanding under our revolving line of credit.
Net borrowings under our revolving line of credit, which are classified
as short-term debt, decreased by $2,992,000 during 2001, primarily as a result
of reduced borrowing availability, due to the reduction in accounts receivable
and inventory at December 31, 2001. In addition, on December 31, 2001, our
borrowing availability was reduced by $680,000 because, during the fourth
quarter of 2001, certain of our accounts receivable from two of our customers
were removed from our availability formula because those customers had filed
chapter 11 petitions under the federal bankruptcy code.
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 covenant compliance and certain availability formulas based
on the levels of our accounts receivable and inventories. In the first quarter
of 2002, we reached an agreement with the lender providing loans to us under our
revolving line of credit, to extend the expiration date of our revolving line of
credit from April 1, 2002, to July 1, 2002. As discussed in more detail below,
as part of our efforts to restructure our indebtedness, we are currently
attempting to extend further the revolving line of credit on terms that are
satisfactory to us. At December 31, 2001, availability under our revolving line
of credit totaled $1,157,000 before outstanding checks of $453,000 were
deducted.
We have substantial borrowings for our size. Because those borrowings
require us to make substantial interest and principal payments, any negative
event may have a greater adverse effect upon us than if we had less debt.
We are in default in the payment of our senior subordinated notes,
which have a principal amount of $27,412,000 and accrued and unpaid interest, as
of December 31, 2001, of $8,446,000. In addition, we have $5,304,000 of secured
term notes that mature during 2002 and $7,847,000 of unsecured term notes that
mature during the second quarter of 2002. We have scheduled principal payments
during 2002 of $7,468,000 on our secured, amortizing term loans, $2,286,000 on
our unsecured, amortizing term notes, and $217,000 on our 12% secured term note.
We estimate that at existing contractual and market rates the interest expense
on all of our debt during 2002 would be approximately $7,400,000.
As discussed in more detail below, we are in the process of negotiating
extensions 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 increase by approximately
$192,000.
Based upon our current business plan, if we are unable to complete the
proposed extensions of our matured and maturing debt, we believe that we will
have adequate financing to meet our working capital and capital expenditure
requirements and the scheduled payments on our secured, amortizing term notes
for the foreseeable future, and to make gradual reductions in our past-due
accounts payable, without the need for additional borrowings, if:
-18-
- the holders of our senior subordinated notes do not take
action to enforce their rights against us,
- none of our significant trade creditors take action to collect
past-due accounts payable or refuse to continue to provide us
with goods and services,
- the holders of our senior, unsecured note, and our junior
subordinated notes are willing to continue to grant waivers
and extensions similar to those granted previously,
- the holders of our secured, amortizing term notes are willing
to continue to grant waivers similar to those granted
previously and to extend the scheduled balloon maturities, and
- the lenders under our revolving line of credit are willing to
extend the expiration date of the revolving line of credit, to
continue to grant waivers similar to those granted previously,
and continue to provide revolving loans in accordance with the
availability formulas presently in effect.
We can give no assurance that all of the events referred to above would
not occur, in which case we might be required to consider our alternatives,
including seeking relief from our creditors under the federal bankruptcy code,
as discussed below.
We had a net working capital deficit of $72,928,000 at December 31,
2001, compared to a net working capital deficit of $80,179,000 at December 31,
2000. The net working capital deficit exists primarily because:
- our senior subordinated notes, which have an aggregate
principal balance of $27,412,000, matured during the first
half of 2000, and our senior, unsecured note and our junior
subordinated notes, which have a combined aggregate principal
balance of $7,847,000, were scheduled to mature during 2001
and have subsequently been rescheduled to mature during the
second quarter of 2002; consequently, all of this indebtedness
was classified as current liabilities in our consolidated
financial statements at December 31, 2001, and December 31,
2000; and
- the long-term portions of our secured, amortizing term notes
were classified as current liabilities at December 31, 2001,
and December 31, 2000, because at each of those dates, the
lenders had granted waivers, for a period of less than one
year, of defaults on those term notes related to the payment
default on the senior subordinated notes.
Substantially all of our assets are pledged as collateral for various
of our borrowings. A number of our financing arrangements contain covenants with
respect to the maintenance of 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 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 or amend certain of
the financial covenants contained in our various note agreements in order to
maintain or otherwise ensure our current or future compliance. A covenant that
limits the amount of past due accounts payable was amended twice and
-19-
covenants requiring a minimum level of tangible net worth were amended four
times during the past year. We cannot assure you that, if we breach a covenant
in the future, our lenders will agree to provide waivers or amendments. 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 or waive those covenants or if an existing
waiver or amendment should no longer be in effect, the lenders would have the
right to declare the borrowings under their note agreements to be immediately
due and payable and the violation might trigger cross-default provisions under
substantially all of our other borrowings. In those circumstances, the lenders
would have, among other things, the right to declare the borrowings to be
immediately due and payable, in which event, we might be required to consider
alternatives, including seeking relief from our creditors under the federal
bankruptcy code. Any proceeding under the federal bankruptcy code could have a
material adverse effect on our results of operations and financial position.
In March 2001, we reached an agreement in principle with the four
largest holders of the senior subordinated notes on the terms of a restructuring
of the senior subordinated notes. The restructuring would be accomplished by
means of an exchange offer pursuant to which the existing senior subordinated
notes would be exchanged for new senior subordinated notes in a principal amount
equal to the principal amount of existing senior subordinated notes being
exchanged plus the accrued and unpaid interest thereon through the day before
the date the exchange offer was consummated. The accrued and unpaid interest on
the senior subordinated notes aggregated $8,446,000 at December 31, 2001. The
proposed principal terms of the new senior subordinated notes are set forth
below:
- a maturity date of December 31, 2004,
- an interest rate of 15%, and
- quarterly interest payments.
If the exchange offer were consummated, we would pay a participation
fee of 3% of the principal amount of senior subordinated notes that were
tendered for exchange and issue warrants to purchase, in the aggregate,
approximately 3% of our outstanding common stock.
The exchange offer commenced on August 6, 2001, and has been extended
nine times. It is currently scheduled to expire on April 1, 2002. One of the
conditions to the consummation of the exchange offer is the tender for exchange
of at least 99% of the senior subordinated notes; as of March 25, 2002, we had
received valid tenders of between 98% and 99% of the senior subordinated notes.
Another condition to completion of the exchange offer is the satisfactory
restructuring of our senior secured borrowings, which we have been unable to
effectuate. Consequently, we are in discussions with the four largest holders of
our senior subordinated notes concerning possible changes to the restructuring
of our senior subordinated notes that would increase the likelihood of our
completing a satisfactory restructuring of our senior secured borrowings. We
cannot assure you that we will be successful in restructuring our senior
subordinated notes.
Since February 1, 2000, the holders of substantially all of our
borrowings other than the senior subordinated notes have waived cross-default
provisions with respect to the default on the senior subordinated notes and have
granted extensions of notes that have been scheduled to mature. We have made all
scheduled payments of interest and principal on all of our borrowings as
extended, other than the senior subordinated notes, since February 1, 2000. The
actions of the various lenders are set forth below:
- The lenders providing loans under our revolving line of credit
and the lenders providing secured, amortizing term loans have
waived the cross-default provisions with respect to
-20-
the default on the senior subordinated notes through July 1,
2002, and have amended certain covenants to eliminate defaults
that would otherwise have occurred because all of our secured,
amortizing term notes were classified as current liabilities
in our consolidated financial statements. Since February 1,
2000, we have been permitted to continue borrowing under our
revolving line of credit and have received new secured,
amortizing term loans in the aggregate principal amount of
$4,460,000.
- In November 2001, we and the holder of our 12% secured term
note executed an agreement extending the maturity of that note
to October 31, 2006; the extended note is payable in sixty
equal, monthly installments of principal and interest
commencing on November 30, 2001.
- The holder of our senior, unsecured note, in the outstanding
principal amount of $7,500,000, has extended the maturity date
of that note to April 30, 2002, and has waived the
cross-default provisions with respect to the default on the
senior subordinated notes. During 2000, the effective
interest rate on the note increased to 12 1/2%. We have
recently reached a non-binding agreement to amend the terms
of the senior, unsecured note, the principal terms of which
are the following:
- an extension of the maturity date to December 31,
2004,
- an amendment fee of 2% of the principal amount of
the senior unsecured note, payable through the
issuance of an additional $150,000 principal
amount of senior, unsecured notes,
- an interest rate of 14%, and
- quarterly principal payments of $637,500,
commencing on March 31, 2003.
- The holder of our junior subordinated notes, in the
outstanding principal amount of $347,000, has extended the
maturity date of those notes to April 30, 2002, has deferred
eight quarterly interest payments on those notes to April 30,
2002, and has waived the cross-default provision with respect
to the default on the senior subordinated notes. We have
reached an agreement in principle with the holder of the
junior subordinated notes to extend the maturity date of the
junior subordinated notes to March 31, 2005, and to increase
the interest rate thereon to 16%.
- The former holders of our junior subordinated convertible
notes, which were outstanding on December 31, 1999, in the
aggregate principal amount of $1,000,000, have deferred one
quarterly interest payment on those notes to April 30, 2002,
and have waived the cross-default provision with respect to
the default on the senior subordinated notes. On February 1,
2000, the junior subordinated convertible notes were
converted into 440,000 shares of our common stock. We have
reached an agreement in principle with the former holders of
the junior subordinated convertible notes to convert the
deferred interest to additional 16% junior subordinated notes
due March 31, 2005.
If these waivers expire prior to the completion of our proposed
restructuring, we will need to seek new waivers. If we are unable to obtain new
waivers, we will need to consider our alternatives, including seeking relief
from our creditors under the federal bankruptcy code, as discussed above.
-21-
In addition to the arrangements with the holders of our outstanding
indebtedness, we have converted $3,239,000 of past due accounts payable into
unsecured, amortizing term notes payable in 17 equal, monthly principal
installments that started in the fourth quarter of 2001, with interest at the
prime rate in effect on the day each note was issued. We are continuing to
negotiate with other trade creditors in an effort to extend the payment dates of
certain of our remaining past-due accounts payable.
In order to complete the extensions of our matured and maturing debt,
we must also renegotiate our senior, secured financing arrangements in order to
provide financing for our on-going working capital and capital expenditure
requirements. We can give you no assurance that we will be able to consummate
the exchange offer or the amendment of our senior, unsecured note, negotiate
additional extensions of our past-due accounts payable, or renegotiate our
senior, secured financing arrangements on terms satisfactory to us. If we are
unable to do so, we may be forced to seek relief from our creditors under the
federal bankruptcy code. Any proceeding under the federal bankruptcy code could
have a material adverse effect on our results of operations and financial
position.
INFLATION
We generally attempt to pass through to our customers fluctuations in
raw material costs; however, many of our customers will not accept price
increases from us to compensate for increases in labor and overhead expenses
that result from inflation. To offset inflationary increases in costs that we
cannot pass through to our customers and to maintain or improve our operating
margins, we attempt to improve our production efficiencies and manufacturing
processes.
ENVIRONMENTAL MATTERS
We have been named from time to time as one of numerous potentially
responsible parties or third-party defendants under applicable environmental
laws for restoration costs at waste-disposal sites, and as a defendant or
potential defendant in various other environmental law matters. It is our policy
to record accruals for matters of these types when we deem a loss to be probable
and we can reasonably estimate the amount of that loss. The various actions to
which we are or may in the future be a party are at various stages of
completion; although we can give you no assurance as to the outcome of existing
or potential environmental litigation, based upon the information currently
available to us, we believe that the outcome thereof will not have a material
adverse effect upon our financial position. You will find information concerning
certain other commitments and contingencies affecting us in Note 12 to our
consolidated financial statements in Part II, Item 8.
QUARTERLY FINANCIAL DATA
For quarterly financial data please refer to Note 16 to our
consolidated financial statements in Part II, Item 8.
CRITICAL ACCOUNTING POLICIES
Our accounting policies are more fully described in Note 1, "Summary of
Significant Accounting Policies," of our consolidated financial statements in
Part II, Item 8. As set forth in Note 1, the preparation of our consolidated
financial statements in conformity with generally accepted accounting principles
requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of contingent liabilities at the date
of the consolidated financial statements, and the reported amount of revenues
and expenses during each reporting period. Future events and their impact on our
results of operations or financial position cannot be determined with absolute
certainty.
-22-
Although we strive to use our best judgment in making estimates, actual results
could vary materially from our estimates.
As a manufacturer of rubber and metal components, we believe that the
most critical accounting policies inherent in the preparation of our
consolidated financial statements include (i) estimates of the recoverability of
accounts receivable, inventory, plant and equipment; and goodwill and other
intangible assets, which are based on such factors as estimated, undiscounted,
future cash flows and current fair value estimates of business units and assets,
(ii) estimates used to determine liabilities related to environmental matters,
litigation, income taxes, restructuring reserves, and other contingencies, and
(iii) revenue recognition.
The process of making estimates takes into account historical
experience, specific facts and circumstances, present and projected economic and
business conditions, and any other factors and assumptions relevant to the
carrying value of our assets and liabilities and the disclosure of contingent
matters. We reevaluate our estimates whenever factors relevant to the making of
a critical estimate change. Historically, our actual results have not differed
significantly from those determined using the estimates described above.
We recognize revenue from the sale of rubber and metal components under
the terms of our arrangements with our customers, which is generally at the time
of shipment and passage of title to customers according to shipping schedules
and terms of sale mutually agreed upon by our customers and us.
Our consolidated financial statements have been prepared assuming that
we will continue as a going concern. There exists substantial doubt about our
ability to continue as a going concern and our ability to realize our assets and
discharge our liabilities in the ordinary course of business. Our consolidated
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or to amounts and
classification of liabilities that may be necessary if we are unable to continue
as a going concern.
RECENTLY ISSUED ACCOUNTING STANDARDS
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 142, GOODWILL AND OTHER
INTANGIBLE ASSETS
In June 2001, the Financial Accounting Standards Board issued
"Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets" (FAS 142), which is effective for all fiscal periods
beginning after December 15, 2001. FAS 142 prohibits the amortization of
goodwill, but requires goodwill to be tested annually for impairment in
accordance with the requirements set forth in FAS 142. Other intangible assets
will continue to be amortized over their useful lives. The Company will adopt
the provisions of FAS 142 during the first quarter of 2002. The elimination of
goodwill amortization pursuant to FAS 142 is expected to result in an increase
of approximately $284,000 in the Rubber Group's income from operations and
$32,000 in the Metals Group's income from operations during fiscal 2002. During
the first six months of 2002, we will be evaluating more closely the goodwill
related to the reporting units within our Metals Group, which aggregated
$207,000 at December 31, 2001. If we determine that this goodwill is impaired we
will be required to record an impairment charge during 2002 of not more than
$207,000.
-23-
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 144, ACCOUNTING FOR THE
IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS
In August 2001, the Financial Accounting Standards Board issued
"Statement of Financial Accounting Standards No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets" (FAS 144), which is effective for
all fiscal periods beginning after December 15, 2001. FAS 144 sets forth the
conditions under which an impairment charge should be recognized for long-lived
assets to be held and used, except for goodwill, assets to be disposed of by
sale, and assets to be disposed of other than by sale. Although we are still
evaluating the provisions of FAS 144, we currently believe that the adoption of
FAS 144 during the first quarter of 2002, will not adversely affect our results
of operations or financial position.
ITEM 7A. 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 December 31, 2001, we had $37,102,000 of outstanding floating-rate
debt at interest rates equal to either LIBOR plus 2 1/2%, LIBOR plus 2 3/4%, or
the prime rate. 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 December 31, 2001, we had outstanding $45,309,000 of fixed-rate,
long-term debt with a weighted-average interest rate of 11.7%, of which
$40,563,000 has matured or is scheduled to mature during 2002. If we were able
to refinance or extend the matured or maturing debt, it might be at interest
rates that are significantly higher than the weighted-average interest rate on
the matured or maturing debt. We have reached an agreement in principle with the
holders of approximately 75% of our senior subordinated notes, of which
$27,412,000 principal amount are outstanding, to amend the terms of the senior
subordinated notes in order to extend the maturity date of those notes from
February 1, 2000, to December 31, 2004, issue additional senior subordinated
notes in payment of accrued and unpaid interest on the notes through the
effective date of the proposed amendment, and increase the interest rate on the
senior subordinated notes to 15%. We have also proposed to extend the maturity
date of our $7,500,000 senior unsecured note from May 1, 2001, to December 31,
2004, and to increase the interest rate thereon to 14%.
If we negotiated extensions of our matured and maturing debt on the
proposed terms discussed above and in "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity" in Part II, Item 7,
we estimate that our monthly interest expense would increase by approximately
$192,000.
For further information about our indebtedness, we recommend that you
also read Note 5 of our consolidated financial statements in Part II, Item 8.
-24-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
TABLE OF CONTENTS
Page
----
Report of Independent Auditors.........................................................26
Consolidated Statement of Operations for the Years Ended
December 31, 2001, 2000, and 1999...................................................27
Consolidated Balance Sheet at December 31, 2001 and 2000...............................28
Consolidated Statement of Stockholders' Deficit for
the Years Ended December 31, 2001, 2000, and 1999....................................30
Consolidated Statement of Cash Flows for the Years Ended
December 31, 2001, 2000, and 1999....................................................31
Notes to Consolidated Financial Statements.............................................32
-25-
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Lexington Precision Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheet of
Lexington Precision Corporation and its subsidiaries at December 31, 2001 and
2000, and the related consolidated statements of operations, stockholders'
deficit, and cash flows for each of the three years in the period ended December
31, 2001. Our audits also included the financial statement schedule contained in
Part IV, Item 14, of the Company's report on Form 10-K. These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Lexington Precision Corporation and its subsidiaries at December 31,
2001 and 2000, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
The accompanying consolidated financial statements have been
prepared assuming that Lexington Precision Corporation will continue as a going
concern. As more fully described in Notes 1 and 5, the Company has approximately
$80,000,000 of short-term debt, including $27,412,000 principal amount of senior
subordinated notes that matured on February 1, 2000, and that have not been
paid. Substantial doubt exists about the Company's ability to refinance, extend,
amend, or exchange such obligations. 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
classifications of assets or liabilities to reflect this uncertainty.
ERNST & YOUNG LLP
Cleveland, Ohio
March 29, 2002
-26-
LEXINGTON PRECISION CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
YEARS ENDED DECEMBER 31
----------------------------------------
2001 2000 1999
---- ---- ----
Net sales $ 126,202 $ 138,302 $ 134,372
Cost of sales 109,055 120,726 111,598
---------- ---------- ----------
Gross profit 17,147 17,576 22,774
Selling and administrative expenses 9,911 10,923 12,153
Impairment of long-lived assets 2,047 - 335
Income from insurance company demutualization 1,274 - -
---------- ---------- ----------
Income from operations 6,463 6,653 10,286
Interest expense 8,534 9,913 9,632
---------- ---------- ----------
Income (loss) before income taxes and
extraordinary item (2,071) (3,260) 654
Income tax provision (benefit) 80 (161) 133
---------- ---------- ----------
Income (loss) before extraordinary item (2,151) (3,099) 521
Extraordinary gain on repurchase of debt, net of
applicable income taxes - - 1,542
---------- ---------- ----------
Net income (loss) $ (2,151) $ (3,099) $ 2,063
========== ========== ==========
Per share data:
Basic and diluted income (loss) before extraordinary
item $ (0.45) $ (0.65) $ 0.10
Extraordinary gain on repurchase of debt, net of
applicable income taxes - - 0.36
---------- ---------- ----------
Basic and diluted net income (loss) applicable to
common stockholders $ (0.45) $ (0.65) $ 0.46
========== ========== ==========
See notes to consolidated financial statements.
