10-Q 1 sept10q.txt SEPTEMBER 2003 10-Q U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 10-Q (Mark One) [X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 2003 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from ____________ to _____________ Commission file number: 0-18434 REINHOLD INDUSTRIES, INC. -------------------------------------------------------------------------------- (Exact name of small business issuer as specified in charter) Delaware 13-2596288 -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 12827 East Imperial Hwy, Santa Fe Springs, CA 90670 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code (562) 944-3281 -------------------------------------------------------------------------------- Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [ X ] NO [ ] Check whether the issuer has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to distribution of securities under a plan confirmed by the Court. YES [ X ] NO [ ] State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: Class A Common Stock, Par Value $.01 - 2,935,201 shares as of November 1, 2003. REINHOLD INDUSTRIES, INC. INDEX PART I - FINANCIAL INFORMATION PAGE Item 1. Condensed Consolidated Statements of Operations 3 Condensed Consolidated Balance Sheets 5 Condensed Consolidated Statements of Cash Flows 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14 Item 3. Quantitative and Qualitative Disclosures About Market Risk 21 Item 4. Controls and Procedures 21 PART II - OTHER INFORMATION 22 SIGNATURES 26 EXHIBITS 27 REINHOLD INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except per share data) (Unaudited) Three Months Ended September 30, 2003 2002 ---- ---- Net sales $15,866 $13,562 Cost of goods sold 10,970 9,252 ------ ----- Gross profit 4,896 4,310 Selling, general and administrative expenses 3,039 3,182 ----- ----- Operating income 1,857 1,128 Interest (income) expense, net (14) 74 ------- ----- Income before income taxes 1,871 1,054 Income tax expense 660 394 ------ ------ Net income $ 1,211 $ 660 ====== ====== Basic earnings per share $ 0.41 $ 0.23 Diluted earnings per share $ 0.39 $ 0.22 Weighted average common shares outstanding - basic 2,930 2,923 Weighted average common shares outstanding - diluted 3,144 2,948 See accompanying notes to condensed consolidated financial statements REINHOLD INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except per share data) (Unaudited) Nine Months Ended September 30, 2003 2002 ---- ---- Net sales $49,944 $40,823 Cost of goods sold 33,798 28,309 ------ ------ Gross profit 16,146 12,514 Selling, general and administrative expenses 8,920 8,723 ------ ------ Operating income 7,226 3,791 Interest expense, net 9 259 ----- ------ Income before income taxes 7,217 3,532 Income taxes 2,602 1,348 ------ ------ Net income $ 4,615 $ 2,184 ======= ======= Basic earnings per share $ 1.58 $ 0.75 Diluted earnings per share $ 1.49 $ 0.74 Weighted average common shares outstanding - basic 2,927 2,923 Weighted average common shares outstanding - diluted 3,094 2,936 See accompanying notes to condensed consolidated financial statements REINHOLD INDUSTRIES, INC CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except per share data) (Unaudited) September 30, 2003 December 31, 2002 ------------------ ----------------- ASSETS Current assets: Cash and cash equivalents $ 4,158 $ 3,037 Accounts receivable 8,894 9,977 Inventories 8,089 5,938 Other current assets 2,876 2,479 ------- ------- Total current assets 24,017 21,431 Property, plant and equipment, net 12,105 11,307 Goodwill 3,786 3,786 Other assets 198 210 ------ ------ $40,106 $36,734 ====== ====== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Borrowings under line of credit $ - $ 3,000 Accounts payable 3,981 4,127 Accrued expenses 4,189 3,660 Current portion - long term debt 160 149 ------ ------ Total current liabilities 8,330 10,936 Long-term pension liability 5,596 5,596 Long term debt - less current portion 11 124 Other long term liabilities 307 276 Commitments and contingencies Stockholders' equity: Preferred stock: Authorized: 250,000 shares Issued and outstanding: None - - Common stock, $0.01 par value: Class A - Authorized: 4,750,000 shares Issued and outstanding: 2,934,232 shares and 2,659,812 shares, respectively 29 27 Additional paid-in capital 25,327 21,213 Retained earnings 6,612 4,873 Accumulated other comprehensive loss (6,106) (6,311) ------ ------ Net stockholders' equity 25,862 19,802 ------ ------ $40,106 $36,734 ====== ====== See accompanying notes to condensed consolidated financial statements REINHOLD INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) (Unaudited) Nine Months Ended September 30, 2003 2002 ---- ---- Cash flow from operating activities: Net income $ 4,615 $ 2,184 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,247 1,049 Additions to paid-in capital resulting from tax benefits 1,180 757 Non-cash compensation 36 - Gain on sale of assets (119) - Changes in assets and liabilities: Accounts receivable 1,083 (1,992) Inventories (2,151) (602) Other current assets (397) 167 Accounts payable (146) 821 Accrued expenses 529 1,647 Other, net 43 46 ------ ------ Net cash provided by operating activities 5,920 4,077 Cash flows used in investing activities: Proceeds from sale of assets 516 105 Capital expenditures (2,442) (1,739) ------ ------ Net cash used