-27-
LEXINGTON PRECISION CORPORATION
CONSOLIDATED BALANCE SHEET
(THOUSANDS OF DOLLARS)
DECEMBER 31
--------------------------------
2001 2000
---- ----
ASSETS:
Current assets:
Cash $ 189 $ 65
Marketable securities 1,274 -
Accounts receivable 18,753 19,912
Inventories 8,493 11,109
Prepaid expenses and other current assets 3,523 3,833
Deferred income taxes 1,914 2,049
---------- ----------
Total current assets 34,146 36,968
---------- ----------
Plant and equipment:
Land 2,309 2,348
Buildings 22,601 24,022
Equipment 111,206 106,004
---------- ----------
136,116 132,374
Accumulated depreciation 80,792 69,596
---------- ----------
Plant and equipment, net 55,324 62,778
---------- ----------
Excess of cost over net assets of businesses acquired, net 7,831 8,147
---------- ----------
Other assets, net 2,576 2,396
---------- ----------
$ 99,877 $ 110,289
========== ==========
See notes to consolidated financial statements. (continued on next page)
-28-
LEXINGTON PRECISION CORPORATION
CONSOLIDATED BALANCE SHEET (CONTINUED)
(THOUSANDS OF DOLLARS)
DECEMBER 31
-------------------------------
2001 2000
---- ----
LIABILITIES AND STOCKHOLDERS' DEFICIT:
Current liabilities:
Accounts payable $ 12,077 $ 16,993
Accrued expenses 14,586 11,158
Short-term debt 77,794 88,984
Current portion of long-term debt 2,617 12
---------- ----------
Total current liabilities 107,074 117,147
---------- ----------
Long-term debt, excluding current portion 2,000 104
---------- ----------
Deferred income taxes and other long-term liabilities 2,132 2,244
---------- ----------
Series B preferred stock, $100 par value, at
redemption value 660 660
Excess of redemption value over par value (330) (330)
---------- ----------
Series B preferred stock at par value 330 330
---------- ----------
Stockholders' deficit:
Common stock, $0.25 par value, 10,000,000 shares
authorized, 4,828,036 shares issued
at December 31, 2001 and 2000 1,207 1,207
Additional paid-in-capital 12,960 12,960
Accumulated deficit (25,826) (23,703)
---------- ----------
Total stockholders' deficit (11,659) (9,536)
---------- ----------
$ 99,877 $ 110,289
========== ==========
See notes to consolidated financial statements.
-29-
LEXINGTON PRECISION CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
(THOUSANDS OF DOLLARS)
ADDITIONAL TOTAL
COMMON PAID-IN- ACCUMULATED TREASURY STOCKHOLDERS'
STOCK CAPITAL DEFICIT STOCK DEFICIT
Balance at December 31, 1998 $ 1,087 $ 12,235 $ (22,556) $ (217) $ (9,451)
========== ========= ========== ========== =========
Net income - - 2,063 - 2,063
Preferred stock dividends
and redemptions - (75) - - (75)
---------- --------- ---------- ---------- ---------
Balance at December 31, 1999 $ 1,087 $ 12,160 $ (20,493) $ (217) $ (7,463)
========== ========= ========== ========== =========
Net loss - - (3,099) - (3,099)
Issuance of 125,000 shares of
restricted stock 10 (90) (137) 217 -
Amortization of restricted stock
grants - - 26 - 26
Conversion of junior subordinated
notes into 440,000 shares of
common stock 110 890 - - 1,000
---------- --------- ---------- ---------- ---------
Balance at December 31, 2000 $ 1,207 $ 12,960 $ (23,703) $ - $ (9,536)
========== ========= ========== ========== =========
Net loss - - (2,151) - (2,151)
Amortization of restricted stock
grants - - 28 - 28
---------- --------- ---------- ---------- ---------
Balance at December 31, 2001 $ 1,207 $ 12,960 $ (25,826) $ - $ (11,659)
========== ========= ========== ========== =========
See notes to consolidated financial statements.
-30-
LEXINGTON PRECISION CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(THOUSANDS OF DOLLARS)
YEARS ENDED DECEMBER 31
--------------------------------------
2001 2000 1999
---- ---- ----
OPERATING ACTIVITIES:
Net income (loss) $ (2,151) $ (3,099) $ 2,063
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 11,923 12,059 10,971
Amortization included in operating expense 1,180 1,431 1,757
Amortization included in interest expense 192 216 234
Extraordinary gain on repurchase of debt - - (1,935)
Income recognized on common stock received
from insurance company demutualization (1,274) - -
Provision for impairment loss on long-lived assets 2,047 - 335
Changes in operating assets and liabilities that
provided (used) cash:
Accounts receivable 1,159 4,186 (6,261)
Inventories 2,616 (1,617) 678
Prepaid expenses and other assets (31) (1,093) (99)
Accounts payable (1,677) 8,396 (2,694)
Accrued expenses 3,428 1,364 449
Other 149 293 126
---------- ---------- ----------
Net cash provided by operating activities 17,561 22,136 5,624
---------- ---------- ----------
INVESTING ACTIVITIES:
Purchases of plant and equipment (6,081) (13,936) (10,328)
Decrease (increase) in equipment deposits 56 447 (231)
Proceeds from sales of equipment 195 313 162
Expenditures for tooling owned by customers (646) (1,076) (697)
Other (241) 416 170
---------- ---------- ----------
Net cash used by investing activities (6,717) (13,836) (10,924)
---------- ---------- ----------
FINANCING ACTIVITIES:
Net increase (decrease) in revolving line of credit (2,992) (2,291) 8,473
Proceeds from issuance of long-term debt 2,000 2,460 15,567
Repayment of long-term debt (9,263) (8,254) (16,092)
Repurchase of debt - - (2,373)
Other (465) (158) (370)
---------- ---------- ----------
Net cash provided (used) by financing activities (10,720) (8,243) 5,205
---------- ---------- ----------
Net increase (decrease) in cash 124 57 (95)
Cash at beginning of year 65 8 103
---------- ---------- ----------
Cash at end of year $ 189 $ 65 $ 8
========== ========== ==========
See notes to consolidated financial statements
-31-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Lexington
Precision Corporation and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent liabilities at the date
of the consolidated financial statements, and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those
estimates.
MARKETABLE SECURITIES
Marketable securities held by the Company are classified as available
for sale and consist of equity securities, which are stated at fair value as
determined by the published closing price of each security at December 31, 2001.
Unrealized holding gains or losses on these securities, net of applicable income
taxes, are reported as a separate component of comprehensive income and included
as part of the Company's accumulated deficit until realized. Realized gains or
losses are based on the first-in, first-out specific identification method.
There were no realized or unrealized gains or losses during 2001, 2000, or 1999.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out
method) or market. Inventory levels by principal classification are set forth
below (dollar amounts in thousands):
DECEMBER 31
-----------------------
2001 2000
---- ----
Finished goods $ 3,727 $ 5,067
Work in process 2,060 2,677
Raw materials and purchased parts 2,706 3,365
--------- --------
$ 8,493 $ 11,109
========= ========
PLANT AND EQUIPMENT
Plant and equipment are carried at cost less accumulated depreciation.
Depreciation is calculated principally on the straight-line method over the
estimated useful lives of the various assets (15 to 32 years for buildings and 3
to 8 years for equipment). When an asset is retired or otherwise disposed of,
the related cost and accumulated depreciation are eliminated. Maintenance and
repair expenses are charged against income as incurred, while major improvements
that increase the useful life of plant and equipment
-32-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
are capitalized. Maintenance and repair expenses were $6,405,000, $7,817,000,
and $6,099,000 for 2001, 2000, and 1999, respectively.
EXCESS OF COST OVER NET ASSETS OF BUSINESSES ACQUIRED
The excess of cost over net assets of businesses acquired (goodwill) is
amortized on the straight-line method, principally over 40 years. At December
31, 2001 and 2000, accumulated amortization of goodwill was $4,158,000 and
$3,842,000, respectively. During 2001, 2000, and 1999, amortization of goodwill
totaled $316,000, $315,000, and $316,000, respectively. Substantially all of the
Company's unamortized goodwill at December 31, 2001, is assignable to operating
units within the Company's Rubber Group. The Company assesses the recoverability
of goodwill and other long-lived assets, when events or changes in circumstances
indicate that the carrying amount may be impaired, by evaluating whether the
anticipated undiscounted future cash flows of the related business will be
sufficient to recover the carrying amount over the remaining useful life of the
asset. If the future undiscounted cash flows are not adequate to recover the
carrying value of an asset over its remaining life, the carrying amount of that
asset is adjusted to its fair value.
DEFERRED FINANCING EXPENSES
Deferred financing expenses are amortized over the lives of the related
debt instruments.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses are recorded as expenses in the year
incurred. These costs totaled $890,000, $850,000, and $878,000 during 2001,
2000, and 1999, respectively.
NET INCOME OR LOSS PER COMMON SHARE
Basic net income or loss per common share is computed using the
weighted-average number of common shares outstanding. Diluted net income or loss
per share is calculated after giving effect to all potential common shares that
were dilutive, using the treasury stock method. Potential common shares are
securities (such as convertible debt securities and convertible preferred stock)
that do not have a current right to participate in earnings but could do so in
the future by virtue of their option or conversion rights. For purposes of the
net income or loss per common share calculations, net income or loss has been
reduced by the amount of preferred stock dividends declared and the amount by
which the redemption value of preferred shares redeemed exceeds the par value of
such shares.
REVENUE RECOGNITION
All of the Company's revenues result from the sale of rubber and metal
components. The Company recognizes revenue from the sale of components upon
shipment and passage of title to customers according to shipping schedules and
terms of sale mutually agreed to by the Company and its customers.
STOCK BASED EMPLOYEE COMPENSATION PLAN
The Company has a restricted stock award plan that permits it to award
restricted shares of its common stock to officers and key employees. Shares
awarded under the plan are accounted for in
-33-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
accordance with the provisions of "Accounting Principles Board Opinion Number
25, Accounting for Stock Issued to Employees." Compensation expense equal to the
market value of the shares on the date of grant is charged to earnings over the
vesting period of the shares, while the unamortized value of the restricted
shares is recorded as a reduction of stockholders' equity.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 142, GOODWILL AND OTHER
INTANGIBLE ASSETS
In June 2001, the Financial Accounting Standards Board issued
"Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets" (FAS 142), which is effective for all fiscal periods
beginning after December 15, 2001. FAS 142 prohibits the amortization of
goodwill, but requires goodwill to be tested annually for impairment in
accordance with the requirements set forth in FAS 142. Other intangible assets
will continue to be amortized over their useful lives. The Company will adopt
the provisions of FAS 142 during the first quarter of 2002. The elimination of
goodwill amortization pursuant to FAS 142 is expected to result in an increase
of approximately $284,000 in the Rubber Group's income from operations and
approximately $32,000 in the Metals Group's income from operations during fiscal
2002. During the first six months of 2002, the Company will be evaluating more
closely the goodwill related to the reporting units within our Metals Group,
which aggregated $207,000 at December 31, 2001. If we determine that this
goodwill is impaired we will be required to record an impairment charge during
2002 of not more than $207,000.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 144, ACCOUNTING FOR THE
IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS
In August 2001, the Financial Accounting Standards Board issued
"Statement of Financial Accounting Standards No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets" (FAS 144), which is effective for
all fiscal periods beginning after December 15, 2001. FAS 144 sets forth the
conditions under which an impairment charge should be recognized for long-lived
assets to be held and used, except for goodwill, assets to be disposed of by
sale, and assets to be disposed of other than by sale. Although the Company is
still evaluating the provision of FAS 144, the Company currently believes that
the adoption of FAS 144 during the first quarter of 2002 will not adversely
affect its results of operations or financial position.
BASIS OF PRESENTATION
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 is in default on its senior subordinated notes because 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 February 1, 2000. In
March 2001, the Company reached an agreement in principle with the four largest
holders of the senior subordinated notes on the terms of a restructuring of the
senior subordinated notes. The restructuring would be accomplished by means of
an exchange offer pursuant to which the existing senior subordinated notes would
be exchanged for new senior subordinated notes in a principal amount equal to
the principal amount of the existing senior subordinated notes being exchanged
plus the accrued and unpaid interest thereon through the day before the date the
exchange offer was consummated. The accrued and unpaid interest on the senior
subordinated notes aggregated $8,446,000 at December 31, 2001. The proposed
principal terms of the new senior subordinated notes are set forth below:
-34-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- a maturity date of December 31, 2004,
- an interest rate of 15%, and
- quarterly interest payments.
If the exchange offer were consummated, the Company would pay a
participation fee of 3% of the principal amount of senior subordinated notes
that were tendered for exchange and issue warrants to purchase, in the
aggregate, approximately 3% of the Company's common stock.
The exchange offer commenced on August 6, 2001, and has been extended
nine times. It is currently scheduled to expire on April 1, 2002. One of the
conditions to the consummation of the exchange offer is the tender for exchange
of at least 99% of the senior subordinated notes; as of March 25, 2002, the
Company had received valid tenders of between 98% and 99% of the senior
subordinated notes.
Since February 1, 2000, the holders of substantially all of the
Company's indebtedness other than the senior subordinated notes have waived
cross-default provisions with respect to the default on the senior subordinated
notes and have granted extensions of notes that have been scheduled to mature.
The Company has made all scheduled payments of interest and principal on all of
its indebtedness as extended, other than the senior subordinated notes, since
February 1, 2000. The actions of the various lenders are set forth below:
- The lenders providing loans under the Company's revolving
line of credit and the lenders providing secured, amortizing
term loans have waived the cross-default provisions with
respect to the default on the senior subordinated notes
through July 1, 2002. Since February 1, 2000, the Company
has been permitted to continue borrowing under its revolving
line of credit and has received new secured, amortizing term
loans in the aggregate principal amount of $4,460,000.
- In November 2001, the Company and the holder of the 12%
secured term note executed an agreement extending the
maturity of the note to October 31, 2006; the extended note
is payable in sixty equal, monthly installments of principal
and interest, commencing on November 30, 2001.
- The holder of the Company's senior, unsecured note, in the
outstanding principal amount of $7,500,000, has extended the
maturity date of that note to April 30, 2002, and has waived
the cross-default provisions with respect to the default on
the senior subordinated notes. During 2000, the effective
interest rate on the note increased to 12 1/2%. The Company
recently reached a non-binding agreement to amend the terms
of the senior, unsecured note, the principal terms of which
are the following:
- an extension of the maturity date to December 31,
2004,
- an amendment fee of 2% of the principal amount of
the senior, unsecured note, payable through the
issuance of an additional $150,000 principal amount
of senior, unsecured notes,
-35-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- an interest rate of 14%, and
- quarterly principal payments of $637,500,
commencing on March 31, 2003.
- The holder of the Company's junior subordinated notes, in
the outstanding principal amount of $347,000, has extended
the maturity date of those notes to April 30, 2002, has
deferred eight quarterly interest payments on those notes to
April 30, 2002, and has waived the cross-default provision
with respect to the default on the senior subordinated
notes. The Company has reached an agreement in principle
with the holder of the junior subordinated notes to extend
the maturity date of the junior subordinated notes to
March 31, 2005, and to increase the interest rate thereon
to 16%.
- The former holders of the Company's junior subordinated
convertible notes, which were outstanding on December 31,
1999, in the aggregate principal amount of $1,000,000, have
deferred one quarterly interest payment on those notes to
April 30, 2002, and have waived the cross-default provision
with respect to the default on the senior subordinated
notes. On February 1, 2000, the junior subordinated
convertible notes were converted into 440,000 shares of the
Company's common stock. The Company has reached an agreement
in principle with the former holders of the junior
subordinated convertible notes to convert the deferred
interest to additional 16% junior subordinated notes due
March 31, 2005.
The Company has converted $3,239,000 of past due accounts payable into
unsecured, amortizing term notes payable in seventeen equal, monthly principal
installments that start in the fourth quarter of 2001, with interest at the
prime rate in effect on the day each note was issued. The Company is continuing
to negotiate with other trade creditors in an effort to extend the payment dates
of its remaining past-due accounts payable. At March 18, 2002, approximately
$1,719,000 of accounts payable remained outstanding beyond normal industry
terms.
In order to complete the extensions of its matured and maturing debt,
the Company must also renegotiate its senior, secured financing arrangements in
order to provide financing for its on-going working capital and capital
expenditure requirements. The Company can give no assurance that it will be able
to consummate the exchange offer or the amendment of the senior, unsecured note,
negotiate additional extensions of past-due accounts payable, or renegotiate its
senior, secured financing arrangements on terms satisfactory to the Company. If
the Company is unable to do so, it may be forced to seek relief from its
creditors under the federal bankruptcy code. Any proceeding under the federal
bankruptcy code could have a material adverse effect on the Company's results of
operations and financial position. The consolidated financial statements do not
include any adjustments to the amounts or classifications of assets or
liabilities to reflect this uncertainty.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the
current year presentation.
NOTE 2 -- PREPAID EXPENSES AND OTHER CURRENT ASSETS
At December 31, 2001 and 2000, other current assets included $1,728,000
and $1,696,000, respectively, of tooling manufactured or purchased by the
Company pursuant to purchase orders issued by
-36-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
customers of the Company. Upon customer approval of the components produced by
such tooling, which normally takes less than 90 days, the customer is obligated
to pay for the tooling in accordance with previously agreed-upon terms.
NOTE 3 -- OTHER NONCURRENT ASSETS
The Company has paid for a portion of the cost of certain tooling that
was purchased by customers and is being used by the Company to produce
components under long-term supply arrangements. The payments have been recorded
as a noncurrent asset and are being amortized on a straight-line basis over
three years or, if shorter, the period during which the tooling is expected to
produce components. At December 31, 2001 and 2000, other noncurrent assets
included $1,094,000 and $1,284,000, respectively, representing the unamortized
portion of such capitalized payments. During 2001, 2000, and 1999, the Company
amortized $836,000, $1,090,000, and $1,441,000, respectively, of such
capitalized payments.
NOTE 4 -- ACCRUED EXPENSES
Accrued expenses at December 31, 2001 and 2000, are summarized below
(dollar amounts in thousands):
DECEMBER 31
---------------------
2001 2000
Employee fringe benefits $ 3,432 $ 3,914
Salaries and wages 684 817
Interest 8,738 5,234
Taxes 610 848
Other 1,122 345
--------- --------
$ 14,586 $ 11,158
========= ========
-37-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 -- DEBT
Debt at December 31, 2001 and 2000, is set forth below (dollar
amounts in thousands):
DECEMBER 31
-----------------------
2001 2000
Short-term debt:
Revolving line of credit $ 16,185 $ 19,177
Secured, amortizing term loans 26,350 33,178
12% secured term note - 1,370
Senior unsecured note 7,500 7,500
Senior subordinated notes 27,412 27,412
Junior subordinated notes 347 347
--------- ----------
Subtotal 77,794 88,984
Current portion of long-term debt 2,617 12
--------- ----------
Total short-term debt $ 80,411 $ 88,996
========= ==========
Long-term debt:
12% secured term note $ 1,336 $ -
Unsecured, amortizing term notes 2,868 -
Other 413 116
--------- ----------
4,617 116
Less current portion (2,617) (12)
--------- ----------
Total long-term debt $ 2,000 $ 104
========= ==========
REVOLVING LINE OF CREDIT
In the first quarter of 2002, we reached an agreement with the lender
providing loans to us under our revolving line of credit, to extend the
expiration date of our revolving line of credit from April 1, 2002, to July 1,
2002.
The loans were classified as short-term at December 31, 2000, because
at that date the Company's lenders had granted waivers, for a period of less
than one year, of the cross-default provisions of the revolving line of credit
with respect to the default on the senior subordinated notes.
At December 31, 2001, availability under the revolving line of credit
totaled $1,157,000, before outstanding checks of $453,000 were deducted. At
December 31, 2001, loans outstanding under the revolving line of credit accrued
interest at the London Interbank Offered Rate (LIBOR) plus 2.5% and at the prime
rate. At December 31, 2001, 2000, and 1999, the weighted-average interest rates
on borrowings under the revolving line of credit were 4.49%, 9.24%, and 8.5%,
respectively.
The loans outstanding under the 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.
-38-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SECURED, AMORTIZING TERM LOANS
Secured, amortizing term loans outstanding at December 31, 2001 and
2000, are set forth below (dollar amounts in thousands):
DECEMBER 31
-----------------------
2001 2000
------- -------
Term loans payable in equal monthly principal installments based on a
180-month amortization schedule, final maturities in 2002, 8.37% $ 2,221 $ 2,454
Term loans payable in equal monthly principal installments, final maturities
in 2002, LIBOR plus 2 3/4% (4.71% at December 31, 2001) 344 1,091
Term loan payable in equal monthly principal installments based on a
180-month amortization schedule, final maturity in 2002, 9.37% 1,084 1,191
Term loan payable in equal monthly principal installments based on a
180-month amortization schedule, final maturity in 2002, 9.0% 2,128 2,330
Term loans payable in equal monthly principal installments, final maturity
in 2002, prime rate and LIBOR plus 2 1/2% (4.42% at December 31, 2001) 305(1) 1,222(1)
Term loan, payable in equal monthly principal installments, final maturity
in 2003, prime rate (4.75% at December 31, 2001) 227 409
Term loans payable in equal monthly principal installments, final maturity
in 2003, prime rate and LIBOR plus 2 1/2% (4.42% at December 31, 2001) 131(1) 251(1)
Term loan payable in equal monthly principal installments, final maturity
in 2003, LIBOR plus 2 3/4% (4.79% at December 31, 2001) 427 747
Term loans payable in equal monthly principal installments, final maturity
in 2004, LIBOR plus 2 3/4% (4.62% at December 31, 2001) 810 1,145
Term loan payable in equal monthly principal installments, final maturity
in 2004, prime rate and LIBOR plus 2 1/2% (4.65% at December 31, 2001) 657 928
Term loans payable in equal monthly principal installments, final maturity
in 2004, prime rate and LIBOR plus 2 1/2% (4.42% at December 31, 2001) 6,325(1) 9,136(1)
Term loan payable in equal monthly principal installments, final maturity
in 2005, LIBOR plus 2 1/2% (4.37% at December 31, 2001) 802 1,027
Term loan payable in equal monthly principal installments, final maturity
in 2005, prime rate and LIBOR plus 2 1/2% (4.42% at December 31, 2001) 852(1) 1,094(1)
Term loan payable in equal monthly principal installments, final maturity
in 2006, prime rate at December 31, 2000 (4.75% at December 31, 2001) 352 435
Term loans payable in equal monthly principal installments, final maturity
in 2006, prime rate and LIBOR plus 2 1/2% (4.42% at December 31, 2001) 6,086(1) 5,422(1)
Term loans payable in equal monthly principal installments, final maturity
in 2007, prime rate and LIBOR plus 2 1/2% (4.42% at December 31, 2001) 3,599(1) 4,296(1)
------- -------
$26,350 $33,178
======= =======
(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.
-39-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 2001 and 2000, the scheduled principal payments on the
secured, amortizing term loans that were payable within one year totaled
$7,468,000 and $10,716,000, respectively. In addition, the portions of the
secured, amortizing term loans that are due more than one year after the date of
the consolidated financial statements 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 loans with respect to the default
on the senior subordinated notes or because the revolving line of credit was
scheduled to expire in less than one year.
The secured, amortizing term loans 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.
SENIOR UNSECURED NOTE
The senior unsecured note, due April 30, 2002, bore interest at 10 1/2%
per annum until July 31, 2000. The effective interest rate increased to 12 1/2%
on August 1, 2000. The holder of this note has waived, until April 30, 2002, the
cross-default provision of this note with respect to the default on the senior
subordinated notes. These notes are senior in right of payment to the senior
subordinated notes and the junior subordinated notes.
UNSECURED, AMORTIZING TERM NOTES
The unsecured, amortizing term notes mature in 2003, and are a series
of notes that are payable in seventeen equal, monthly principal installments,
with interest at the prime rate in effect on the day each note was issued. At
December 31, 2001, the weighted average interest rate on the unsecured,
amortizing term notes was 5.6%.
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 interest and principal then due on the senior subordinated notes in the
amounts of $1,748,000 and $27,412,000, respectively. For a more detailed
discussion of the status of the senior subordinated notes, refer to Note 1,
"Summary of Significant Accounting Policies - Basis of Presentation."
JUNIOR SUBORDINATED NOTES
The junior subordinated convertible notes and the junior subordinated
nonconvertible notes are unsecured obligations of the Company. The $1,000,000
principal amount of junior subordinated convertible notes were converted into
440,000 shares of common stock on February 1, 2000. The junior subordinated
nonconvertible notes are due on April 30, 2002, 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 currently bear interest at 14% per annum. The holders of the junior
subordinated notes have deferred until April 30, 2002, the interest payments
that were due on or after February 1, 2000, and have waived their cross-default
provisions with respect to the default on the senior subordinated notes.
-40-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
RESTRICTIVE COVENANTS
Certain of the Company's financing arrangements contain covenants that
set 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 plant and equipment,
the purchase of common stock, the redemption of preferred stock, and the payment
of cash dividends. In addition, substantially all of the Company's financing
agreements include cross-default provisions.
From time to time, the Company's lenders have agreed to waive or amend
certain of the financial covenants contained in our various loan agreements in
order to maintain or otherwise ensure our current or future compliance. A
covenant that limits the amount of past due accounts payable was amended twice
and covenants requiring a minimum level of tangible net worth were amended four
times during the past year. The Company cannot provide assurance that, if the
Company breaches a covenant in the future, its lenders will agree to provide
waivers or amendments. In the event that the Company is not in compliance with
any of its covenants in the future and the Company's lenders do not agree to
amend or waive those covenants, the lenders would have the right to declare the
indebtedness under their note agreements to be immediately due and payable and
the violation might trigger cross-default provisions under substantially all of
the Company's other indebtedness. In those circumstances, the holders of that
indebtedness, would, among other things, have the right to declare the
indebtedness to be immediately due and payable, in which event the Company might
be required to consider alternatives, including seeking relief from its
creditors under the federal bankruptcy code. Any proceeding under the federal
bankruptcy code could have a material adverse effect upon the Company's results
of operations and financial position. For a more detailed discussion of recent
amendments to and waivers under the Company's various note agreements, refer to
Note 1, "Summary of Significant Accounting Policies - Basis of Presentation."
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company believes that, at December 31, 2001, the fair values of the
secured, amortizing term loans and the loans outstanding under the revolving
line of credit approximated the principal amounts of such loans.
Since January 1, 2000, the Company is unaware of any trading activity
in the senior subordinated notes. The Company has no basis to express an opinion
as to the fair market value of the senior unsecured notes, the senior
subordinated notes, or the junior subordinated notes.
FINANCIAL LEVERAGE AND LIQUIDITY
The Company has substantial borrowings for its size. Because those
borrowings require the Company to make substantial interest and principal
payments, any negative event may have a greater adverse effect upon the Company
than if it had less debt. The Company is in default in the payment of its senior
subordinated notes, which have a principal amount of $27,412,000 and accrued and
unpaid interest, as of December 31, 2001, of $8,446,000. In addition, the
Company has secured, amortizing term notes with scheduled balloon maturities
during 2002 of $5,304,000 and $7,847,000 of unsecured term notes that have been
extended to mature during the second quarter of 2002. Excluding the debt listed
above, there are $7,468,000 of scheduled principal payments during 2002 on the
Company's secured, amortizing term
-41-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
loans, $2,286,000 of scheduled principal payments on the unsecured,
amortizing term notes, and $217,000 of scheduled principal payments on the 12%
secured term note. The Company estimates that, if its debt is not restructured
or refinanced, the interest expense on all of its debt during 2002, at existing
contractual and market rates, would be approximately $7,400,000. Interest paid
during 2001, 2000, and 1999 totaled $4,838,000, $6,214,000, and $9,618,000,
respectively.
NOTE 6 -- PREFERRED STOCK
SERIES B PREFERRED STOCK
At December 31, 2000, there were outstanding 3,300 shares of the
Company's $8 cumulative convertible preferred stock, series B, par value $100
per share. Each share of series B preferred stock is (1) entitled to one vote,
(2) redeemable for $200 plus accumulated and unpaid dividends, (3) convertible
into 14.8148 shares of common stock (subject to adjustment), and (4) entitled,
upon voluntary or involuntary liquidation and after payment of the debts and
other liabilities of the Company, to a liquidation preference of $200 plus
accumulated and unpaid dividends. Redemptions of $90,000 are scheduled on
November 30 of each year in order to retire 450 shares of series B preferred
stock annually. The Company failed to make the scheduled redemptions in the
amount of $90,000 for 450 shares of series B preferred stock on each of November
30, 2000 and 2001, as discussed in more detail below. Including the 450 shares
of series B preferred stock that the Company did not redeem on each of November
30, 2000 and 2001, scheduled redemptions of series B preferred stock during the
years 2002 through 2006 aggregate $630,000. For accounting purposes, when series
B preferred stock is redeemed, the series B preferred stock account is reduced
by the $100 par value of each share redeemed, and paid-in-capital is charged for
the $100 excess of redemption value over par value of each share redeemed. Under
the terms of the series B preferred stock, the Company may not declare any cash
dividends on its common stock if there exists a dividend arrearage on the series
B preferred stock.
As more fully discussed in Note 1, the Company did not make the
payments of interest and principal on the senior subordinated notes that were
due on February 1, 2000, in the amounts of $1,748,000 and $27,412,000,
respectively. As a result, the Company is prohibited from making any dividend
payments on or redemptions of the series B preferred stock until it cures the
payment default. At December 31, 2001, the Company was in arrears in the payment
of eight dividends on the series B preferred stock in the aggregate amount of
$53,000 and in the redemption of 900 shares of series B preferred stock in the
amount of $180,000. Because more than five dividend payments are in arrears, the
holders of the series B preferred stock are entitled to elect two members to the
Company's board of directors until the annual meeting of stockholders following
the date on which all accumulated but unpaid dividends have been eliminated.
OTHER AUTHORIZED PREFERRED STOCK
The Company's restated certificate of incorporation provides that the
Company is authorized to issue 2,500 shares of 6% cumulative convertible
preferred stock, series A, par value $100 per share. At December 31, 2001 and
2000, no shares of the series A preferred stock had been issued.
The Company's restated certificate of incorporation also provides that
the Company is authorized to issue 2,500,000 shares of other preferred stock
having a par value of $1 per share. At December 31, 2001 and 2000, no shares of
the $1 par value preferred stock had been issued.
-42-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 -- COMMON STOCK
COMMON STOCK, $.25 PAR VALUE
At December 31, 2001 and 2000, there were 4,828,036 shares of the
Company's common stock outstanding. At December 31, 2001 and 2000, 48,889 shares
were reserved for issuance on the conversion of the series B preferred stock.
In January 2000, the Compensation Committee of the Company's Board of
Directors awarded to key employees of the Company, under a restricted stock
award plan, 125,000 shares of common stock, of which 85,915 represented treasury
shares and 39,085 shares represented authorized but previously unissued shares.
In February 2000, the holders of the Company's junior subordinated
convertible notes converted the $1,000,000 principal amount of the notes into
440,000 shares of the Company's common stock in accordance with the terms of the
notes.
Because the Company is currently in default in respect of the senior
subordinated notes, the Company cannot pay cash dividends on, or redeem any
shares of, its capital stock.
RESTRICTED STOCK AWARD PLAN
The Company had a restricted stock award plan that permitted it to
award restricted shares of common stock to officers and other key employees.
During 1999, no shares of restricted common stock were awarded or outstanding.
In January 2000, the Compensation Committee of the Board of Directors awarded
125,000 shares of restricted common stock to key employees of the Company. Under
the terms of the restricted stock award plan, the restricted shares vest over
the five-year period following the date of grant. The individuals who received
restricted shares are entitled to receive cash dividends (if any) and to vote
their unvested shares. The restricted stock award plan expired on December 31,
2001.
NOTE 8 -- EMPLOYEE BENEFIT PLANS
RETIREMENT AND SAVINGS PLAN
The Company maintains a retirement and savings plan pursuant to Section
401 of the Internal Revenue Code (a "401(k)" plan). All employees of the Company
are entitled to participate in the 401(k) plan after meeting the eligibility
requirements. Generally, employees may contribute up to 15% of their annual
compensation but not more than prescribed amounts established by the United
States Secretary of the Treasury. Employee contributions, up to a maximum of 6%
of an employee's compensation, are matched 50% by the Company. During 2001,
2000, and 1999, matching contributions made by the Company totaled $637,000,
$696,000, and $682,000, respectively. In addition, the Company has the option to
make a profit-sharing contribution to the 401(k) plan. The consolidated
financial statements include a provision for a profit-sharing contribution of
$665,000 for 1999. There was no provision for a profit-sharing contribution for
2001 or 2000. Effective January 1, 2002, Company contributions to the 401(k)
plan vest at a rate of 20% per year commencing in the participant's second year
of service until the participant becomes fully vested after six years of
service.
-43-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INCENTIVE COMPENSATION PLAN
The Company has an incentive compensation plan that provides for the
payment of annual cash bonus awards to certain officers and key employees of the
Company. The Compensation Committee of the Company's Board of Directors, which
consists of two directors who are not employees of the Company, oversees the
administration of the incentive compensation plan and approves the cash bonus
awards. Bonus awards for eligible divisional employees are typically based upon
the attainment of predetermined profit targets at each division. Bonus awards
for corporate officers are typically based upon the attainment of predetermined
consolidated profit targets. The consolidated financial statements include
provisions for bonuses totaling $243,000, $349,000, and $1,062,000 for 2001,
2000, and 1999, respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company maintains programs to fund certain costs related to a
prescription drug card program for retirees of one of its former divisions and
to fund insurance premiums for certain retirees of one of its divisions. At
December 31, 2001, the Company's accumulated postretirement benefit obligation
totaled $413,000. The Company is amortizing its transition obligation over the
remaining life expectancy of the participants, which equates to an annual rate
of $57,000.
A reconciliation of the changes in the Company's post-retirement
obligations at December 31, 2001 and 2000, is set forth below (dollar amounts in
thousands):
DECEMBER 31
-------------------------
2001 2000
Accumulated postretirement benefit obligation at
beginning of year $ 361 $ 304
Interest cost 26 23
Benefits paid (55) (47)
Actuarial (gain) loss 81 81
--------- -------
Accumulated postretirement benefit obligation at
end of year 413 361
Plan assets at fair market value - -
--------- -------
Unfunded accumulated postretirement benefit obligation
at end of year 413 361
Unrecognized transition obligation (176) (236)
Unrecognized net gain 22 112
--------- -------
Accrued benefit cost $ 259 $ 237
========= =======
-44-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net annual postretirement benefit costs for 2001, 2000, and 1999, are
summarized below (dollar amounts in thousands):
YEARS ENDED DECEMBER 31
----------------------------------
2001 2000 1999
---- ---- ----
Service cost $ - $ - $ 2
Interest cost 26 23 20
Net amortization and deferral 48 33 31
-------- ------- -------
Net annual postretirement benefit cost $ 74 $ 56 $ 53
======== ======= =======
The weighted-average annual rate of increase in the per capita cost of
covered benefits for the prescription drug card program is assumed to be 11% in
2001 and is projected to decrease gradually thereafter until it reaches 5% in
2010. Changing the assumed rate of increase in the prescription drug cost by one
percentage point in each year would not have a significant effect on the
accumulated postretirement benefit obligation. The Company's program to fund
certain insurance premiums for retirees of one of its divisions has a defined
dollar benefit and is therefore unaffected by increases in health care costs.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation at December 31, 2001 and 2000, was 7.75%.
NOTE 9 -- INCOME TAXES
The components of the provisions for income taxes related to operations
in 2001, 2000, and 1999, are set forth below (dollar amounts in thousands):
YEARS ENDED DECEMBER 31
---------------------------------
2001 2000 1999
---- ---- ----
Current:
Federal $ - $ (214) $ 157
State 80 53 (24)
-------- -------- -------
(161) 133
Deferred:
Federal - - -
-------- -------- -------
Income tax provision (benefit) $ 80 $ (161) $ 133
======== ======== =======
During 1999, the Company also provided for income taxes of $393,000
related to the extraordinary gain on the repurchase of debt.
Income taxes paid during 2001, 2000, and 1999 totaled $125,000,
$113,000, and $96,000, respectively.
-45-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The difference between the Company's income tax provision (benefit)
in 2001, 2000, and 1999 and the income taxes that would have been payable at the
federal statutory rate is reconciled as follows (dollar amounts in thousands):
YEARS ENDED DECEMBER 31
-----------------------------------
2001 2000 1999
---- ---- ----
Federal statutory income tax provision $ (704) $ (1,108) $ 222
Change in valuation allowance 588 963 (150)
Amortization of nondeductible goodwill 107 107 107
State income taxes, net of federal benefit 53 57 (14)
Adjustment of prior year's tax - (214) -
Other 36 34 (32)
--------- --------- --------
Income tax provision (benefit) $ 80 $ (161) $ 133
========= ========= ========
The following table sets forth the deferred tax assets and the
deferred tax liabilities of the Company at December 31, 2001 and 2000 (dollar
amounts in thousands):
DECEMBER 31
------------------------
2001 2000
Deferred tax assets:
Net operating losses and tax credit carryforwards:
Federal net operating losses $ 5,031 $ 4,983
State net operating losses 1,787 1,783
Federal alternative minimum taxes 1,552 1,552
Investment tax credit 100 101
Other tax credit 81 81
-------- --------
Total tax carryforwards 8,551 8,500
Deductible temporary differences:
Impairment of long-lived assets 696 --
Asset loss reserves 341 142
Tax inventory over book 498 579
Deferred compensation liabilities 36 40
Vacation accruals 341 333
Other accruals 261 249
Deferred financing costs and other 27 27
-------- --------
Total deferred tax assets 10,751 9,870
Valuation allowance (6,716) (6,128)
-------- --------
Net deferred tax assets 4,035 3,742
Deferred tax liabilities:
Tax over book depreciation 3,602 3,742
Unrealized gain on marketable securities 433 --
-------- --------
Net deferred taxes $ -- $ --
======== ========
During 2001, the Company's valuation allowance increased by $588,000,
primarily due to the net loss incurred by the Company during 2001.
-46-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 2001, the Company had net operating loss carryforwards
for federal income tax purposes of $14,798,000, which expire in the years 2005
through 2016, and alternative minimum tax credits of $1,552,000, which can be
used to offset future payments of regular federal income taxes, if any, without
any time limitations.
NOTE 10 -- SEGMENTS
DESCRIPTION OF SEGMENTS AND PRODUCTS
The Company has two operating segments, the Rubber Group and the Metals
Group. The Rubber Group produces seals used in automotive wiring systems,
insulators for automotive ignition wire sets, components for medical devices,
and molds used to produce components for the Company's customers. The Metals
Group manufactures aluminum die castings and machines components from aluminum,
brass, and steel bars, for sale primarily to automotive suppliers, industrial
equipment manufacturers, and manufacturers of computer and office equipment. The
Rubber Group and the Metals Group conduct substantially all of their business in
the continental United States.
MEASUREMENT OF SEGMENT PROFIT OR LOSS
The Company evaluates performance based upon several measures,
including income from operations and earnings before interest, taxes,
depreciation, and amortization, which is frequently referred to as EBITDA. We
use the term Adjusted EBITDA to refer to EBITDA adjusted to exclude nonrecurring
items of income and expense. EBITDA and Adjusted EBITDA are not measures of
performance under accounting principles generally accepted in the United States.