in investing activities (1,926) (1,634) Cash flows used in financing activities: Dividends paid (9) (9) Borrowings against line of credit - 7,221 Repayments on line of credit (3,000) (2,221) Proceeds from exercise of stock options 33 - Repayment of long-term debt (102) (9,391) ----- ------- Net cash used in financing activities (3,078) (4,400) Effect of exchange rate changes on cash 205 308 ----- ------ Net increase (decrease) in cash and cash equivalents 1,121 (1,649) Cash and cash equivalents, beginning of period 3,037 4,105 ----- ------ Cash and cash equivalents, end of period $ 4,158 $ 2,456 ====== ====== See accompanying notes to condensed consolidated financial statements REINHOLD INDUSTRIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2003 (Unaudited) DESCRIPTION OF BUSINESS Reinhold Industries, Inc. ("Reinhold" or the "Company") is a manufacturer of advanced custom composite components, sheet molding compounds, and graphic arts and industrial rollers for a variety of applications in the United States and Europe. Reinhold derives revenues from the defense contract industry, the aircraft industry, the printing industry and other commercial industries. USE OF ESTIMATES The Company's consolidated financial statements and related public financial information are based on the application of generally accepted accounting principles ("GAAP"). GAAP requires the use of estimates, assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental information contained in the external disclosures of the Company including information regarding contingencies, risk and financial condition. The Company believes its use of estimates and underlying accounting assumptions adhere to generally accepted accounting principles and are consistently and conservatively applied. Valuations based on estimates are reviewed for reasonableness and conservatism on a consistent basis throughout the Company. Primary areas where financial information of the Company is subject to the use of estimates, assumptions and the application of judgment include revenues, receivables, inventories, acquisitions, valuation of long-lived and intangible assets, pension and post-retirement benefits, the realizability of deferred tax assets, and foreign exchange translation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. BASIS OF PRESENTATION The accompanying financial statements of the Company for the three and nine months ended September 30, 2003 and 2002 are unaudited. The financial statements consolidate the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. In the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been included. Such adjustments consisted only of normal recurring items. Interim results are not necessarily indicative of results for a full year. The condensed financial statements and notes are presented as permitted by Form 10-Q and, therefore, should be read in conjunction with the Company's annual report on Form 10-K for the year ended December 31, 2002. Notes to Condensed Consolidated Financial Statements (Continued) INVENTORIES Inventories are stated at the lower of cost or market on a first-in, first-out (FIFO) basis. Inventoried costs relating to long-term contracts and programs are stated at the actual production costs, including factory overhead, initial tooling and other related non-recurring costs incurred to date, reduced by amounts related to revenue recognized on units delivered. The components of inventory are as follows (in thousands): September 30, 2003 December 31, 2002 -------------------------------------------------------------------------------- Raw material $ 5,409 4,625 Work-in-process 2,073 874 Finished goods 607 439 -------------------------------------------------------------------------------- Total $ 8,089 5,938 EARNINGS PER COMMON SHARE The Company presents basic and diluted earnings per share ("EPS"). Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the assumed conversion of all dilutive securities, consisting of employee stock options and shares to be issued to Directors. On April 30, 2003, the Board of Directors approved the distribution of a 10% stock dividend to shareholders of record as of May 16, 2003. As a result, an additional 265,418 shares were issued on May 29, 2003. All common stock information and earnings per share computations for all periods presented have been adjusted for the stock dividend. The number of stock options outstanding and the exercise price were also adjusted for the impact of the 10% stock dividend. The reconciliations of basic and diluted weighted average shares are as follows (in thousands, except exercise price data): Three Months Ended Nine Months Ended September 30, September 30, 2003 2002 2003 2002 ---------------------------------------------- Net income $1,211 $660 $4,615 $ 2,184 ===== ==== ===== ====== Weighted average shares used in basic computation 2,930 2,923 2,927 2,923 Dilutive effect of stock options 210 25 164 13 Other dilutive shares 4 - 3 - ----- ----- ----- ----- Weighted average shares used for diluted calculation 3,144 2,948 3,094 2,936 Stock options outstanding 355 240 355 240 Range of exercise price $5.63-$11.36 $5.63-$7.33 $5.63-$11.36 $5.63-$7.33 Notes to Condensed Consolidated Financial Statements (Continued) STOCK OPTION PLAN The Company accounts for its stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and has adopted the disclosure-only alternative of Statement of Financial Accounting Standard ("SFAS") No. 123 "Accounting For Stock-Based Compensation", as amended by SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure." The following table illustrates the effect on net income and earnings per share had compensation expense for the employee stock-based plans been recorded based on the fair value method under SFAS No. 123 (in thousands except for per share data):