While EBITDA and Adjusted EBITDA should not be considered in isolation or used
as a substitute for net income, cash flows from operating activities, or other
operating or cash flow statement data prepared in accordance with accounting
principles generally accepted in the United States, the Company believes that
EBITDA and Adjusted EBITDA are used by investors as supplemental information to
evaluate a company's financial performance, including its ability to incur and
to service debt. In addition, the Company's definition of EBITDA and Adjusted
EBITDA may not be the same as the definition of EBITDA and Adjusted EBITDA used
by other companies.
The accounting policies of the Company's operating segments are the
same as those described in Note 1, "Summary of Significant Accounting Policies,"
except that debt, deferred financing expenses, interest expense, and income and
franchise tax expense are recorded at the Corporate Office. Corporate Office
expenses that are not considered direct expenses of the Rubber Group or the
Metals Group are not allocated to those segments for purposes of evaluating
operating performance.
FACTORS MANAGEMENT USED TO IDENTIFY REPORTABLE SEGMENTS
Although all of the Company's production facilities are similar
manufacturing operations, selling to similar customers, the Company presents
financial data for the Rubber Group and the Metals Group because of the
significant difference in financial performance between those segments.
INDUSTRY CONCENTRATION; RELIANCE ON LARGE CUSTOMERS AND CREDIT RISK
During 2001, 2000, and 1999, net sales to customers in the automotive
industry totaled $107,818,000, $119,572,000, and $114,473,000, respectively,
which represented 85.4%, 86.4%, and 85.2%, respectively, of the Company's net
sales. At December 31, 2001 and 2000, accounts receivable from automotive
customers totaled $17,646,000 and $17,685,000, respectively. The Company
operates
-47-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
primarily in the domestic automotive market, which has been characterized by
intense price competition and increasing customer requirements for quality and
service. These factors, among others, may have a sudden and an adverse affect on
the operating results and financial condition of our customers, and, in turn,
the collectibility of the Company's accounts receivable from those customers.
The Company attempts to mitigate this risk of loss through ongoing evaluations
of automotive market conditions, examinations of customer financial statements,
and discussions with customer management as deemed necessary. Provisions for
credit losses are based upon historical experience and such ongoing evaluations
of the financial condition of the Company's customers. The Company generally
does not require collateral from its customers to support the extension of trade
credit. At December 31, 2001 and 2000, the Company had reserves for credit
losses of $669,000 and $181,000, respectively.
During the fourth quarter of 2001, two automotive customers of the
Company filed petitions for protection from creditors under Chapter 11 of the
federal bankruptcy code. The unpaid, outstanding pre-petition accounts
receivable from the two customers as of December 31, 2001, totaled $1,068,000.
Of this amount, the Company has filed claims for the reclamation of product
delivered during the ten days prior to the respective filing date totaling
$291,000. At December 31, 2001, the Company has written down these receivables
to an estimated net realizable value of $686,000.
During 2001, 2000, and 1999, the Company's net sales to Delphi
Corporation, totaled $24,388,000, $28,782,000, and $30,360,000. Sales to Delphi
in 2001, 2000, and 1999, represented 19.3%, 20.8%, and 22.6%, respectively, of
the Company's net sales and 25.8%, 27.3%, and 30.6%, respectively, of the Rubber
Group's net sales. No other customer accounted for more than 10% of the
Company's net sales during 2001, 2000, or 1999. In 2001, the three largest
customers of the Rubber Group, including Delphi, accounted for 46.7% of the
Rubber Group's net sales. In 2001, the three largest customers of the Metals
Group accounted for 45.9% of the Metals Group's net sales. Loss of a significant
amount of business from Delphi or any of the Company's other large customers
would have a material adverse effect on the Company if such business were not
substantially replaced by additional business from existing or new customers.
During 2001, 2000, and 1999, most of the connector seals that the
Company sold to Delphi were subject to a multi-year agreement that expired on
December 31, 2001. In July 2001, Delphi and the Rubber Group entered into a new
agreement that will govern, through December 31, 2004, the purchase of many of
the component parts that the Company currently sells to Delphi. Under the terms
of that agreement, the Company provided Delphi with significant price reductions
effective July 16, 2001, and the selling prices of the components will be
further reduced by agreed-upon percentages in each of the years covered by the
agreement. During 2001, the price reductions granted to Delphi on July 16, 2001,
reduced net sales by $2,588,000.
CORPORATE OFFICE
The net loss from operations at the Corporate Office consists primarily
of general administrative expenses that are not a result of any activity carried
on by either the Rubber Group or the Metals Group. Corporate Office expenses
include the compensation and benefits of the Company's executive officers and
corporate staff, rent on the office space occupied by these individuals, general
corporate legal fees, and certain insurance expenses. Assets of the Corporate
Office include primarily marketable securities, certain prepaid expenses and
other miscellaneous current assets, deferred tax assets, and deferred financing
expenses.
-48-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEGMENT FINANCIAL DATA
Information relating to the Company's operating segments and the
Corporate Office for 2001, 2000, and 1999 is summarized below (dollar amounts in
thousands):
YEARS ENDED DECEMBER 31
----------------------------------------
2001 2000 1999
---- ---- ----
NET SALES:
Rubber Group $ 91,532 $ 102,171 $ 98,969
Metals Group 34,670 36,131 35,403
---------- ---------- ----------
Total net sales $ 126,202 $ 138,302 $ 134,372
========== ========== ==========
INCOME (LOSS) FROM OPERATIONS (1):
Rubber Group $ 10,389 $ 10,484 $ 14,324
Metals Group (3,070) (1,586) (1,592)
---------- ---------- ----------
Subtotal 7,319 8,898 12,732
Corporate Office (856) (2,245) (2,446)
---------- ---------- ----------
Total income from operations $ 6,463 $ 6,653 $ 10,286
========== ========== ==========
DEPRECIATION AND AMORTIZATION (2):
Rubber Group $ 8,484 $ 8,554 $ 8,096
Metals Group 4,531 4,849 4,585
---------- ---------- ----------
Subtotal 13,015 13,403 12,681
Corporate Office 88 87 47
---------- ---------- ----------
Total depreciation and amortization $ 13,103 $ 13,490 $ 12,728
========== ========== ==========
CAPITAL EXPENDITURES (3):
Rubber Group $ 5,116 $ 10,355 $ 7,508
Metals Group 1,281 3,580 2,711
---------- ---------- ----------
Subtotal 6,397 13,935 10,219
Corporate Office 11 1 109
---------- ---------- ----------
Total capital expenditures $ 6,408 $ 13,936 $ 10,328
========== ========== ==========
ASSETS:
Rubber Group $ 68,823 $ 71,549 $ 73,414
Metals Group 27,287 35,905 35,785
---------- ---------- ----------
Subtotal 96,110 107,454 109,199
Corporate Office 3,767 2,835 2,128
---------- ---------- ----------
Total assets $ 99,877 $ 110,289 $ 111,327
========== ========== ==========
(1) During 2001 and 1999, the loss from operations at the Metals Group
includes (i) a provision for asset impairment of $2,047,000,
related to the planned closure of the Metals Group's metal
machining facility located in Casa Grande, Arizona, during the
first half of 2002, and (ii) $335,000 related to the closure of
the Group's die casting facility in Manchester, NY, respectively.
During 2001, the loss from operations at the Corporate Office was
reduced by $1,274,000 as a result of the demutualization of an
insurance company.
(2) Excludes amortization of deferred financing expenses, which
totaled $192,000, $216,000, and $234,000, during 2001, 2000, and
1999, respectively, and which is included in interest expense in
the consolidated financial statements.
(3) Capital expenditures for 2001 included $327,000 of equipment
purchased under capital lease agreements.
-49-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 -- NET INCOME (LOSS) PER COMMON SHARE
The calculations of basic and diluted net income or loss per common
share for 2001, 2000, and 1999, 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, before giving effect to the extraordinary
gain, was not dilutive for the years ended December 31, 2001, 2000, and 1999.
The pro forma conversion of the Company's 14% junior subordinated convertible
notes was not dilutive for the years ended December 31, 2000 and 1999. As a
result, the calculations of diluted net income or loss per common share set
forth below do not reflect any pro forma conversion.
For purposes of the earnings per share calculation, earnings are
reduced by (i) preferred stock dividends and (ii) the amount by which payments
made to redeem preferred stock exceeded the par value of such shares. During the
year ended December 31, 2001, the Company did not pay any dividends on, or
redeem any shares of, the series B preferred stock. The Company's failure to pay
dividends on the series B preferred stock, or to redeem shares of series B
preferred stock during 2001 and 2000 reduced the Company's net loss per share by
one cent per share during each year.
YEARS ENDED DECEMBER 31
--------------------------------
2001 2000 1999
---- ---- ----
Numerator:
Income (loss) before extraordinary item $ (2,151) $ (3,099) $ 521
Preferred stock dividends - - (30)
Excess of redemption value over par value of
preferred stock redeemed during year - - (45)
-------- -------- --------
Numerator for basic net income (loss) per share -
income applicable to common stockholders before
extraordinary item (2,151) (3,099) 446
Effect of assumed conversion of dilutive securities -
junior subordinated convertible notes - 12 112
-------- -------- --------
Numerator for diluted net income (loss) per share -
income (loss) applicable to common stockholders
before extraordinary items (2,151) (3,087) 558
Extraordinary gain, net of applicable income taxes - - 1,542
-------- -------- --------
Numerator for net income (loss) per share - income
applicable to common stockholders after
extraordinary item $ (2,151) $ (3,087) $ 2,100
======== ======== ========
(continued on next page)
-50-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued from prior page)
YEARS ENDED DECEMBER 31
--------------------------------
2001 2000 1999
---- ---- ----
Denominator:
Denominator for basic net income (loss) per share -
weighted-average common shares 4,828 4,781 4,263
Adjustments to derive denominator for diluted net
income (loss) per share:
Conversion of junior subordinated
convertible notes into 440,000 common shares - 38 440
Issuance of 125,000 shares of restricted common
stock - 9 -
-------- -------- --------
Denominator for diluted net income (loss) per share -
adjusted weighted-average common shares 4,828 4,828 4,703
======== ======== ========
Per share data:
Basic and diluted income (loss) per common share
before extraordinary item $ (0.45) $ (0.65) $ 0.10
Extraordinary gain, net of applicable income taxes - - 0.36
-------- -------- --------
Basic and diluted net income (loss) available to common
stockholders $ (0.45) $ (0.65) $ 0.46
======== ======== ========
NOTE 12 -- COMMITMENTS AND CONTINGENCIES
PURCHASE COMMITMENTS
At December 31, 2001, the Company had outstanding commitments to
purchase plant and equipment of $1,327,000.
LEASES
The Company is lessee under various operating leases relating to
storage and office space, temporary office units, and equipment. Total rent
expense under operating leases aggregated $410,000, $400,000, and $391,000 for
2001, 2000, and 1999, respectively. At December 31, 2001, future minimum lease
commitments under noncancelable operating leases totaled $196,000, $126,000, and
$64,000 for 2002, 2003, and 2004, respectively. Commitments subsequent to 2004
are not significant.
LEGAL ACTIONS
The Company is subject to various claims and legal proceedings covering
a wide range of matters that arise in the ordinary course of its business
activities. It is the Company's policy to record accruals for such matters when
a loss is deemed probable and the amount of such loss can be reasonably
estimated. The various actions to which the Company is or may in the future be a
party are at various stages of
-51-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
completion. Although there can be no assurance as to the outcome of existing or
potential litigation, the Company believes, based upon the information currently
available to it, that the outcome of such actions will not have a material
adverse effect upon its financial position.
LETTERS OF CREDIT
At December 31, 2001 and 2000, the Company had outstanding irrevocable
letters of credit totaling $1,238,000 and $966,000, respectively. The letters of
credit guaranteed certain payments that may be required under the Company's
self-insured workers' compensation program.
OTHER
The Company maintains insurance coverage for certain aspects of its
business and operations. Based on the Company's evaluation of the various risks
to which it may be exposed, the Company has elected to retain a portion of the
potential losses that it could experience in the future through the use of
various deductibles, limits, and retentions. These forms of self-insurance
subject the Company to possible future liability for which it is partially or
completely uninsured. Although there can be no assurance that it will be
successful in its efforts, the Company attempts to limit future liability
through, among other things, the ongoing training and education of its
employees, the use of safety programs, the ongoing testing and evaluation of the
safety and suitability of its workplace environments, the development of sound
business practices, and the exercise of care and judgment in the negotiation of
contracts.
NOTE 13 -- RELATED PARTIES
The Chairman of the Board and the President of the Company are the two
largest holders of the Company's common stock, the holders of the junior
subordinated notes, and the beneficial owners of $200,000 principal amount of
the senior subordinated notes. In addition, the Chairman of the Board of the
Company and certain of his affiliates hold an aggregate of $1,300,000 principal
amount of the senior subordinated notes. In February 2000, the Chairman of the
Board and the President of the Company converted the junior subordinated
convertible notes in the principal amount of $1,000,000 into 440,000 shares of
common stock.
The Chairman of the Board and the President of the Company are partners
of an investment banking firm that is retained by the Company to provide
management and investment banking services. The annual fee for such services has
been set at $500,000 for 2002. Additionally, the firm may receive incentive
compensation tied to the Company's operating performance and other compensation
for specific transactions completed by the Company with the assistance of the
firm. The Company also has agreed to reimburse the firm for certain expenses.
During each of 2001, 2000, and 1999, the Company paid the firm fees of $500,000.
During 2001, 2000, and 1999, the Company reimbursed the firm for expenses of
$223,000, $269,000, and $200,000, respectively.
NOTE 14 -- PLANT CLOSURES - ASSET IMPAIRMENT CHARGE
During the fourth quarter of 2001, the Company learned that the Metal
Group's largest customer would cease purchasing components from the Metals Group
after December 31, 2001. During 2001, this customer purchased $5,937,000 of
machined metal components, which were manufactured primarily at the Company's
Casa Grande, Arizona facility. As a result of the reduction in volume at the
Casa Grande facility, during February 2002, the Company decided to close the
facility and to consolidate the balance of
-52-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the Casa Grande production into the Company's other metal machining facility in
Rochester, New York. In accordance with Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," the Company recorded, as of December 31,
2001, an impairment charge of $2,047,000 to reduce to fair market value the
carrying value of the Casa Grande facility's land and building and certain metal
machining equipment currently idled by the loss of this business. The Company's
estimate of fair value is based on appraisals of the assets. The Company
anticipates that the land, building, and equipment that is not being held for
future use, which has an estimated fair value of approximately $2,502,000, will
be sold during 2002 or the first half of 2003. Machinery and equipment currently
idled by the loss of business that is currently being held by the Company for
anticipated future use has an estimated fair value of $862,000. The impairment
charge is presented on the face of the Company's consolidated statement of
operations in the caption titled, "Impairment of long-lived assets." Excluding
operating losses incurred by the Arizona facility during the first quarter of
2002, the Company currently estimates that the costs to be incurred during 2002
in connection with the closing of the Casa Grande facility, will total
approximately $738,000, consisting of severance and other employee costs of
$215,000, asset relocation costs of $211,000, on-going costs to support and
maintain the facility while it is being held for sale of $207,000, and other
plant closure costs of $105,000.
In May 1999, the Company closed a 21,000 square foot diecasting
facility in Manchester, New York. During 1999, the Manchester facility had net
sales of $935,000, and a loss from operations of $186,000. The Company recorded
expenses related to the closure and disposal of the facility during 1999 in the
amount of $553,000, of which $507,000 was charged to cost of sales and $46,000
was charged to selling and administrative expenses. At December 31, 2001, the
book value of the Manchester assets remaining to be disposed of totaled
$123,000. During 2001, the Company wrote down the carrying value of the
Manchester assets by $38,000. The Company presently anticipates that it will
complete the disposal of the Manchester assets during 2002.
NOTE 15 -- EXTRAORDINARY ITEM
During 1999, the Company repurchased $4,308,000 principal amount of its
senior subordinated notes. The Company recorded an extraordinary gain on the
repurchase of debt, net of applicable income taxes, of $1,542,000.
-53-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16 -- QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial data for the eight quarters ended December 31,
2001, is set forth below (dollar amounts in thousands, except per share
amounts).
QUARTERS ENDED 2001 QUARTERS ENDED 2000
------------------------------------------------ ------------------------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31
------- ------- -------- -------- ------- ------- -------- -------
Net sales $ 32,968 $ 33,831 $ 30,070 $ 29,333 $ 36,429 $ 34,849 $ 33,745 $ 33,279
Gross profit 4,419 5,638 3,745 3,345 5,832 3,714 3,488 4,542
Net income (loss) (381) 755 (532) (1,993) 263 (1,429) (1,381) (552)
Per share data:
Basic and diluted
net income (loss)
applicable to common
stockholders $ (0.08) $ 0.16 $ (0.11) $ (0.41) $ 0.05 $ (0.30) $ (0.29) $ (0.11)
The fourth quarter of 2001 included (i) a pre-tax gain of $1,274,000,
or 26 cents per share, resulting from the demutualization of an insurance
company and (ii) a pre-tax loss of $2,047,000, or 42 cents per share, resulting
from a provision for asset impairment. For additional information see Notes 14
and 17.
NOTE 17 -- INCOME FROM INSURANCE COMPANY DEMUTUALIZATION
During December 2001, a mutual insurance company, Principal Mutual
Holding Company, underwent a demutualization and converted to a stock company,
Principal Financial Group, Inc. (Principal). The Company was a member of the
mutual insurance company as a policyholder and received 53,103 shares of common
stock of Principal as a result of the demutualization. In accordance with
Financial Accounting Standards Board Emerging Issue Task Force Bulletin 99-4,
"Accounting for Stock Received from the Demutualization of a Mutual Insurance
Company" (EITF 99-4), the Company has recorded these shares at fair value by
using the published closing price for the stock on December 31, 2001. The income
from the demutualization is presented on the face of the Company's consolidated
statement of operations in the caption titled "Income from insurance company
demutualization."
-54-
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-55-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by Item 10 is incorporated by reference to the
Company's proxy statement to be issued in connection with its 2002 Annual
Meeting of Stockholders and to be filed with the Securities and Exchange
Commission (the Commission) not later than 120 days after December 31, 2001.
ITEM 11. EXECUTIVE COMPENSATION
Information required by Item 11 is incorporated by reference to the
Company's proxy statement to be issued in connection with its 2002 Annual
Meeting of Stockholders and to be filed with the Commission not later than 120
days after December 31, 2001.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by Item 12 is incorporated by reference to the
Company's proxy statement to be issued in connection with its 2002 Annual
Meeting of Stockholders and to be filed with the Commission not later than 120
days after December 31, 2001.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by Item 13 is incorporated by reference to the
Company's proxy statement to be issued in connection with its 2002 Annual
Meeting of Stockholders and to be filed with the Commission not later than 120
days after December 31, 2001.
-56-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
The consolidated financial statements of Lexington Precision
Corporation (LPC) and its wholly owned subsidiaries, Lexington
Rubber Group, Inc. (LRGI) and Lexington Precision GmbH, are
included in Part II, Item 8.
2. FINANCIAL STATEMENT SCHEDULE
Schedule II, "Valuation and Qualifying Accounts and Reserves,"
is included in this Part IV, Item 14, on page 71. All other
schedules are omitted because the required information is not
applicable, not material, or included in the consolidated
financial statements or the notes thereto.
3. EXHIBITS
3-1 Articles of Incorporation and Restatement thereof
3-2 By-Laws, as amended
3-3 Certificate of Correction dated September 21, 1976
3-4 Certificate of Ownership and Merger dated May 24,
1977
3-5 Certificate of Ownership and Merger dated May 31,
1977
3-6 Certificate of Reduction of Capital dated December
30, 1977
3-7 Certificate of Retirement of Preferred Shares dated
December 30, 1977
3-8 Certificate of Reduction of Capital dated December
28, 1978
3-9 Certificate of Retirement of Preferred Shares dated
December 28, 1978
3-10 Certificate of Reduction of Capital dated January 9,
1979
3-11 Certificate of Reduction of Capital dated December
20, 1979
3-12 Certificate of Retirement of Preferred Shares dated
December 20, 1979
3-13 Certificate of Reduction of Capital dated December
16, 1982
3-14 Certificate of Reduction of Capital dated December
17, 1982
3-15 Certificate of Amendment of Restated Certificate of
Incorporation dated September 26, 1984
-57-
3-16 Certificate of Retirement of Stock dated September
24, 1986
3-17 Certificate of Amendment of Restated Certificate of
Incorporation dated November 21, 1986
3-18 Certificate of Retirement of Stock dated January 15,
1987
3-19 Certificate of Retirement of Stock dated February 22,
1988
3-20 Certificate of Amendment of Restated Certificate of
Incorporation dated January 6, 1989
3-21 Certificate of Retirement of Stock dated August 17,
1989
3-22 Certificate of Retirement of Stock dated January 9,
1990
3-23 Certificate of the Designations, Preferences and
Relative Participating, Optional and Other Special
Rights of 12% Cumulative Convertible Exchangeable
Preferred Stock, Series C, and the Qualifications,
Limitations and Restrictions thereof dated January
10, 1990
3-24 Certificate of Ownership and Merger dated April 25,
1990
3-25 Certificate of Elimination of 12% Cumulative
Convertible Exchangeable Preferred Stock, Series C,
dated June 4, 1990
3-26 Certificate of Retirement of Stock dated March 6,
1991
3-27 Certificate of Retirement of Stock dated April 29,
1994
3-28 Certificate of Retirement of Stock dated January 6,
1995
3-29 Certificate of Retirement of Stock dated January 5,
1996
3-30 Certificate of Retirement of Stock dated January 6,
1997
3-31 Certificate of Retirement of Stock dated January 9,
1998
3-32 Certificate of Retirement of Stock dated January 13,
1999
3-33 Certificate of Retirement of Stock dated January 26,
2000
4-1 Certificate of Designations, Preferences, Rights and
Number of Shares of Redeemable Preferred Stock,
Series B
4-2 Purchase Agreement dated as of February 7, 1985,
between LPC and L&D Precision Limited Partnership
("L&D Precision") and exhibits thereto
4-3 Amendment Agreement dated as of April 27, 1990,
between LPC and L&D Precision with respect to
Purchase Agreement dated as of February 7, 1985
-58-
4-4 Recapitalization Agreement dated as of April 27,
1990, between LPC and L&D Woolens Limited Partnership
("L&D Woolens") and exhibits thereto
4-5 Specimen of Junior Subordinated Convertible
Increasing Rate Note, due May 1, 2000
4-6 Specimen of 14% Junior Subordinated Note, due May 1,
2000
4-7 Indenture dated as of August 1, 1993, between LPC and
IBJ Schroder Bank & Trust Company, as Trustee
4-8 Specimen of 12.75% Senior Subordinated Note, due
February 1, 2000
4-9 Note Purchase Agreement dated October 27, 1997,
between LPC and Nomura Holding America, Inc.
("Nomura")
4-10 Specimen of 10.5% Senior Unsecured Note due February
1, 2000, from LPC to Nomura
4-11 Note amendment dated January 28, 2000, between LPC
and Nomura
4-12 Agreement dated January 31, 2000, between LPC and
Nomura
4-13 Agreement relating to Junior Subordinated Convertible
Increasing Rate Notes dated January 31, 2000, among
LPC, Michael A. Lubin, and Warren Delano
4-14 Agreement relating to 14% Junior Subordinated Notes
dated January 31, 2000, between LPC and Michael A.
Lubin
10-1 Purchase agreement dated as of February 7, 1985,
between LPC and L&D Precision and exhibits thereto
10-2 Amendment agreement dated as of April 27, 1990,
between LPC and L&D Precision with respect to
purchase agreement dated as of February 7, 1985
10-3 *Lexington Precision Corporation Flexible
Compensation Plan, as amended
10-4 *1986 Restricted Stock Award Plan, as amended
10-5 *Lexington Precision Corporation Retirement & Savings
Plan, as amended
10-6 *Description of 2001 Compensation Arrangements with
Lubin, Delano, & Company
10-7 *Corporate Office 2001 Management Cash Bonus Plan
10-8 Consent and Amendment Letter Agreement between
Chemical Bank of New Jersey and LPC dated as of
December 29, 1993
-59-
10-9 Promissory Note of LRGI dated November 30, 1988,
payable to the order of Paul H. Pennell in the
original principal amount of $3,530,000
10-10 Guaranty dated as of November 30, 1988, from LPC to
Paul H. Pennell
10-11 Amendment agreement dated as of November 30, 1991,
between LRGI and Paul H. Pennell
10-12 Release and Notice Agreement dated as of March 31,
1993, between LRGI and Paul H. Pennell
10-13 Recapitalization Agreement dated as of April 27,
1990, between LPC and L&D Woolens and exhibits
thereto
10-14 Accounts Financing Agreement [Security Agreement]
dated as of January 11, 1990, between Congress
Financial Corporation ("Congress") and LPC
10-15 Accounts Financing Agreement [Security Agreement]
dated as of January 11, 1990, between Congress and
LRGI
10-16 Covenants Supplement to Accounts Financing Agreement
[Security Agreement] dated as of January 11, 1990,
between Congress and LPC
10-17 Covenants Supplement to Accounts Financing Agreement
[Security Agreement] dated as of January 11, 1990,
between Congress and LRGI
10-18 Letter dated April 11, 1990, from LPC and Wise Die
Casting, Inc. to Congress
10-19 Letter Agreement dated February 28, 1991, between LPC
and Congress amending certain financing agreements
and consent thereto of LRGI
10-20 Letter Agreement dated February 28, 1991, between
LRGI and Congress amending certain financing
agreements and consent thereto of LPC
10-21 Letter Agreement dated January 14, 1994, between LPC
and Congress amending certain financing agreements
and consent thereto of LRGI
10-22 Letter Agreement dated January 14, 1994, between LRGI
and Congress amending certain financing agreements
and consent thereto of LPC
10-23 Letter Agreement dated March 25, 1994, between
Congress and LPC, and consent thereto of LRGI
10-24 Letter Agreement dated March 25, 1994, between
Congress and LRGI, and consent thereto of LPC
-60-
10-25 Letter Agreement dated as of August 1, 1994, between
LPC and Congress amending certain financing
agreements and consent thereto of LRGI
10-26 Letter Agreement dated as of August 1, 1994, between
LRGI and Congress amending certain financing
agreements and consent thereto of LPC
10-27 Trade Financing Agreement Supplement to Accounts
Financing Agreement [Security Agreement] dated as of
July 19, 1994, between LPC and Congress
10-28 Letter Agreement dated January 13, 1995, between LRGI
and Congress amending certain financing agreements
and consent thereto of LPC
10-29 Letter Agreement dated January 31, 1995, between LPC
and Congress amending certain financing agreements
and consent thereto of LRGI
10-30 Letter Agreement dated January 31, 1995, between LRGI
and Congress amending certain financing agreements
and consent thereto of LPC
10-31 Amendment to Financing Agreements dated August 1,
1995, from LPC in favor of Congress
10-32 Amendment to Financing Agreements dated August 1,
1995, from LRGI in favor of Congress
10-33 Amendment to Financing Agreements dated January 16,
1996, from LPC in favor of Congress
10-34 Term Promissory Note dated January 16, 1996, in the
amount of $375,000 from LPC in favor of Congress
10-35 Term Promissory Note dated January 16, 1996, in the
amount of $450,000 from LPC in favor of Congress
10-36 Amendment to Financing Agreements dated February 28,
1999, from LPC in favor of Congress Congress
10-37 Amendment to Financing Agreements and Consent dated
March 14, 1996, from LPC in favor of Congress
10-38 Amendment to Financing Agreements and Consent dated
March 14, 1996, from LRGI in favor of Congress
10-39 Term Note dated May 31, 1996, from LPC in favor of
Congress
10-40 Amendment to Financing Agreements dated August 21,
1996, from LRGI in favor of Congress
10-41 Amendment to Financing Agreements dated August 21,
1996, from LPC in favor of Congress
-61-
10-42 Amendment to Financing Agreements dated January 31,
1997, from LPC in favor of Congress
10-43 Amendment to Financing Agreements dated January 31,
1997, from LRGI in favor of Congress
10-44 Credit Facility and Security Agreement and Rider A to
Credit Facility and Security Agreement dated January
31, 1997, from LPC and LRGI in favor of Bank One,
Akron, NA ("Bank One")
10-45 Promissory Note (Equipment Term Loan) dated January
31, 1997, from LPC and LRGI in favor of Bank One
10-46 Promissory Note (North Canton Term Loan) dated
January 31, 1997, from LPC and LRGI in favor of Bank
One
10-47 Promissory Note (Vienna Term Loan) dated January 31,
1997, from LPC and LRGI in favor of Bank One
10-48 Promissory Note (Casa Grande Note) dated January 31,
1997, from LPC and LRGI in favor of Bank One
10-49 Promissory Note (LaGrange Term Loan) dated January
31, 1997, from LPC and LRGI in favor of Bank One
10-50 Promissory Note (North Canton Equipment Loan) dated
January 31, 1997, from LPC and LRGI in favor of Bank
One
10-51 Fourth Amended and Restated Promissory Note dated
March 11, 1997, from LRGI in favor of Congress
10-52 Fourth Amended and Restated Promissory Note dated
March 11, 1997, from LPC in favor of Congress
10-53 Amendment to Financing Agreements dated March 11,
1997, from LRGI in favor of Congress
10-54 Amendment to Financing Agreements dated March 11,
1997, from LPC in favor of Congress
10-55 Loan and Security Agreement and Rider A to Loan and
Security Agreement dated March 19, 1997, from LPC in
favor of The CIT Group/Equipment Financing, Inc.
("CIT")
10-56 Promissory Note dated March 19, 1997, from LPC in
favor of CIT
10-57 Amendment to Financing Agreements and Consent dated
April 17, 1997, between LPC and Congress
10-58 Amendment to Financing Agreements and Consent dated
April 17, 1997, between LRGI and Congress
-62-
10-59 First Amendment Agreement dated April 17, 1997, among
LPC, LRGI, and Bank One
10-60 Specimen of Amended and Restated Promissory Note
dated April 17, 1997, of LPC and LRGI to Bank One
10-61 Specimen of Promissory Note dated August 29, 1997,
from LPC to CIT
10-62 Note Purchase Agreement dated October 27, 1997,
between LPC and Nomura
10-63 Specimen of 10.5% Senior Unsecured Note due February
1, 2000, from LPC to Nomura
10-64 Amendment No. 1 to Credit Facility and Security
Agreement dated December 31, 1997, among LPC, LRGI,
and Bank One
10-65 Amendment No. 2 to Credit Facility and Security
Agreement dated March 20, 1998, among LPC, LRGI, and
Bank One
10-66 Promissory Note dated March 31, 1998, from LPC in
favor of CIT
10-67 New Equipment Term Note dated June 26, 1998, from LPC
in favor of Congress
10-68 Second Amendment Agreement dated May 1, 1998, from
LRGI in favor of Paul H. Pennell
10-69 Amendment No. 1 to Loan and Security Agreement dated
June 30, 1998, between LPC and CIT
10-70 Amendment No. 3 to Credit Facility and Security
Agreement dated June 30, 1998, among LPC, LRGI, and
Bank One
10-71 Amendment to Financing Agreements and Consent dated
August 13, 1998, between LPC and Congress
10-72 Amendment to Financing Agreements and Consent dated
August 13, 1998, between LRGI and Congress
10-73 Amendment to Financing Agreements and Consent dated
October 20, 1998, between LPC and Congress
10-74 Amendment to Financing Agreements and Consent dated
October 20, 1998, between LRGI and Congress
10-75 Amendment No. 2 to Loan and Security Agreement dated
November 30, 1998, between LPC and CIT
10-76 New Equipment Term Note dated December 16, 1998,
between LPC and Congress
-63-
10-77 Amendment to Financing Agreements dated January 28,
1999, between LPC and Congress
10-78 Amendment to Financing Agreements dated January 28,
1999, between LRGI and Congress
10-79 Term Promissory Note dated January 28, 1999, between
LRGI and Congress
10-80 Term Promissory Note dated January 28, 1999, between
LPC and Congress
10-81 Fifth Amended and Restated Promissory Note dated
January 28, 1999, between LPC and Congress
10-82 Amendment No. 6 to Credit Facility and Security
Agreement dated January 31, 1999, among LPC, LRGI,
and Bank One
10-83 Fifth Amendment Agreement dated March 10, 1999, among
LPC, LRGI, and Bank One
10-84 Promissory Note (Additional Equipment Term Loan)
dated March 10, 1999, among LPC, LRGI, and Bank One
10-85 Promissory Note dated March 30, 1999, between LPC and
CIT
10-86 Amendment No. 3 to Loan and Security Agreement dated
March 30, 1999, between LPC and CIT
10-87 Amendment to Financing Agreements dated March 31,
1999, between LPC and Congress
10-88 Term Promissory Note dated March 31, 1999, between
LPC and Congress
10-89 Amendment to Financing Agreements dated March 31,
1999, between LRGI and Congress
10-90 Term Promissory Note dated March 31, 1999, between
LRGI and Congress
10-91 Promissory Note dated July 29, 1999, between LPC and
CIT
10-92 New Equipment Term Note dated July 30, 1999, between
LRGI and Congress
10-93 Amendment to Financing Agreements dated October 1,
1999, between LPC and Congress
10-94 Amendment to Financing Agreements dated October 1,
1999, between LRGI and Congress
10-95 New Equipment Note dated December 6, 1999, between
LRGI and Congress
10-96 Term Promissory Note dated December 30, 1999, between
LPC and Congress
-64-
10-97 Sixth Amended and Restated Promissory Note dated
December 30, 1999, between LPC and Congress
10-98 Amendment to financing agreements dated December 30,
1999, between LPC and Congress
10-99 Amendment no. 5 to Loan and Security Agreement dated
December 31, 1999, between LPC and CIT
10-100 Amendment no. 8 to Credit Facility and Security
Agreement dated December 31, 1999 among LPC, LRGI,
and Bank One
10-101 Note amendment dated January 28, 2000, between LPC
and Nomura
10-102 Agreement dated January 31, 2000, between LPC and
Nomura
10-103 Third amendment agreement between LRGI and Paul H.
Pennell
10-104 Agreement dated January 31, 2000, among LPC, LRGI,
and Congress
10-105 Agreement dated January 31, 2000, between LPC and CIT
10-106 Agreement dated January 31, 2000, among LPC, LRGI,
and Bank One
10-107 Amendment no. 9 to Credit Facility and Security
Agreement dated as of December 31, 1999, among LPC,
LRGI, and Bank One
10-108 New equipment note dated April 24, 2000, between LPC
and Congress
10-109 New equipment note dated April 24, 2000, between LRGI
and Congress
10-110 Agreement relating to 14% Junior Subordinated Notes
dated April 30, 2000, between LPC and Michael A.
Lubin
10-111 Agreement relating to Junior Subordinated Convertible
Increasing Rate Note dated April 30, 2000, among LPC,
Michael A. Lubin, and Warren Delano
10-112 Note amendment no. 2 to note dated as of April 30,
2000, between LPC and Tri-Links Investment Trust, as
successor to Nomura
10-113 Fourth amendment agreement dated April 30, 2000,
between LRGI and Paul H. Pennell
10-114 Agreement dated as of April 30, 2000, among LPC,
LRGI, and Congress
10-115 Agreement dated as of April 30, 2000, between LPC and
CIT
10-116 Agreement dated as of April 30, 2000, among LPC,
LRGI, and Bank One
-65-
10-117 Amendment to financing agreements dated May 12, 2000,
between LPC and Congress
10-118 Amendment to financing agreements dated May 12, 2000,
between LRGI and Congress
10-119 Promissory note dated June 26, 2000, between LPC and
CIT
10-120 Amendment No. 4 to Loan and Security Agreement dated
June 26, 2000, between LPC and CIT
10-121 Amendment No. 10 to Credit Facility and Security
Agreement dated as of June 30, 2000, between LPC,
LRGI, and Bank One
10-122 Agreement relating to 14% Junior Subordinated Notes
dated July 31, 2000, between LPC and Michael A. Lubin
10-123 Agreement relating to Junior Subordinated Convertible
Increasing Rate Note dated July 31, 2000, among LPC,
Michael A. Lubin, and Warren Delano
10-124 Note amendment No. 3 to Note dated as of July 31,
2000, between LPC and Tri-Links Investment Trust, as
successor to Nomura
10-125 Fifth amendment agreement dated July 31, 2000,
between LRGI and Paul H. Pennell
10-126 Agreement dated as of July 31, 2000, among LPC, LRGI,
and Congress
10-127 Agreement dated as of July 31, 2000, between LPC and
CIT
10-128 Agreement dated as of July 31, 2000, among LPC, LRGI,
and Bank One
10-129 Congress covenant waiver dated August 11, 2000
10-130 Congress covenant amendment dated as of August 31,
2000
10-131 Agreement relating to 14% Junior Subordinated Notes
dated October 31, 2000, between LPC and Michael A.
Lubin
10-132 Agreement relating to Junior Subordinated Convertible
Increasing Rate Note dated October 31, 2000, among
LPC, Michael A. Lubin, and Warren Delano
10-133 Note amendment No. 4 to Note dated as of October 31,
2000, between LPC and Tri-Links Investment Trust, as
successor to Nomura
10-134 Sixth amendment agreement dated October 31, 2000,
between LRGI and Paul H. Pennell
10-135 Agreement dated as of October 31, 2000, among LPC,
LRGI, and Congress
-66-
10-136 Agreement dated as of October 31, 2000, between LPC
and CIT
10-137 Agreement dated as of October 31, 2000, among LPC,
LRGI, and Bank One
10-138 Congress covenant amendment dated November 30, 2000
10-139 Amendment No. 6 to Loan and Security Agreement dated
December 31, 2000, between LPC and CIT
10-140 Amendment No. 12 to Credit Facility and Security
Agreement dated December 31, 2000, between LPC, LRGI,
and Bank One
10-141 Amendment No. 11 to Credit Facility and Security
Agreement dated January 31, 2001, between LPC, LRGI,
and Bank One
10-142 Agreement relating to 14% Junior Subordinated Notes
dated January 31, 2001, between LPC and Michael A.
Lubin
10-143 Agreement relating to Junior Subordinated Convertible
Increasing Rate Notes dated January 31, 2001, between
LPC, Michael A. Lubin, and Warren Delano
10-144 Note amendment No.4 relating to Note dated as of
January 31, 2001, between LPC and Tri-Links
Investment Trust, as successor to Nomura
10-145 Seventh amendment agreement dated January 31, 2001
between LRGI and Paul Pennell
10-146 Agreement dated January 31, 2001, between LPC, LRGI,
and Congress
10-147 Agreement dated January 31, 2001, between LPC and CIT
10-148 Agreement dated January 31, 2001, between LPC, LRGI,
and Congress
10-149 New Equipment Term Note date February 8, 2001,
between LRG and Congress
10-150 Letter agreement dated February 8, 2001, between
Congress and LRGI, and consent thereto of LPC
10-151 Letter agreement dated February 8, 2001, between
Congress and LPC, and consent thereto of LRGI
10-152 Agreement relating to 14% Junior Subordinated Notes
dated as of April 30, 2001, between LPC and Michael
A. Lubin
10-153 Agreement relating to Junior Subordinated Convertible
Increasing Rate Note dated as of April 30, 2001,
among LPC, Michael A. Lubin, and Warren Delano
10-154 Amendment No. 6 to Note dated as of April 30, 2001,
between LPC and Tri-Links Investment Trust, as
successor to Nomura
10-155 Eight amendment agreement dated April 30, 2001,
between LRGI and Paul H. Pennell
-67-
10-156 Agreement dated as of April 30, 2001, among
LPC, LRGI, and Congress
10-157 Agreement dated as of April 30, 2001, between LPC and
CIT
10-158 Agreement dated as of April 30, 2001, among LPC,
LRGI, and Bank One
10-159 Agreement relating to 14% Junior Subordinated Notes
dated as of July 31, 2001, between LPC and Michael A.