Three Months Nine Months Ended Sept 30, Ended Sept 30, 2003 2002 2003 2002 ----------------------------------------------------------------------------------------------------- Net income as reported $1,211 $ 660 $4,615 $2,184 Deduct, total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (31) (33) (87) (100) ----------------------------------------------------------------------------------------------------- Net income, as adjusted $1,180 $ 627 $4,528 $2,084 ===== ==== ===== ===== Earnings per share: Basic - as reported $0.41 $0.23 $1.58 $0.75 Basic - as adjusted $0.40 $0.21 $1.55 $0.71 Diluted - as reported $0.39 $0.22 $1.49 $0.74 Diluted - as adjusted $0.38 $0.21 $1.46 $0.71
REPORTING OTHER COMPREHENSIVE INCOME The Company reports other comprehensive income under Statement of Financial Accounting Standard ("SFAS") No. 130, "Reporting Comprehensive Income". The difference between net income and total comprehensive income during the three months ended September 30, 2003 and 2002 was a gain on foreign currency translation of $43,000 and $151,000, respectively. The difference between net income and total comprehensive income during the nine months ended September 30, 2003 and 2002 was a gain on foreign currency translation of $205,000 and $308,000, respectively. INCOME TAXES Income taxes for interim periods are computed using the estimated effective tax rate to be applicable for the current year. Notes to Condensed Consolidated Financial Statements (Continued) LONG TERM DEBT On March 20, 2002, the Company entered into a one year $10,000,000 revolving credit facility with LaSalle Bank National Association ("LaSalle"). Interest is at a rate which approximates LIBOR plus 2.50% and is secured by all financial assets of the Company. The credit agreement with LaSalle is subject to various financial covenants to which the Company must comply. The covenants require the Company to maintain certain ratios of profitability, cash flow, total outstanding debt, minimum net worth and limits on capital expenditures. As of September 30, 2003, the Company was in compliance with all applicable covenants. On March 21, 2002, the Company received approximately $7,200,000 from LaSalle against this credit facility. The proceeds from the credit facility and additional cash on hand were used to extinguish all outstanding debt (approximately $8,700,000) with a prior bank. On March 21, 2003, the Company amended the credit facility to extend the termination date to June 20, 2003. No changes were made to any other terms and conditions. On June 20, 2003 the Company amended the credit facility to extend the termination date to June 20, 2004. The line of credit under the facility has been reduced from $10,000,000 to $8,000,000. On June 19, 2003 the Company paid off the remaining outstanding balance pertaining to the LaSalle credit facility. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts of the following financial instruments approximate fair value because of the short maturity of those instruments: cash and cash equivalents, accounts receivable, other current assets, other assets, accounts payable, accrued expenses and current installments of long-term debt. The long-term debt bears interest at a variable market rate and, thus, has a carrying amount that approximates fair value. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. FOREIGN CURRENCY The reporting currency of the Company is the United States dollar. The functional currency of NP Aerospace is the UK pound sterling. For consolidation purposes, the assets and liabilities of the Company's subsidiaries are translated at the exchange rate in effect at the balance sheet date. The consolidated statement of operations is translated at the average exchange rate in effect during the period being reported. Exchange differences arise mainly from the valuation rates of the intercompany accounts and are taken directly to Stockholders' equity. Notes to Condensed Consolidated Financial Statements (Continued) OPERATING SEGMENTS The Company reports operating segment data under SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information". Reinhold is a manufacturer of advanced custom composite components, sheet molding compounds, and graphic arts and industrial rollers for a variety of applications primarily in the United States and Europe. The Company generates revenues from five operating segments: Aerospace, CompositAir, Commercial, NP Aerospace and Bingham. Management has determined these to be Reinhold's operating segments based upon the nature of their products. Aerospace produces a variety of products for the U.S. military and space programs. CompositAir produces components for the commercial aircraft seating industry. The Commercial segment produces lighting housings and pool filters. NP Aerospace, our subsidiary located in Coventry, England, produces products for law enforcement, lighting, military, automotive and commercial aircraft. Bingham manufactures rubber and urethane rollers for graphic arts and industrial applications. Prior to January 1, 2003, the company generated revenues from six operating segments. Due to the similarity of customer base and markets served, on January 1, 2003, the Thermal Insulation and Aerospace operating segments were combined. Prior year information has been changed to conform with the current presentation. The information in the following tables is derived directly from the segment's internal financial reporting for corporate management purposes (in thousands).