Lubin
10-160 Agreement relating to Junior Subordinated Convertible
Increasing Rate Note dated as of July 31, 2001, among
LPC, Michael A. Lubin, and Warren Delano
10-161 Amendment No. 7 to Note dated as of July 31, 2001,
between LPC and Tri-Links Investment Trust, as
successor to Nomura
10-162 Ninth amendment agreement dated July 31, 2001,
between LRGI and Paul H. Pennell
10-163 Agreement dated as of July 31, 2001, among LPC, LRGI,
and Congress
10-164 Congress covenant amendment dated June 29, 2001
10-165 Agreement dated as of July 31, 2001, between LPC and
CIT
10-166 Agreement dated as of July 31, 2001, among LPC, LRGI,
and Bank One
10-167 Amendment to promissory note dated July 31, 2001,
between LPC, LRGI, and Bank One
10-168 Amendment to promissory note dated July 31, 2001,
between LPC, LRGI, and Bank One
10-169 Bank One covenant amendment dated June 30, 2001
10-170 **Long term contract between Delphi Automotive
Systems LLC and Lexington Connector Seals
10-171 Agreement relating to 14% Junior Subordinated Notes
dated as of October 31, 2001, between LPC and Michael
A. Lubin
10-172 Agreement relating to Junior Subordinated Convertible
Increasing Rate Note dated a of October 31, 2001,
among LPC, Michael A. Lubin, and Warren Delano
10-173 Amendment No. 8 to Note dated as of October 31, 2001,
between LPC and Tri-Links Investment Trust, as
successor to Nomura
10-174 Tenth amendment agreement dated as of October 31,
2001, between LRGI and Paul H. Pennell
10-175 Agreement dated as of October 31, 2001, among LPC,
LRGI, and Congress
-68-
10-176 Congress covenant amendment dated as of August 30,
2001
10-177 Agreement dated as of October 31, 2001, between LPC
and CIT
10-178 Agreement dated as of October 31, 2001, among LPC,
LRGI, and Bank One
10-179 Agreement relating to 14% Junior Subordinated Notes
dated as of January 31, 2002, between LPC and Michael
A. Lubin
10-180 Agreement relating to Junior Subordinated Convertible
Increasing Rate Note dated as of January 31, 2002,
among LPC, Michael A. Lubin, and Warren Delano
10-181 Amendment No. 9 to Note dated as of January 31, 2002,
between LPC and Tri-Links investment Trust, as
successor to Nomura
10-182 Agreement dated as of January 31, 2002, among LPC,
LRGI, and Congress
10-183 Agreement dated as of January 31, 2002, between LPC
and The CIT
10-184 Agreement dated as of January 31, 2002, among LPC,
LRGI, and Bank One
10-185 Extension letter dated March 28, 2002 from Bank One
to LPC
10-186 Congress covenant amendment dated March 29, 2002
10-187 Bank One covenant amendment dated as of December 31,
2001
10-188 CIT covenant amendment dated as of February 28, 2002
10-189 Agreement dated as of March 29, 2002, among LPC,
LRGI, and Congress
21-1 Significant Subsidiary of Registrant
* Indicates a management contract or compensatory plan or
arrangement required to be filed as an exhibit pursuant to
Item 14(a)(3).
** This Exhibit has been filed in redacted form pursuant to a
request for confidential treatment, filed separately with the
Securities and Exchange Commission pursuant to Rule 24b-2.
Note: Pursuant to section (b)(4)(iii) of item 601 of
Regulation S-K, LPC agrees to furnish to the Commission upon
request documents defining the rights of other holders of
long-term debt.
-69-
(b) REPORTS ON FORM 8-K
On October 1, 2001, we filed a Form 8-K that included a press
release dated October 1, 2001, stating that we were extending the expiration
date of our offer to exchange our senior subordinated notes from 5:00 p.m., New
York City time, on October 1, 2001, to 5:00 p.m., New York City time, on October
31, 2001.
On October 31, 2001, we filed a Form 8-K that included a press
release dated October 31, 2001, stating that we were extending the expiration
date of our offer to exchange our senior subordinated notes from 5:00 p.m., New
York City time, on October 31, 2001, to 5:00 p.m., New York City time, on
November 30, 2001.
On November 30, 2001, we filed a Form 8-K that included a
press release dated November 30, 2001, stating that we were extending the
expiration date of our offer to exchange our senior subordinated notes from 5:00
p.m., New York City time, on November 30, 2001, to 5:00 p.m., New York City
time, on December 31, 2001.
On December 21, 2001, we filed a Form 8-K that included a
press release dated November 30, 2001, stating that we were extending the
expiration date of our offer to exchange our senior subordinated notes from 5:00
p.m., New York City time, on December 31, 2001, to 5:00 p.m., New York City
time, on January 31, 2001.
-70-
LEXINGTON PRECISION CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(THOUSANDS OF DOLLARS)
BALANCE AT CHARGED TO DEDUCTIONS BALANCE
BEGINNING COSTS AND FROM AT END
OF PERIOD EXPENSES RESERVES OF PERIOD
--------- -------- -------- ---------
ALLOWANCE FOR
DOUBTFUL ACCOUNTS
-----------------
Year ended December 31, 2001 $ 181 $ 523 $ 35 $ 669
Year ended December 31, 2000 248 7 74 181
Year ended December 31, 1999 197 73 22 248
INVENTORY RESERVE
-----------------
Year ended December 31, 2001 $ 872 $ 1,135 $ 637 $ 1,370
Year ended December 31, 2000 777 617 522 872
Year ended December 31, 1999 591 302 116 777
-71-
SIGNATURES
Pursuant to the requirements of Section 13 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)
By: /s/ Warren Delano
-----------------------------------
Warren Delano, President
March 29, 2002
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 29, 2002:
PRINCIPAL EXECUTIVE OFFICERS AND DIRECTORS:
/s/ Michael A. Lubin
- ------------------------------------------------
Michael A. Lubin, Chairman of the Board
/s/ Warren Delano
- ------------------------------------------------
Warren Delano, President and Director
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
/s/ Dennis J. Welhouse
- ------------------------------------------------
Dennis J. Welhouse, Senior Vice President
and Chief Financial Officer
DIRECTORS:
/s/ William B. Conner
- ------------------------------------------------
William B. Conner, Director
/s/ Kenneth I. Greenstein
- ------------------------------------------------
Kenneth I. Greenstein, Secretary and
Director
/s/ Joseph A. Pardo
- ------------------------------------------------
Joseph A. Pardo, Director
-72
EXHIBIT INDEX
Exhibit
Number Exhibit Location
- ------ ------- --------
3-1 Articles of Incorporation and Restatement Incorporated by reference from Exhibit 3-1 Lexington
thereof Precision Corporation's (the "Company") to the
Company's Form 10-K for the year ended May 31,
1981 located under Securities and Exchange
Commission File No. 0-3252 ("1981 10-K")
3-2 By-laws, as amended Incorporated by reference from Exhibit 3-2 to
1998 10-K
3-3 Certificate of Correction dated Incorporated by reference from Exhibit 3-3 to the
September 21, 1976 Company's Form 10-K for the year ended May 31,
1983 located under Securities and Exchange
Commission File No. 0-3252 ("1983 10-K")
3-4 Certificate of Ownership and Merger dated Incorporated by reference from Exhibit 3-4 to
May 24, 1977 1983 10-K
3-5 Certificate of Ownership and Merger dated Incorporated by reference from Exhibit 3-5 to
May 31, 1977 1983 10-K
3-6 Certificate of Reduction of Capital dated Incorporated by reference from Exhibit 3-6 to
December 30, 1977 1983 10-K
3-7 Certificate of Retirement of Preferred Incorporated by reference from Exhibit 3-7 to
Shares dated December 30, 1977 1983 10-K
3-8 Certificate of Reduction of Capital dated Incorporated by reference from Exhibit 3-8 to
December 28, 1978 1983 10-K
3-9 Certificate of Retirement of Preferred Incorporated by reference from Exhibit 3-9 to
Shares dated December 28, 1978 1983 10-K
3-10 Certificate of Reduction of Capital dated Incorporated by reference from Exhibit 3-10 to
January 9, 1979 1983 10-K
3-11 Certificate of Reduction of Capital dated Incorporated by reference from Exhibit 3-11 to
December 20, 1979 1983 10-K
3-12 Certificate of Retirement of Preferred Incorporated by reference from Exhibit 3-12 to
Shares dated December 20, 1979 1983 10-K
3-13 Certificate of Reduction of Capital dated Incorporated by reference from Exhibit 3-13 to
December 16, 1982 1983 10-K
3-14 Certificate of Reduction of Capital dated Incorporated by reference from Exhibit 3-14 to
December 17, 1982 1983 10-K
3-15 Certificate of Amendment of Restated Incorporated by reference from Exhibit 3-15 to the
Certificate of Incorporation dated Company's Form 10-K for the year ended
September 26, 1984 May 31, 1985 located under Securities and Exchange
Commission File No. 0-3252
3-16 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 4-3 to the
September 24, 1986 Company's Registration Statement on Form S-2
located under Securities and Exchange Commission
File No. 33-9380 ("1933 Act Registration Statement")
3-17 Certificate of Amendment of Restated Incorporated by reference from Exhibit 3-17 to the
Certificate of Incorporation dated Company's Form 10-K for the year ended
November 21, 1986 May 31, 1987 located under Securities and Exchange
Commission File No. 0-3252
3-18 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 4-5 to
January 15, 1987 Amendment No. 1 to 1933 Act Registration Statement
3-19 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-19 to the
February 22, 1988 Company's Form 10-K for the year ended
May 31, 1989 located under Securities and Exchange
Commission File No. 0-3252 ("May 31, 1989 10-K")
3-20 Certificate of Amendment of Restated Incorporated by reference from Exhibit 3-20 to
Certificate of Incorporation dated May 31, 1989 10-K
January 6, 1989
3-21 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-21 to
August 17, 1989 May 31, 1989 10-K
3-22 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-22 to the
January 9, 1990 Company's Form 10-K for the seven months ended
December 31, 1989 located under Securities and
Exchange Commission File No. 0-3252
("December 31, 1989 10-K")
3-23 Certificate of the Designations, Incorporated by reference from Exhibit 3-1 to the
Preferences and Relative Participating, Company's Form 10-Q for the quarter ended November
Optional and Other Special Rights of 12% 30, 1989 located under Securities and Exchange
Cumulative Convertible Exchangeable Commission File No. 0-3252 ("November 30, 1989
Preferred Stock, Series C, and the 10-Q")
Qualifications, Limitations and
Restrictions thereof dated January 10,
1990
3-24 Certificate of Ownership and Merger dated Incorporated by reference from Exhibit 3-24 to
April 25, 1990 December 31, 1989 10-K
3-25 Certificate of Elimination of 12% Incorporated by reference from Exhibit 3-25 to the
Cumulative Convertible Exchangeable Company's Form 10-K for the year ended
Preferred Stock, Series C, dated December 31, 1990 located under Securities and
June 4, 1990 Exchange Commission File No. 0-3252 ("1990 10-K")
3-26 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-26 to
March 6, 1991 1990 10-K
-2-
3-27 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-27 to
April 29, 1994 1994 10-K
3-28 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-28 to
January 6, 1995 199410-K
3-29 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-29 to
January 5, 1996 1995 10-K
3-30 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-30 to
January 6, 1997 1996 10-K
3-31 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-31 to
January 9, 1998 1997 10-K
3-32 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-32 to
January 13, 1999 1998 10-K
3-33 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-33 to
January 26, 2000 1999 10-K
4-1 Certificate of Designations, Preferences, Incorporated by reference from Exhibit 3-3 to
Rights and Number of Shares of 1981 10-K
Redeemable Preferred Stock, Series B
4-2 Purchase Agreement dated as of Incorporated by reference from Exhibit 4-1 to the
February 7, 1985, between LPC and L&D Company's Form 8-K dated February 7, 1985 (date of
Precision Limited Partnership ("L&D earliest event reported) located under Securities and
Precision") and exhibits thereto Exchange Commission File No. 0-3252
4-3 Amendment Agreement dated as of Incorporated by reference from Exhibit 10-2 to
April 27, 1990, between LPC and L&D 1990 10-K
Precision with respect to Purchase
Agreement dated as of February 7, 1985
4-4 Recapitalization Agreement dated as of Incorporated by reference from Exhibit 4-10 to
April 27, 1990, between LPC and L&D December 31, 1989 10-K
Woolens Limited Partnership ("L&D
Woolens") and exhibits thereto
4-5 Specimen of Junior Subordinated Incorporated by reference from Exhibit 4-11 to
Convertible Increasing Rate Note, due December 31, 1989 10-K
May 1, 2000
4-6 Specimen of 14% Junior Subordinated Incorporated by reference from Exhibit 10-2 to the
Note, due May 1, 2000 Company's Form 8-K dated December 10,1993 (date
of earliest event reported) located under Securities and
Exchange Commission File No. 0-3252
4-7 Indenture dated as of August 1, 1993, Incorporated by reference from Exhibit 4-2 to the
between LPC and IBJ Schroder Bank & Company's Form 8-K dated January 18, 1994 (date of
Trust Company, as Trustee earliest event reported) located under Securities and
Exchange Commission File No. 0-3252
-3-
4-8 Specimen of 12.75% Senior Subordinated Included in Exhibit 4-7 hereto
Note, due February 1, 2000
4-9 Note Purchase Agreement dated Incorporated by reference from Exhibit 10-2 to the
October 27, 1997, between LPC and Company's Form 10-Q for the quarter ended
Nomura Holding America, Inc. ("Nomura") June 30, 1997 located under Securities and Exchange
Commission File No. 0-3252 ("June 30, 1997 Form
10-Q")
4-10 Specimen of 10.5% Senior Unsecured Note Incorporated by reference from Exhibit 10-3 to
due February 1, 2000, from LPC to Nomura June 30, 1997 Form 10-Q
4-11 Note Amendment dated January 28, 2000, Incorporated by reference from Exhibit 4-11 to
between LPC and Nomura 1999 10-K
4-12 Agreement dated January 31, 2000, Incorporated by reference from Exhibit 4-12 to
between LPC and Nomura 1999 10-K
4-13 Agreement relating to Junior Subordinated Incorporated by reference from Exhibit 4-13 to
Convertible Increasing Rate Notes among 1999 10-K
LPC, Michael A. Lubin, and Warren
Delano
4-14 Agreement relating to 14% Junior Incorporated by reference from Exhibit 4-14 to
Subordinated Notes between LPC and 1999 10-K
Michael A. Lubin
10-1 Purchase Agreement dated as of See Exhibit 4-2 hereto
February 7, 1985, between LPC and L&D
Precision and exhibits thereto
10-2 Amendment Agreement dated as of See Exhibit 4-3 hereto
April 27, 1990, between LPC and L&D
Precision with respect to Purchase
Agreement dated as of February 7, 1985
10-3 Lexington Precision Corporation Flexible Incorporated by reference from Exhibit 10-3 to the
Compensation Plan, as amended Company's Form 10-K for the year ended
December 31, 1991 located under Securities and
Exchange Commission File No. 0-3252 ("1991 10-K")
10-4 1986 Restricted Stock Award Plan, as Incorporated by reference from Exhibit 10-38 to
amended December 31, 1989 10-K
10-5 Lexington Precision Corporation Incorporated by reference from Exhibit 10-5 to
Retirement and Savings Plan, as amended December 31, 1998 10-K
10-6 Description of 2001 Compensation Filed with this Form 10-K
Arrangements with Lubin, Delano, &
Company
10-7 Corporate Office 2001 Management Cash Filed with this Form 10-K
Bonus Plan
-4-
10-8 Consent and Amendment Letter Agreement Incorporated by reference from Exhibit 10-1 to the
between Chemical Bank of New Jersey and Company's Form 8-K dated December 30, 1993 (date
LPC dated as of December 29, 1993 of earliest event reported) located under Securities and
Exchange Commission File No. 0-3252
10-9 Promissory Note dated November 30, 1988, Incorporated by reference from Exhibit 10-32 to
of LRGI payable to the order of Paul H. May 31, 1989 10-K
Pennell in the original principal amount of
$3,530,000
10-10 Guaranty dated as of November 30, 1988, Incorporated by reference from Exhibit 10-33 to
from LPC to Paul H. Pennell May 31, 1989 10-K
10-11 Amendment Agreement dated as of Incorporated by reference from Exhibit 10-28 to
November 30, 1991, between LRGI and 1991 10-K
Paul H. Pennell
10-12 Release and Notice Agreement dated as of Incorporated by reference from Exhibit 10-40 to the
March 31, 1993, between LRGI and Paul Company's Form 10-K for the year ended
H. Pennell December 31, 1992 located under Securities and
Exchange Commission File No. 0-3252
10-13 Recapitalization Agreement dated as of See Exhibit 4-4 hereto
April 27, 1990, between LPC and L&D
Woolens and exhibits thereto
10-14 Accounts Financing Agreement [Security Incorporated by reference from Exhibit 4-2 to
Agreement] dated as of January 11, 1990, November 30, 1989 10-Q
between Congress Financial Corporation
("Congress") and LPC
10-15 Accounts Financing Agreement [Security Incorporated by reference from Exhibit 4-3 to
Agreement] dated as of January 11, 1990, November 30, 1989 10-Q
between Congress and LRGI
10-16 Covenants Supplement to Accounts Incorporated by reference from Exhibit 10-49 to
Financing Agreement [Security Agreement] 1990 10-K
dated as of January 11, 1990, between
Congress and LPC
10-17 Covenants Supplement to Accounts Incorporated by reference from Exhibit 10-50 to
Financing Agreement [Security Agreement] 1990 10-K
dated as of January 11, 1990, between
Congress and LRGI
10-18 Letter dated April 11, 1990, from LPC and Incorporated by reference from Exhibit 10-51 to
Wise Die Casting, Inc. to Congress 1990 10-K
10-19 Letter Agreement dated February 28, 1991, Incorporated by reference from Exhibit 10-54 to
between LPC and Congress amending 1990 10-K
certain financing agreements and consent
thereto of LRGI
-5-
10-20 Letter Agreement dated February 28, 1991, Incorporated by reference from Exhibit 10-56 to
between LRGI and Congress amending 1990 10-K
certain financing agreements and consent
thereto of LPC
10-21 Letter Agreement dated January 14, 1994, Incorporated by reference from Exhibit 10-26 to the
between LPC and Congress amending Company's Form 10-K for the year ended
certain financing agreements and consent December 31, 1993 located under Securities and
thereto of LRGI Exchange Commission File No. 0-3252 ("1993 10-K")
10-22 Letter Agreement dated January 14, 1994, Incorporated by reference from Exhibit 10-27 to
between LRGI and Congress amending 1993 10-K
certain financing agreements and consent
thereto of LPC
10-23 Letter Agreement dated March 25, 1994, Incorporated by reference from Exhibit 10-30 to
between Congress and LPC, and consent 1993 10-K
thereto of LRGI
10-24 Letter Agreement dated March 25, 1994, Incorporated by reference from Exhibit 10-31 to
between Congress and LRGI, and consent 1993 10-K
thereto of LPC
10-25 Letter Agreement dated as of Incorporated by reference from Exhibit 10-1 to the
August 1, 1994, between LPC and Company's Form 10-Q for the quarter ended
Congress amending certain financing September 30, 1994 located under Securities and
agreements and consent thereto of LRGI Exchange Commission File No. 0-3252
("September 30, 1994 10-Q")
10-26 Letter Agreement dated as of Incorporated by reference from Exhibit 10-2 to
August 1, 1994, between LRGI and September 30, 1994 10-Q
Congress amending certain financing
agreements and consent thereto of LPC
10-27 Trade Financing Agreement Supplement to Incorporated by reference from Exhibit 10-3 to
Accounts Financing Agreement [Security September 30, 1994 10-Q
Agreement] dated as of July 19, 1994,
between LPC and Congress
10-28 Letter Agreement dated January 13, 1995, Incorporated by reference from Exhibit 10-32 to
between LRGI and Congress amending 1994 Form 10-K
certain financing agreements and consent
thereto of LPC
10-29 Letter Agreement dated January 31, 1995, Incorporated by reference from Exhibit 10-34 to
between LPC and Congress amending 1994 Form 10-K
certain financing agreements and consent
thereto of LRGI
10-30 Letter Agreement dated January 31, 1995, Incorporated by reference from Exhibit 10-36 to
between LRGI and Congress amending 1994 Form 10-K
certain financing agreements and consent
thereto of LPC
-6-
10-31 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-1 to the
dated August 1, 1995, from LPC in favor of Company's Form 10-Q for the quarter ended
Congress September 30, 1995 located under Securities and
Exchange Commission File No. 0-3252
("September 30, 1995 Form 10-Q")
10-32 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-2 to
dated August 1,1995, from LRGI in favor September 30, 1995 Form 10-Q
of Congress
10-33 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-49 to the
dated January 16, 1996, from LPC in favor Company's Form 10-K for the year ended
of Congress December 31, 1995 located under Securities and
Exchange Commission File No.0-3252 ("1995
Form 10-K")
10-34 Term Promissory Note dated Incorporated by reference from Exhibit 10-50 to
January 16, 1996, in the amount of 1995 Form 10-K
$375,000 from LPC in favor of Congress
10-35 Term Promissory Note dated Incorporated by reference from Exhibit 10-51 to
January 16, 1996, in the amount of 1995 Form 10-K
$450,000 from LPC in favor of Congress
10-36 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-62 to
dated February 28, 1996, from LPC in 1995 Form 10-K
favor of Congress
10-37 Amendment to Financing Agreements and Incorporated by reference from Exhibit 10-63 to
Consent dated March 14, 1996, from LPC 1995 Form 10-K
in favor of Congress
10-38 Amendment to Financing Agreements and Incorporated by reference from Exhibit 10-64 to
Consent dated March 14, 1996, from LRGI 1995 Form 10-K
in favor of Congress
10-39 Term Note dated May 31, 1996, from LPC Incorporated by reference from Exhibit 10-1 to the
in favor of Congress Company's Form 10-Q for the quarter ended
June 30, 1996 located under Securities and Exchange
Commission File No. 0-3252
10-40 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-3 to the
dated August 21, 1996, from LRGI in favor Company's Form 10-Q for the quarter ended
of Congress September 30, 1996 located under Securities and
Exchange Commission File No. 0-3252
("September 30, 1996 Form 10-Q")
10-41 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-4 to
dated August 21, 1996, from LPC in favor September 30, 1996 Form 10-Q
of Congress
-7-
10-42 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-42 to the
dated January 31, 1997, from LPC in favor Company's Form 10-K for the year ended
of Congress December 31, 1996 located under Securities and
Exchange Commission File No. 0-3252 ("1996 Form
10-K")
10-43 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-43 to
dated January 31, 1997, from LRGI in 1996 Form 10-K
favor of Congress
10-44 Credit Facility and Security Agreement and Incorporated by reference from Exhibit 10-44 to
Rider A to Credit Facility and Security 1996 Form 10-K
Agreement dated January 31, 1997, from
LPC and LRGI in favor of Bank One,
Akron, NA ("Bank One")
10-45 Promissory Note (Equipment Term Loan) Incorporated by reference from Exhibit 10-45 to
dated January 31, 1997, from LPC and 1996 Form 10-K
LRGI in favor of Bank One
10-46 Promissory Note (North Canton Term Incorporated by reference from Exhibit 10-46 to
Loan) dated January 31, 1997, from LPC 1996 Form 10-K
and LRGI in favor of Bank One
10-47 Promissory Note (Vienna Term Loan) dated Incorporated by reference from Exhibit 10-47 to
January 31, 1997, from LPC and LRGI in 1996 Form 10-K
favor of Bank One
10-48 Promissory Note (Casa Grande Note) dated Incorporated by reference from Exhibit 10-48 to
January 31, 1997, from LPC and LRGI in 1996 Form 10-K
favor of Bank One
10-49 Promissory Note (LaGrange Term Loan) Incorporated by reference from Exhibit 10-49 to
dated January 31, 1997, from LPC and 1996 Form 10-K
LRGI in favor of Bank One
10-50 Promissory Note (North Canton Equipment Incorporated by reference from Exhibit 10-50 to
Loan) dated January 31, 1997, from LPC 1996 Form 10-K
and LRGI in favor of Bank One
10-51 Fourth Amended and Restated Promissory Incorporated by reference from Exhibit 10-51 to
Note dated March 11, 1997, from LRGI in 1996 Form 10-K
favor of Congress
10-52 Fourth Amended and Restated Promissory Incorporated by reference from Exhibit 10-52 to
Note dated March 11, 1997, from LPC in 1996 Form 10-K
favor of Congress
10-53 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-53 to
dated March 11, 1997, from LRGI in favor 1996 Form 10-K
of Congress
-8-
10-54 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-54 to
dated March 11, 1997, from LPC in favor 1996 Form 10-K
of Congress
10-55 Loan and Security Agreement and Rider A Incorporated by reference from Exhibit 10-55 to
to Loan and Security Agreement dated 1996 Form 10-K
March 19, 1997, from LPC in favor of The
CIT Group/Equipment Financing, Inc.
("CIT")
10-56 Promissory Note dated March 19, 1997, Incorporated by reference from Exhibit 10-56 to
from LPC in favor of CIT 1996 Form 10-K
10-57 Amendment to Financing Agreements and Incorporated by reference from Exhibit 10-1 to the
Consent dated April 17, 1997, between Company's Form 10-Q for the quarter ended
LPC and Congress March 31, 1997 located under Securities and Exchange
Commission File No. 0-3252 ("March 31, 1997 Form
10-Q")
10-58 Amendment to Financing Agreements and Incorporated by reference from Exhibit 10-2 to
Consent dated April 17, 1997, between March 31, 1997 Form 10-Q
LRGI and Congress
10-59 First Amendment Agreement dated Incorporated by reference from Exhibit 10-3 to
April 17, 1997, among LPC, LRGI, and March 31, 1997 Form 10-Q
Bank One
10-60 Specimen of Amended and Restated Incorporated by reference from Exhibit 10-4
Promissory Note dated April 17, 1997, of March 31, 1997 Form 10-Q
LPC and LRGI to Bank One
10-61 Specimen of Promissory Note dated Incorporated by reference from Exhibit 10-1 to the
August 29, 1997, from LPC Company's Form 10-Q for the quarter ended
June 30, 1997 located under Securities and Exchange
Commission File No. 0-3252 ("June 30, 1997 Form
10-Q")
10-62 Note Purchase Agreement dated Incorporated by reference from Exhibit 10-2 to
October 27, 1997, between LPC and June 30, 1997 Form 10-Q
Nomura
10-63 Specimen of 10.5% Senior Unsecured Note Incorporated by reference from Exhibit 10-3 to
due February 1, 2000, from LPC to Nomura June 30, 1997 Form 10-Q
10-64 Amended No. 1 to Credit Facility and Incorporated by reference from Exhibit 10-65 to the
Security Agreement dated Company's Form 10-K for the year ended
December 31, 1997, among LPC, LRGI, December 31, 1997 located under Securities and
and Bank One Exchange Commission File No. 0-3252 ("1997 Form
10-K")
10-65 Amendment No. 2 to Credit Facility and Incorporated by reference from Exhibit 10-66 to
Security Agreement dated March 20, 1998, 1997 Form 10-K
among LPC, LRGI, and Bank One
-9-
10-66 Promissory Note dated March 31, 1998, Incorporated by reference from Exhibit 10-1 to the
from LPC in favor of CIT Company's Form 10-Q for the quarter ended
March 31, 1998 located under Securities and Exchange
Commission File No. 0-3252 ("March 31, 1998 Form
10-Q")
10-67 New Equipment Term Note dated Incorporated by reference from Exhibit 10-1 to the
June 26, 1998, from LPC in favor of Company's Form 10-Q for the quarter ended
Congress June 30, 1998 located under Securities and Exchange
Commission File No. 0-3252 ("June 30, 1998 Form
10-Q")
10-68 Second Amendment Agreement dated Incorporated by reference from Exhibit 10-2 to the
May 1, 1998, from LRGI in favor of Paul Company's Form 10-Q for the quarter ended
H. Pennell June 30, 1998 located under Securities and Exchange
Commission File No. 0-3252 ("June 30, 1998 Form
10-Q")
10-69 Amendment No. 1 to Loan and Security Incorporated by reference from Exhibit 10-1 to the
Agreement dated June 30, 1998, between Company's Form 10-Q for the quarter ended
LPC and CIT September 30, 1998 located under Securities and
Exchange Commission File No. 0-3252
("September 30, 1998 Form 10-Q")
10-70 Amendment No. 3 to Credit Facility and Incorporated by reference from Exhibit 10-2 to the
Security Agreement dated June 30, 1998, Company's Form 10-Q for the quarter ended
among LPC, LRGI, and Bank One September 30, 1998 located under Securities and
Exchange Commission File No. 0-3252
("September 30, 1998 Form 10-Q")
10-71 Amendment to Financing Agreements and Incorporated by reference from Exhibit 10-3 to the
Consent dated August 13, 1998, between Company's Form 10-Q for the quarter ended
LPC and Congress September 30, 1998 located under Securities and
Exchange Commission File No. 0-3252
("September 30, 1998 Form 10-Q")
10-72 Amendment to Financing Agreements and Incorporated by reference from Exhibit 10-4 to the
Consent dated August 13, 1998, between Company's Form 10-Q for the quarter ended
LRGI and Congress September 30, 1998 located under Securities and
Exchange Commission File No. 0-3252
("September 30, 1998 Form 10-Q")
10-73 Amendment to Financing Agreements and Incorporated by reference from Exhibit 10-5 to the
Consent dated October 20, 1998, between Company's Form 10-Q for the quarter ended
LPC and Congress September 30, 1998 located under Securities and
Exchange Commission File No. 0-3252
("September 30, 1998 Form 10-Q")
10-74 Amendment to Financing Agreements and Incorporated by reference from Exhibit 10-6 to the
Consent dated October 20, 1998, between Company's Form 10-Q for the quarter ended
LRGI and Congress September 30, 1998 located under Securities and
Exchange Commission File No. 0-3252
("September 30, 1998 Form 10-Q")
-10-
10-75 Amendment No. 2 to Loan and Security Incorporated by reference from Exhibit 10-76 to
Agreement dated November 30, 1998, 1998 Form 10-K
between LPC and CIT
10-76 New Equipment Term Note dated Incorporated by reference from Exhibit 10-77 to
December 16, 1998, between LPC and 1998 Form 10-K
Congress
10-77 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-78 to
dated January 28, 1999, between LPC and 1998 Form 10-K
Congress
10-78 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-79 to
dated January 28, 1999, between LRGI and 1998 Form 10-K
Congress
10-79 Term Promissory Note dated Incorporated by reference from Exhibit 10-80 to
January 28, 1999, between LRGI and 1998 Form 10-K
Congress
10-80 Term Promissory Note dated Incorporated by reference from Exhibit 10-81 to
January 28, 1999, between LPC and 1998 Form 10-K
Congress
10-81 Fifth Amended and Restated Promissory Incorporated by reference from Exhibit 10-82 to
Note dated January 28, 1999, between LPC 1998 Form 10-K
and Congress
10-82 Amendment No. 6 to Credit Facility and Incorporated by reference from Exhibit 10-83 to
Security Agreement dated 1998 Form 10-K
January 31, 1999, among LPC, LRGI, and
Bank One
10-83 Fifth Amendment Agreement dated Incorporated by reference from Exhibit 10-84 to
March 10, 1999, among LPC, LRGI, and 1998 Form 10-K
Bank One
10-84 Promissory Note (Additional Equipment Incorporated by reference from Exhibit 10-85 to
Term Loan) dated March 10, 1999, among 1998 Form 10-K
LPC, LRGI, and Bank One
10-85 Promissory Note dated March 30, 1999, Incorporated by reference from Exhibit 10-86 to
between LPC and CIT 1998 Form 10-K
10-86 Amendment No. 3 to Loan and Security Incorporated by reference from Exhibit 10-87 to
Agreement dated March 30, 1999, between 1998 Form 10-K
LPC and CIT
10-87 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-1 to the
dated March 31, 1999, between LPC and Company's Form 10-Q for the quarter ended
Congress March 31, 1999 located under Securities and Exchange
Commission File No. 0-3252 ("March 31, 1999 Form
10-Q")
-11-
10-88 Term Promissory Note dated Incorporated by reference from Exhibit 10-2 to the
March 31, 1999, between LPC and Company's Form 10-Q for the quarter ended
Congress March 31, 1999 located under Securities and Exchange
Commission File No. 0-3252 ("March 31, 1999 Form
10-Q")
10-89 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-3 to the
dated March 31, 1999, between LRGI and Company's Form 10-Q for the quarter ended
Congress March 31, 1999 located under Securities and Exchange
Commission File No. 0-3252 ("March 31, 1999 Form
10-Q")
10-90 Term Promissory Note dated Incorporated by reference from Exhibit 10-4 to the
March 31, 1999, between LRGI and Company's Form 10-Q for the quarter ended
Congress March 31, 1999 located under Securities and Exchange
Commission File No. 0-3252 ("March 31, 1999 Form
10-Q")
10-91 Promissory Note dated July 29, 1999, Incorporated by reference from Exhibit 10-1 to the
between LPC and CIT Company's Form 10-Q for the quarter ended
June 30, 1999 located under Securities and Exchange
Commission File No. 0-3252 ("June 30, 1999 Form
10-Q")
10-92 New Equipment Note dated July 30, 1999, Incorporated by reference from Exhibit 10-2 to the
between LRG and Congress Company's Form 10-Q for the quarter ended
June 30, 1999 located under Securities and Exchange
Commission File No. 0-3252 ("June 30, 1999 Form
10-Q")
10-93 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-1 to the
dated October 1, 1999, between LPC and Company's Form 10-Q for the quarter ended
Congress September 30, 1999 located under Securities and
Exchange Commission File No. 0-3252
("September 30, 1999 Form 10-Q")
10-94 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-2 to the
dated October 1, 1999, between LRG and Company's Form 10-Q for the quarter ended
Congress September 30, 1999 located under Securities and
Exchange Commission File No. 0-3252
("September 30, 1999 Form 10-Q")
10-95 New Equipment Note dated December 6, Incorporated by reference from Exhibit 10-96 to
1999, between LRGI and Congress 1999 Form 10-K
10-96 Term Promissory Note dated December 30, Incorporated by reference from Exhibit 10-97 to
1999, between LPC and Congress 1999 Form 10-K
10-97 Sixth Amended and Restated Promissory Incorporated by reference from Exhibit 10-98 to
Note dated December 30, 1999, between 1999 Form 10-K
LPC and Congress
10-98 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-99 to
dated December 30, 1999, between LPC 1999 Form 10-K
and Congress
-12-
10-99 Note Amendment No. 5 to Loan and Incorporated by reference from Exhibit 10-100 to
Security Agreement dated 1999 Form 10-K
December 31, 1999, between LPC and CIT
10-100 Amendment No. 8 to Credit Facility and Incorporated by reference from Exhibit 10-101 to
Security Agreement dated 1999 Form 10-K
December 31, 1999, among LPC, LRGI,
and Bank One
10-101 Note Amendment dated January 28, 2000, Incorporated by reference from Exhibit 10-102 to
between LPC and Nomura 1999 Form 10-K
10-102 Agreement dated January 31, 2000, Incorporated by reference from Exhibit 10-103 to
between LPC and Nomura 1999 Form 10-K
10-103 Third Amendment Agreement between Incorporated by reference from Exhibit 10-104 to
LRGI and Paul H. Pennell 1999 Form 10-K
10-104 Agreement dated January 31, 2000, among Incorporated by reference from Exhibit 10-105 to
LPC, LRGI, and Congress
10-105 Agreement dated January 31, 2000, Incorporated by reference from Exhibit 10-106 to
between LPC and CIT 1999 Form 10-K
10-106 Agreement dated January 31, 2000, among Incorporated by reference from Exhibit 10-107 to
LPC, LRGI, and Bank One 1999 Form 10-K
10-107 Amendment No. 9 to Credit Facility and Incorporated by reference from Exhibit 10-1 to the
Security Agreement dated as of December Company's Form 10-Q for the quarter ended
31,1999, among LPC, LRGI, and Bank One March 31, 2000 located under Securities and Exchange
Commission file No. 0-3252 ("March 31, 2000 Form
10-Q")
10-108 New Equipment Note dated April 24, 2000, Incorporated by reference from Exhibit 10-2 to the
between LPC and Congress Company's Form 10-Q for the quarter ended
March 31, 2000 located under Securities and Exchange
Commission file No. 0-3252 ("March 31, 2000 Form
10-Q")
10-109 New Equipment Note dated April 24, 2000, Incorporated by reference from Exhibit 10-3 to the
between LRGI and Congress Company's Form 10-Q for the quarter ended
March 31, 2000 located under Securities and Exchange
Commission file No. 0-3252 ("March 31, 2000 Form
10-Q")
10-110 Agreement relating to 14% Junior Incorporated by reference from Exhibit 10-4 to the
Subordinated Notes dated April 30, 2000, Company's Form 10-Q for the quarter ended
between LPC and Michael A. Lubin March 31, 2000 located under Securities and Exchange
Commission file No. 0-3252 ("March 31, 2000 Form
10-Q")
-13-
10-111 Agreement relating to Junior Subordinated Incorporated by reference from Exhibit 10-5 to the
Convertible Increasing Rate Note dated Company's Form 10-Q for the quarter ended
April 30, 2000, among LPC, Michael A. March 31, 2000 located under Securities and Exchange
Lubin, and Warren Delano Commission file No. 0-3252 ("March 31, 2000 Form
10-Q")
10-112 Note Amendment No. 2 to Note dated as of Incorporated by reference from Exhibit 10-6 to the
April 30, 2000, between LPC and Tri-Links Company's Form 10-Q for the quarter ended
Investment Trust, as successor to Nomura March 31, 2000 located under Securities and Exchange
Commission file No. 0-3252 ("March 31, 2000 Form
10-Q")
10-113 Fourth Amendment Agreement dated Incorporated by reference from Exhibit 10-7 to the
April 30, 2000, between LRGI and Paul H. Company's Form 10-Q for the quarter ended
Pennell March 31, 2000 located under Securities and Exchange
Commission file No. 0-3252 ("March 31, 2000 Form
10-Q")
10-114 Agreement dated as of April 30, 2000, Incorporated by reference from Exhibit 10-8 to the
among LPC, LRGI, and Congress Company's Form 10-Q for the quarter ended