Three Months Ended Nine Months Ended September 30, September 30, 2003 2002 2003 2002 ---------------------------------------------------------------------------------------------------------- Net sales Aerospace $ 5,571 $ 4,691 $16,298 $12,891 CompositAir 778 1,685 4,053 4,966 Commercial 1,004 779 2,575 2,036 NP Aerospace 4,635 2,654 14,551 8,301 Bingham 3,878 3,753 12,467 12,629 ---------------------------------------------------------------------------------------------------------- Total sales $15,866 $13,562 $49,944 $40,823 ---------------------------------------------------------------------------------------------------------- Income before income taxes Aerospace $ 1,709 $ 1,652 $ 5,188 $ 4,309 CompositAir (128) 133 269 158 Commercial (1) 44 33 135 NP Aerospace 878 276 3,158 860 Bingham (347) (317) (664) (431) Unallocated corporate expenses (240) (734) (767) (1,499) ----------------------------------------------------------------------------------------------------------- Total income before income taxes $ 1,871 $ 1,054 $ 7,217 $ 3,532
Notes to Condensed Consolidated Financial Statements (Continued) September 30, 2003 December 31, 2002 -------------------------------------------------------------------------------- Total assets Aerospace $11,989 $10,436 CompositAir 2,536 2,749 Commercial 1,610 1,220 NP Aerospace 10,070 8,504 Bingham 9,942 10,311 Unallocated corporate 3,959 3,514 -------------------------------------------------------------------------------- Total assets $40,106 $36,734 LEGAL PROCEEDINGS The Company has been informed that it may be a potentially responsible party ("PRP") under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended ("CERCLA"), with respect to certain environmental liabilities arising at the Valley Forge National Historical Park Site ("Valley Forge Site") located in Montgomery County, Pennsylvania and at a site formerly known as the Casmalia Resources Hazardous Waste Management Facility, located in Santa Barbara County, California ("Casmalia Site"). CERCLA imposes liability for the costs of responding to a release or threatened release of "hazardous substances" into the environment. CERCLA liability is imposed without regard to fault. PRPs under CERCLA include current owners and operators of the site, owners and operators at the time of disposal, as well as persons who arranged for disposal or treatment of hazardous substances sent to the site, or persons who accepted hazardous substances for transport to the site. Because PRPs' CERCLA liability to the government is joint and several, a PRP may be required to pay more than its proportional share of such costs. Liability among PRPs, however, is subject to equitable allocation through contribution actions. On June 16, 2000 the U.S. Department of Justice notified the Company that it may be a PRP with respect to the Valley Forge Site and demanded payment for past costs incurred by the United States in connection with the site, which the Department of Justice estimated at $1,753,726 incurred by the National Park Service ("NPS") as of May 31, 2000 and $616,878 incurred by the United States Environmental Protection Agency ("EPA") as of November 30, 1999. Payment of these past costs would not release the Company from a claim for future response costs. Management believes that in or about 1977, the Company's predecessor, Keene Corporation ("Keene"), sold to the U.S. Department of Interior certain real property and improvements now located within the Valley Forge Site. Prior to the sale, Keene operated a manufacturing facility on the real property and may have used friable asbestos, the substance which gives rise to the claim at the Valley Forge Site. On December 30, 2002, the United States District Court for the Southern District of New York approved and entered a Consent Decree agreed upon by the United States and the Company settling the claims asserted by the National Park Service against the Company. The United States and the Company stipulated that the EPA will not seek reimbursement of its response costs with respect to the Valley Forge Site and that the Company's claim for a declaratory judgment with respect to those costs may be dismissed with prejudice. Notes to Condensed Consolidated Financial Statements (Continued) Under the terms of the Consent Decree, the Company was obligated to pay $500,000 to the Department of the Interior. In return, the Company has received from the United States a covenant not to sue, subject to certain limited exceptions, for claims under CERCLA Sections 106, 107 and 113 and RCRA Section 7003 relating to the Site. The payment to the Department of the Interior was made on January 23, 2003. In September 2002, in accordance with SFAS No. 5, Accounting for Contingencies, the Company recorded a reserve of $500,000 for the estimated cost to conclude this matter. These costs were included in the December 31, 2002 balance sheet as a component of "Accrued Expenses." Pursuant to the Consent Decree and CERCLA Section 113(f)(2), the Company's settlement with the United States bars any other party from asserting claims for contribution for any response costs incurred with respect to the Valley Forge Site by the United States, any state or other governmental entity, or any other party. With respect to the Casmalia Site, on August 11, 2000, the EPA notified the Company that it is a PRP by virtue of waste materials deposited at the site. The EPA has designated the Company as a "de minimis" waste generator at this site, based on the amount of waste at the Casmalia Site attributed to the Company. The Company is not currently a party to any litigation concerning the Casmalia Site, and based on currently available data, the Company believes that the Casmalia Site is not likely to have a material adverse impact on the Company's consolidated financial position or results of operations. The Company is involved in various other claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material effect on the Company's financial position, results of operations, or liquidity. REINHOLD INDUSTRIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS September 30, 2003 The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included in Item 1 of this filing and the financial statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2002. Reinhold Industries, Inc. ("Reinhold" or the "Company") is a manufacturer of advanced custom composite components, sheet molding compounds, and graphic arts and industrial rollers for a variety of applications in the United States and Europe. Reinhold derives revenues from the defense contract industry, the aircraft industry, the printing industry and other commercial industries. CRITICAL ACCOUNTING POLICIES The Company's consolidated financial statements and related public financial information are based on the application of generally accepted accounting principles ("GAAP"). GAAP requires the use of estimates, assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental information contained in the external disclosures of the Company including information regarding contingencies, risk and financial condition. The Company believes its use of estimates and underlying accounting assumptions adhere to generally accepted accounting principles and are consistently and conservatively applied. Valuations based on estimates are reviewed for reasonableness and conservatism on a consistent basis throughout the Company. Primary areas where financial information of the Company is subject to the use of estimates, assumptions and the application of judgment include revenues, receivables, inventories, acquisitions, valuation of long-lived and intangible assets, pension and post-retirement benefits, the realizability of deferred tax assets, and foreign exchange translation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. Revenue Recognition And Allowances For Doubtful Accounts The Company recognizes revenue when title and risk of ownership have passed to the buyer. Allowances for doubtful accounts are estimated based on estimates of losses related to customer receivable balances. Estimates are developed by using standard quantitative measures based on historical losses, adjusting for current economic conditions and, in some cases, evaluating specific customer accounts for risk of loss. The establishment of reserves requires the use of judgment and assumptions regarding the potential for losses on receivable balances. Though the Company considers these balances adequate and proper, changes in economic conditions in specific markets in which the Company operates could have a material effect on reserve balances required. Inventories We value our inventories at lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method, including material, labor and factory overhead. The Company writes down its inventory for estimated obsolescence equal to the cost of the inventory. Product obsolescence may be caused by shelf-life expiration, discontinuance of a product line, replacement products in the marketplace or other competitive situations. Management's Discussion and Analysis (cont'd) Fair Value Of Assets Acquired And Liabilities Assumed In Purchase Combinations The purchase combinations carried out by us require management to estimate the fair value of the assets acquired and liabilities assumed in the combinations. These estimates of fair value are based on our business plan for the entities acquired including planned redundancies, restructuring, use of assets acquired and assumptions as to the ultimate resolution of obligations assumed for which no future benefit will be received. Should actual use of assets or resolution of obligations differ from our estimates, revisions to the estimated fair values would be required. If a change in estimate occurs after one year of the acquisition, the change would be recorded in our statement of operations. Pensions And Post Retirement Benefits The valuation of the Company's pension and other post-retirement plans requires the use of assumptions and estimates that are used to develop actuarial valuations of expenses and assets/liabilities. These