March 31, 2000 located under Securities and Exchange
Commission file No. 0-3252 ("March 31, 2000 Form
10-Q")
10-115 Agreement dated as of April 30, 2000, Incorporated by reference from Exhibit 10-9 to the
between LPC and CIT Company's Form 10-Q for the quarter ended
March 31, 2000 located under Securities and Exchange
Commission file No. 0-3252 ("March 31, 2000 Form
10-Q")
10-116 Agreement dated as of April 30, 2000, Incorporated by reference from Exhibit 10-10 to the
among LPC, LRGI, and Bank One Company's Form 10-Q for the quarter ended
March 31, 2000 located under Securities and Exchange
Commission file No. 0-3252 ("March 31, 2000 Form
10-Q")
10-117 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-11 to the
dated May 12, 2000, between LPC and Company's Form 10-Q for the quarter ended
Congress March 31, 2000 located under Securities and Exchange
Commission file No. 0-3252 ("March 31, 2000 Form
10-Q")
10-118 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-12 to the
dated May 12, 2000, between LRGI and Company's Form 10-Q for the quarter ended
Congress March 31, 2000 located under Securities and Exchange
Commission file No. 0-3252 ("March 31, 2000 Form
10-Q")
10-119 Promissory Note dated June 26, 2000, Incorporated by reference from Exhibit 10-1 to the
Between LPC and CIT Company's Form 10-Q for the quarter ended
June 30, 2000 located under Securities and Exchange
Commission file No. 0-3252 ("June 30, 2000 Form
10-Q")
-14-
10-120 Amendment No. 4 to Loan and Security Incorporated by reference from Exhibit 10-2 to the
Agreement dated June 26, 2000, between Company's Form 10-Q for the quarter ended
LPC and CIT June 30, 2000 located under Securities and Exchange
Commission file No. 0-3252 ("June 30, 2000 Form
10-Q")
10-121 Amendment No. 10 to Credit Facility and Incorporated by reference from Exhibit 10-3 to the
Security Agreement dated as of Company's Form 10-Q for the quarter ended
June 30, 2000, between LPC, LRGI, and June 30, 2000 located under Securities and Exchange
Bank One Commission file No. 0-3252 ("June 30, 2000 Form
10-Q")
10-122 Agreement relating to 14% Junior Incorporated by reference from Exhibit 10-4 to the
Subordinated Notes dated July 31, 2000, Company's Form 10-Q for the quarter ended
between LPC and Michael A. Lubin June 30, 2000 located under Securities and Exchange
Commission file No. 0-3252 ("June 30, 2000 Form
10-Q")
10-123 Agreement relating to Junior Subordinated Incorporated by reference from Exhibit 10-5 to the
Convertible Increasing Rate Note dated Company's Form 10-Q for the quarter ended
July 31, 2000, among LPC, Michael A. June 30, 2000 located under Securities and Exchange
Lubin, and Warren Delano Commission file No. 0-3252 ("June 30, 2000 Form
10-Q")
10-124 Note Amendment No. 3 to Note dated as of Incorporated by reference from Exhibit 10-6 to the
July 31, 2000, between LPC and Tri-Links Company's Form 10-Q for the quarter ended
Investment Trust, as successor to Nomura June 30, 2000 located under Securities and Exchange
Commission file No. 0-3252 ("June 30, 2000 Form
10-Q")
10-125 Fifth Amendment Agreement dated Incorporated by reference from Exhibit 10-7 to the
July 31, 2000, between LRGI and Paul H. Company's Form 10-Q for the quarter ended
Pennell June 30, 2000 located under Securities and Exchange
Commission file No. 0-3252 ("June 30, 2000 Form
10-Q")
10-126 Agreement dated as of July 31, 2000, Incorporated by reference from Exhibit 10-8 to the
among LPC, LRGI, and Congress Company's Form 10-Q for the quarter ended
June 30, 2000 located under Securities and Exchange
Commission file No. 0-3252 ("June 30, 2000 Form
10-Q")
10-127 Agreement dated as of July 31, 2000, Incorporated by reference from Exhibit 10-9 to the
between LPC and CIT Company's Form 10-Q for the quarter ended
June 30, 2000 located under Securities and Exchange
Commission file No. 0-3252 ("June 30, 2000 Form
10-Q")
10-128 Agreement dated as of July 31, 2000, Incorporated by reference from Exhibit 10-10 to the
among LPC, LRGI, and Bank One Company's Form 10-Q for the quarter ended
June 30, 2000 located under Securities and Exchange
Commission file No. 0-3252 ("June 30, 2000 Form
10-Q")
-15-
10-129 Congress Covenant Waiver Incorporated by reference from Exhibit 10-1 to the
Company's Form 10-Q for the quarter ended
September 30, 2000 located under Securities and
Exchange Commission file No. 0-3252
("September 30, 2000 Form 10-Q")
10-130 Congress Covenant Amendment dated as of Incorporated by reference from Exhibit 10-2 to the
August 31, 2000 Company's Form 10-Q for the quarter ended
September 30, 2000 located under Securities and
Exchange Commission file No. 0-3252
("September 30, 2000 Form 10-Q")
10-131 Agreement relating to 14% Junior Incorporated by reference from Exhibit 10-3 to the
Subordinated Notes dated Company's Form 10-Q for the quarter ended
October 31, 2000, between LPC and September 30, 2000 located under Securities and
Michael A. Lubin Exchange Commission file No. 0-3252
("September 30, 2000 Form 10-Q")
10-132 Agreement relating to Junior Subordinated Incorporated by reference from Exhibit 10-4 to the
Convertible Increasing Rate Note dated Company's Form 10-Q for the quarter ended
October 31, 2000, among LPC, Michael A. September 30, 2000 located under Securities and
Lubin, and Warren Delano Exchange Commission file No. 0-3252
("September 30, 2000 Form 10-Q")
10-133 Note Amendment No. 4 to Note dated as of Incorporated by reference from Exhibit 10-5 to the
October 31, 2000, between LPC and Tri- Company's Form 10-Q for the quarter ended
Links Investment Trust, as successor to September 30, 2000 located under Securities and
Nomura Exchange Commission file No. 0-3252
("September 30, 2000 Form 10-Q")
10-134 Sixth Amendment Agreement dated Incorporated by reference from Exhibit 10-6 to the
October 31, 2000, between LRGI and Paul Company's Form 10-Q for the quarter ended
H. Pennell September 30, 2000 located under Securities and
Exchange Commission file No. 0-3252
("September 30, 2000 Form 10-Q")
10-135 Agreement dated as of October 31, 2000, Incorporated by reference from Exhibit 10-7 to the
among LPC, LRGI, and Congress Company's Form 10-Q for the quarter ended
September 30, 2000 located under Securities and
Exchange Commission file No. 0-3252
("September 30, 2000 Form 10-Q")
10-136 Agreement dated as of October 31, 2000, Incorporated by reference from Exhibit 10-8 to the
between LPC and CIT Company's Form 10-Q for the quarter ended
September 30, 2000 located under Securities and
Exchange Commission file No. 0-3252
("September 30, 2000 Form 10-Q")
10-137 Agreement dated as of October 31, 2000, Incorporated by reference from Exhibit 10-9 to the
among LPC, LRGI, and Bank One Company's Form 10-Q for the quarter ended
September 30, 2000 located under Securities and
Exchange Commission file No. 0-3252
("September 30, 2000 Form 10-Q")
-16-
10-138 Congress Covenant Amendment dated Incorporated by reference from Exhibit 10-139 to 2000
November 30, 2000 Form 10-K
10-139 Amendment No. 6 to Loan and Security Incorporated by reference from Exhibit 10-140 to 2000
Agreement dated December 31, 2000, Form 10-K
between LPC and CIT
10-140 Amendment No. 12 to Credit Facility and Incorporated by reference from Exhibit 10-141 to 2000
Security Agreement dated Form 10-K
December 31, 2000, between LPC, LRGI,
and Bank One
10-141 Amendment No. 11 to Credit Facility and Incorporated by reference from Exhibit 10-142 to 2000
Security Agreement dated Form 10-K
January 31, 2001, between LPC, LRGI, and
Bank One
10-142 Agreement relating to 14% Junior Incorporated by reference from Exhibit 10-143 to 2000
Subordinated Notes dated Form 10-K
January 31, 2001, between LPC and
Michael A. Lubin
10-143 Agreement relating to Junior Subordinated Incorporated by reference from Exhibit 10-144 to 2000
Convertible Increasing Rate Notes dated Form 10-K
January 31, 2001, between LPC, Michael
A. Lubin, and Warren Delano
10-144
Note Amendment No. 5 relating to Note Incorporated by reference from Exhibit 10-145 to 2000
dated as of January 31, 2001, between LPC Form 10-K
and Tri-Links Investment Trust, as
successor to Nomura
10-145
Seventh Amendment Agreement dated Incorporated by reference from Exhibit 10-146 to 2000
January 31, 2001, between LRGI and Paul Form 10-K
Pennell
10-146
Agreement dated January 31, 2001, Incorporated by reference from Exhibit 10-147 to 2000
between LPC, LRGI, and Congress Form 10-K
10-147
Agreement dated January 31, 2001, Incorporated by reference from Exhibit 10-148 to 2000
between LPC and CIT Form 10-K
10-148
Agreement dated January 31, 2001, Incorporated by reference from Exhibit 10-149 to 2000
between LPC, LRGI, and Bank One Form 10-K
10-149
New Equipment Term Note dated Incorporated by reference from Exhibit 10-150 to 2000
February 8, 2001, between LRGI and Form 10-K
Congress
-17-
10-150 Letter Agreement dated February 8, 2001, Incorporated by reference from Exhibit 10-151 to 2000
between Congress and LRGI, and consent Form 10-K
thereto of LPC
10-151 Letter Agreement dated February 8, 2001, Incorporated by reference from Exhibit 10-152 to 2000
between Congress and LPC, and consent Form 10-K
thereto of LRGI
10-152 Agreement relating to 14% Junior Incorporated by reference from Exhibit 10-1 to the
Subordinated Notes dated as of April 30, Company's Form 10-Q for the quarter ended
2001, between LPC and Michael A. Lubin March 31, 2001 located under Securities and Exchange
Commission file No. 0-3252 ("March 31, 2001
Form 10-Q")
10-153 Agreement relating to Junior Subordinated Incorporated by reference from Exhibit 10-2 to the
Convertible Increasing Rate note dated as Company's Form 10-Q for the quarter ended
of April 30, 2001, among LPC, Michael A. March 31, 2001 located under Securities and Exchange
Lubin, and Warren Delano Commission file No. 0-3252 ("March 31, 2001
Form 10-Q")
10-154 Amendment no. 6 to note dated as of Incorporated by reference from Exhibit 10-3 to the
April 30, 2001, between LPC and Tri-Links Company's Form 10-Q for the quarter ended
Investment Trust, as successor to Nomura March 31, 2001 located under Securities and Exchange
Commission file No. 0-3252 ("March 31, 2001
Form 10-Q")
10-155 Eighth amendment agreement dated Incorporated by reference from Exhibit 10-4 to the
April 30, 2001, between LRGI and Paul Company's Form 10-Q for the quarter ended
Pennell March 31, 2001 located under Securities and Exchange
Commission file No. 0-3252 ("March 31, 2001
Form 10-Q")
10-156 Agreement dated as of April 30, 2001, Incorporated by reference from Exhibit 10-5 to the
among LPC, LRGI, and Congress Company's Form 10-Q for the quarter ended
March 31, 2001 located under Securities and Exchange
Commission file No. 0-3252 ("March 31, 2001
Form 10-Q")
10-157 Agreement dated as of April 30, 2001, Incorporated by reference from Exhibit 10-6 to the
between LPC and CIT Company's Form 10-Q for the quarter ended
March 31, 2001 located under Securities and Exchange
Commission file No. 0-3252 ("March 31, 2001
Form 10-Q")
10-158 Agreement dated as of April 30, 2001, Incorporated by reference from Exhibit 10-7 to the
among LPC, LRGI, and Bank One Company's Form 10-Q for the quarter ended
March 31, 2001 located under Securities and Exchange
Commission file No. 0-3252 ("March 31, 2001
Form 10-Q")
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10-159 Agreement relating to 14% Junior Incorporated by reference from Exhibit 10-1 to the
Subordinated Notes dated as of July 31, Company's Form 10-Q for the quarter ended
2001, between LPC and Michael A. Lubin June 30, 2001 located under Securities and Exchange
Commission file No. 0-3252 ("June 30, 2001
Form 10-Q")
10-160 Agreement relating to Junior Subordinated Incorporated by reference from Exhibit 10-2 to the
Convertible Increasing Rate note dated as Company's Form 10-Q for the quarter ended
of July 31, 2001, among LPC, Michael A. June 30, 2001 located under Securities and Exchange
Lubin, and Warren Delano Commission file No. 0-3252 ("June 30, 2001
Form 10-Q")
10-161 Amendment no. 7 to note dated as of Incorporated by reference from Exhibit 10-3 to the
July 31, 2001, between LPC and Tri-Links Company's Form 10-Q for the quarter ended
Investment Trust, as successor to Nomura June 30, 2001 located under Securities and Exchange
Commission file No. 0-3252 ("June 30, 2001
Form 10-Q")
10-162 Ninth amendment agreement dated July 31, Incorporated by reference from Exhibit 10-4 to the
2001, between LRGI and Paul Pennell Company's Form 10-Q for the quarter ended
June 30, 2001 located under Securities and Exchange
Commission file No. 0-3252 ("June 30, 2001
Form 10-Q")
10-163 Agreement dated as of July 31, 2001, Incorporated by reference from Exhibit 10-5 to the
among LPC, LRGI, and Congress Company's Form 10-Q for the quarter ended
June 30, 2001 located under Securities and Exchange
Commission file No. 0-3252 ("June 30, 2001
Form 10-Q")
10-164 Congress covenant amendment dated Incorporated by reference from Exhibit 10-6 to the
June 29, 2001 Company's Form 10-Q for the quarter ended
June 30, 2001 located under Securities and Exchange
Commission file No. 0-3252 ("June 30, 2001
Form 10-Q")
10-165 Agreement dated as of July 31, 2001, Incorporated by reference from Exhibit 10-7 to the
between LPC and CIT Company's Form 10-Q for the quarter ended
June 30, 2001 located under Securities and Exchange
Commission file No. 0-3252 ("June 30, 2001
Form 10-Q")
10-166 Agreement dated as of July 31, 2001, Incorporated by reference from Exhibit 10-8 to the
among LPC, LRGI, and Bank One Company's Form 10-Q for the quarter ended
June 30, 2001 located under Securities and Exchange
Commission file No. 0-3252 ("June 30, 2001
Form 10-Q")
10-167 Amendment to promissory note dated Incorporated by reference from Exhibit 10-9 to the
July 31, 2001, between LPC, LRGI, and Company's Form 10-Q for the quarter ended
Bank One June 30, 2001 located under Securities and Exchange
Commission file No. 0-3252 ("June 30, 2001
Form 10-Q")
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10-168 Amendment to promissory note dated Incorporated by reference from Exhibit 10-10 to the
July 31, 2001, between LPC, LRGI, and Company's Form 10-Q for the quarter ended
Bank One June 30, 2001 located under Securities and Exchange
Commission file No. 0-3252 ("June 30, 2001
Form 10-Q")
10-169 Bank One covenant amendment dated June Incorporated by reference from Exhibit 10-11 to the
30, 2001 Company's Form 10-Q for the quarter ended
June 30, 2001 located under Securities and Exchange
Commission file No. 0-3252 ("June 30, 2001
Form 10-Q")
10-170 Long term contract between Delphi Incorporated by reference from Exhibit 10-12 to the
Automotive Systems LLC and Lexington Company's Form 10-Q for the quarter ended
Connector Seals June 30, 2001 located under Securities and Exchange
Commission file No. 0-3252 ("June 30, 2001
Form 10-Q")
10-171 Agreement relating to 14% Junior Incorporated by reference from Exhibit 10-1 to the
Subordinated Notes dated as of October Company's Form 10-Q for the quarter ended
31, 2001, between LPC and Michael A. September 30, 2001 located under Securities and
Lubin Exchange Commission file No. 0-3252
("September 30, 2001 Form 10-Q")
10-172 Agreement relating to Junior Subordinated Incorporated by reference from Exhibit 10-2 to the
Convertible Increasing Rate note dated as Company's Form 10-Q for the quarter ended
of October 31, 2001, among LPC, Michael September 30, 2001 located under Securities and
A. Lubin, and Warren Delano Exchange Commission file No. 0-3252
("September 30, 2001 Form 10-Q")
10-173 Amendment no. 8 to note dated as of Incorporated by reference from Exhibit 10-3 to the
October 31, 2001, between LPC and Tri- Company's Form 10-Q for the quarter ended
Links Investment Trust, as successor to September 30, 2001 located under Securities and
Nomura Exchange Commission file No. 0-3252
("September 30, 2001 Form 10-Q")
10-174 Tenth amendment agreement dated Incorporated by reference from Exhibit 10-4 to the
October 31, 2001, between LRGI and Paul Company's Form 10-Q for the quarter ended
Pennell September 30, 2001 located under Securities and
Exchange Commission file No. 0-3252
("September 30, 2001 Form 10-Q")
10-175 Agreement dated as of October 31, 2001, Incorporated by reference from Exhibit 10-5 to the
among LPC, LRGI, and Congress Company's Form 10-Q for the quarter ended
September 30, 2001 located under Securities and
Exchange Commission file No. 0-3252
("September 30, 2001 Form 10-Q")
10-176 Congress covenant amendment dated as of Incorporated by reference from Exhibit 10-6 to the
August 30, 2001 Company's Form 10-Q for the quarter ended
September 30, 2001 located under Securities and
Exchange Commission file No. 0-3252
("September 30, 2001 Form 10-Q")
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10-177 Agreement dated as of October 31, 2001, Incorporated by reference from Exhibit 10-7 to the
between LPC and CIT Company's Form 10-Q for the quarter ended
September 30, 2001 located under Securities and
Exchange Commission file No. 0-3252
("September 30, 2001 Form 10-Q")
10-178 Agreement dated as of October 31, 2001, Incorporated by reference from Exhibit 10-8 to the
among LPC, LRGI, and Bank One Company's Form 10-Q for the quarter ended
September 30, 2001 located under Securities and
Exchange Commission file No. 0-3252
("September 30, 2001 Form 10-Q")
10-179 Agreement relating to 14% Junior Filed with this Form 10-K
Subordinated Notes dated as of January 31,
2002, between LPC and Michael A. Lubin
10-180 Agreement relating to Junior Subordinated Filed with this Form 10-K
Convertible Increasing Rate note dated as
of January 31, 2002, among LPC, Michael
A. Lubin, and Warren Delano
10-181 Amendment no. 9 to note dated as of Filed with this Form 10-K
January 31, 2002, between LPC and Tri-
Links Investment Trust, as successor to
Nomura
10-182 Agreement dated as of January 31, 2002, Filed with this Form 10-K
among LPC, LRGI, and Congress
10-183 Agreement dated as of January 31, 2002, Filed with this Form 10-K
between LPC and CIT
10-184 Agreement dated as of January 31, 2002, Filed with this Form 10-K
among LPC, LRGI, and Bank One
10-185 Extension letter dated March 28, 2002 from Filed with this Form 10-K
Bank One to LPC
10-186 Congress covenant amendment dated Filed with this Form 10-K
March 29, 2002
10-187 Bank One covenant amendment dated as of Filed with this Form 10-K
December 31, 2001
10-188 CIT covenant amendment dated as of Filed with this Form 10-K
February 28, 2002
10-189 Agreement dated as of March 29, 2002 Filed with this Form 10-K
among LPC, LRGI, and Congress
21-1 Significant Subsidiary of Registrant Filed with this Form 10-K
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