assumptions include discount rates, investment returns, projected salary increases and benefits, and mortality rates. The actuarial assumptions used in the Company's pension reporting are reviewed annually and compared with external benchmarks to assure that they accurately account for our future pension obligations. Changes in assumptions and future investment returns could potentially have a material impact on the Company's pension expenses and related funding requirements. Valuation Of Long-Lived Assets In accordance with Statement of Financial Accounting Standard ("SFAS") No. 142 and SFAS No. 144, we assess the fair value and recoverability of our long-lived assets, including goodwill, whenever events and circumstances indicate the carrying value of an asset may not be recoverable from estimated future cash flows expected to result from its use and eventual disposition. In doing so, we make assumptions and estimates regarding future cash flows and other factors to make our determination. The fair value of our long-lived assets and goodwill is dependent upon the forecasted performance of our business and the overall economic environment. When we determine that the carrying value of our long-lived assets and goodwill may not be recoverable, we measure any impairment based upon a forecasted discounted cash flow method. If these forecasts are not met, we may have to record additional impairment charges not previously recognized. Income Taxes We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities. We regularly review our deferred tax assets for recoverability and establish a valuation allowance based upon historical losses, projected future taxable income and the expected timing of the reversals of existing temporary differences. Cumulative Foreign Exchange Translation Accounting In preparing our consolidated financial statements, we are required to translate the financial statements of NP Aerospace from the currency in which they keep their accounting records, the British Pound Sterling, into United States dollars. This process results in exchange gains and losses which are either included within the statement of operations or as a separate part of our net equity under the caption "accumulated other comprehensive loss." Under the relevant accounting guidance, the treatment of these translation gains or losses is dependent upon management's determination of the functional currency of NP Aerospace. Generally, the currency in which the subsidiary transacts a majority of its transactions, including billings, financing, payroll and other expenditures would be considered the functional currency but any dependency upon the parent and the nature of the subsidiary's operations must also be considered. Management's Discussion and Analysis (cont'd) If any subsidiary's functional currency is deemed to be the local currency, then any gain or loss associated with the translation of that subsidiary's financial statements is included in cumulative translation adjustments. However, if the functional currency is deemed to be the United States dollar then any gain or loss associated with the translation of these financial statements would be included within our statement of operations. Based on our assessment of the factors discussed above, we consider NP Aerospace's local currency to be the functional currency. Accordingly, we had cumulative foreign currency translation losses of approximately $685,000 and $890,000 that were included as part of "accumulated other comprehensive loss" within our balance sheet at September 30, 2003 and December 31, 2002, respectively. Environmental Liabilities With respect to outstanding actions that are in preliminary procedural stages, as well as any actions that may be filed in the future, insufficient information exists upon which judgments can be made as to the validity or ultimate disposition of such actions, thereby making it difficult to reasonably estimate what, if any, potential liability or costs may be incurred. Accordingly, no estimate of future liability has been included for such claims. Comparison of Third Quarter 2003 to 2002 In the third quarter of 2003, net sales increased $2.3 million (17%) to $15.9 million, compared to third quarter 2002 sales of $13.6 million. Sales in the Aerospace business unit increased by $0.9 million (19%) to $5.6 million due mainly to increased shipments of components related to the Minuteman III Propulsion Replacement Program. Sales decreased by $0.9 million (54%) in the CompositAir business unit to $0.8 million due to an industry slowdown. Sales increased $0.2 million (29%) to $1.0 million in the Commercial business unit due to higher shipments of pool filter tanks and heater covers, in-ground lighting housings and production tooling. Sales at NP Aerospace increased by $2.0 million (75%) to $4.6 million due primarily to additional sales of ballistic personal protection products. Sales for the Bingham business unit increased by $0.1 million (3%) to $3.9 million. Gross profit margin in the third quarter decreased from 32% in 2002 to 31% in 2003. Gross profit margin for Aerospace decreased from 46% to 44% due to changes in product mix. Gross profit margin for CompositAir decreased from 20% to 4% due to lower sales volume. Gross profit margin for Commercial decreased from 20% to 15% due to higher labor and overhead costs. Gross profit margin for NP Aerospace increased from 28% to 33% due to higher sales volume. Gross profit margin for Bingham decreased from 25% to 19% due mainly to higher material and overhead costs. Selling, general and administrative expenses for the third quarter 2003 were $3.0 million (19% of sales) compared to $3.2 million (23% of sales) for the same quarter of 2002. The decrease is due to $0.5 million in costs recorded in 2002 to settle the Valley Forge litigation offset by increases in other general and administrative expenses of $0.3 million in 2003, consisting primarily of $0.2 million in pension expenses. Interest income of $0.01 million was realized in the third quarter of 2003 compared to interest expense of $0.07 million in the third quarter of 2002 due to lower outstanding debt. Management's Discussion and Analysis (cont'd) Income before income taxes increased to $1.9 million (12% of sales) in the third quarter of 2003 from $1.1 million (8% of sales) in the same period of 2002. Income before income taxes for Aerospace was $1.7 million (31% of sales) in 2003 compared to $1.7 million (35% of sales) in 2002 due to changes in product mix. A loss before income taxes was realized for CompositAir in the third quarter of 2003 of $0.1 million (-16% of sales) compared to $0.1 million income (8% of sales) in 2002 due to an industry slowdown. Income before income taxes for Commercial was at breakeven in 2003 compared to $0.044 million (6% of sales) in 2002. Income before income taxes for NP Aerospace increased to $0.9 million (19% of sales) from $0.3 million (10% of sales) due to higher sales. A loss before income taxes for Bingham of $0.3 million (-9% of sales) was realized in the third quarter of 2003 compared to a loss before income taxes of $0.3 million (-8% of sales) in the third quarter of 2002. A tax provision of $660,000 was recorded in the third quarter of 2003 as compared to $394,000 in the third quarter of 2002. Income taxes for interim periods are computed using the effective tax rate estimated to be applicable for the full fiscal year, which is subject to ongoing review and evaluation by management. Comparison of Nine Months 2003 to 2002 In the first nine months of 2003, net sales increased $9.1 million, or 22%, to $49.9 million, compared to 2002 sales of $40.8 million. Sales in the Aerospace business unit increased by $3.4 million (26%) to $16.3 million due to increased shipments of components related to the Minuteman III Propulsion Replacement Program. Sales in the CompositAir business unit decreased $0.9 million (18%) to $4.1 million due to an industry slowdown. Sales increased $0.5 million (26%) to $2.6 million in the Commercial business unit due to increased shipments of pool filter tanks and heater covers and in-ground lighting housings. Sales at NP Aerospace increased $6.3 million (75%) to $14.6 million due to increased shipments of body armor and other personal protection products. Sales for the Bingham business unit decreased by $0.2 million (1%) to $12.5 million. Gross profit margin in the first nine months increased from 31% in 2002 to 32% in 2003. Gross profit margin for Aerospace was unchanged from 2002 at 45% for the first nine months of 2003. Gross profit margin for CompositAir increased from 15% to 22% due to elimination of labor inefficiencies resulting from our 2002 consolidation of production facilities in Santa Fe Springs, California. Gross profit margin for Commercial decreased from 22% to 17% due to higher overhead expenses. Gross profit margin for NP Aerospace increased from 28% to 33% due to increased sales and the resulting absorption of fixed overhead expenses. Gross profit margin for Bingham decreased from 26% to 22% due to higher overhead costs. Selling, general and administrative expenses for the first nine months of 2003 were $8.9 million (18% of sales) compared to $8.7 million (21% of sales) for the first nine months of 2002. The increase is due to higher pension expenses and estimated year-end management incentive compensation. Interest expense, net, in the first nine months of 2003 decreased by $0.3 million due to lower outstanding debt and lower effective interest rates. Management's Discussion and Analysis (cont'd) Income before income taxes increased to $7.2 million (14% of sales) in the first nine months of 2003 from $3.5 million (9% of sales) in the same period of 2002. Income before income taxes for Aerospace was $5.2 million (32% of sales) in 2003 compared to $4.3 million (33% of sales) in 2002 due to increased shipments of components related to the Minuteman III Propulsion Replacement Program. Income before income taxes for CompositAir was $0.3 million (7% of sales) in 2003 compared to $0.2 million (3% of sales) in 2002 due to the elimination of labor inefficiencies that resulted from our 2002 consolidation of production facilities in Santa Fe Springs, California. Income before income taxes for Commercial decreased from $0.1 million (7% of sales) in the first nine months of 2002 to breakeven in 2003 due to higher overhead expenses. Income before income taxes for NP Aerospace increased to $3.2 million (22% of sales) from $0.9 million (10% of sales) due to increased sales. A loss before income taxes for Bingham of $0.7 million (-5% of sales) was realized in the first nine months of 2003 compared to a loss before income taxes of $0.4 million (-3% of sales) in 2002 due to generally poor economic conditions and higher overhead costs. A tax provision of $2.6 million was recorded in the first nine months of 2003 as compared to $1.3 million in the first nine months of 2002. Income taxes for interim periods are computed using the effective tax rate estimated to be applicable for the full fiscal year, which is subject to ongoing review and evaluation by management. At December 31, 2002, the Company had net operating loss carryforwards for Federal income tax purposes of approximately $21.2 million. The Company may utilize the Federal net operating losses by carrying them forward to offset future Federal taxable income, if any, through 2011. As more fully described in Note 3 to the 2002 consolidated financial statements filed on Form 10-K, benefits realized from loss carryforwards arising prior to the reorganization have been recorded directly to additional paid-in capital. Liquidity and Capital Resources As of September 30, 2003, working capital was $15.7 million, up $5.2 million from December 31, 2002. Cash and cash equivalents of $4.2 million held at September 30, 2003 were $1.1 million higher than cash and cash equivalents held at December 31, 2002 primarily due to the increased profitability of the Company. Net cash provided by operating activities totaled $5.9 million for the nine months ended September 30, 2003. Net cash provided by operating activities totaled $4.1 million for the comparable period in 2002. The increase over the prior period relates to improved working capital management and increased profitability of the Company. Net cash used in investing activities for the nine months ended September 30, 2003 totaled $1.9 million and consisted of capital expenditures and proceeds from sale of assets. Net cash used in investing activities for the nine months ended September 30, 2002 totaled $1.6 million and consisted of capital expenditures. Net cash used in financing activities for the nine months ended September 30, 2003 totaled $3.1 million and consisted of repayment of the $3.0 million line of credit balance and repayment of long-term debt of $0.1 million. Net cash used in financing activities for the nine months ended September 30, 2002 totaled $4.4 million and consisted of borrowings against the line of credit of $7.2 million less subsequent repayments of $2.2 million and repayments of long-term debt of $9.4 million. Management's Discussion and Analysis (cont'd) Expenditures in 2003 and 2002 related to investing and financing activities were financed by existing cash and cash equivalents and proceeds from the LaSalle line of credit. On March 20, 2002, the Company entered into a one year $10,000,000 revolving credit facility with LaSalle Bank National Association ("LaSalle"). Interest is at a rate which approximates LIBOR plus 2.50% and is secured by all financial assets of the Company. The credit agreement with LaSalle is subject to various financial covenants to which the Company must comply. The covenants require the Company to maintain certain ratios of profitability, cash flow, total outstanding debt, minimum net worth and limits on capital expenditures. As of September 30, 2003, the Company was in compliance with all applicable covenants. On March 21, 2002, the Company received approximately $7,200,000 from LaSalle against this credit facility. The proceeds from the credit facility and additional cash on hand were used to extinguish all outstanding debt with a prior bank. On March 21, 2003, the Company amended the credit facility to extend the termination date to June 20, 2003. No changes were made to any other terms and conditions. On June 20, 2003 the Company amended the credit facility to extend the termination date to June 20, 2004. The line of credit under the facility has been reduced from $10,000,000 to $8,000,000. On June 19, 2003 the Company paid off the remaining outstanding balance pertaining to the LaSalle credit facility. Management believes that the available cash, cash flows from operations and cash available under the line of credit will be sufficient to fund the Company's operating and capital expenditure requirements through at least September 30, 2004. Stock Dividend On April 30, 2003, the Board of Directors approved the distribution of a 10% stock dividend to shareholders of record as of May 16, 2003. As a result, an additional 265,418 shares were issued on May 29, 2003. All common stock information and earnings per share computations for all periods presented have been adjusted for the stock dividend. The number of stock options outstanding and the exercise price were also adjusted for the impact of the 10% stock dividend. Forward Looking Statements This Form 10-Q contains statements which, to the extent that they are not recitations of historical fact, constitute "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). The words "estimate", "anticipate", "project", "intend", "expect", and similar expressions are intended to identify forward looking statements. All forward looking statements involve risks and uncertainties, including, without limitation, statements and assumptions with respect to future revenues, program performance and cash flow. Readers are cautioned not to place undue reliance on these forward looking statements which speak only as of the date of this 10-Q. The Company does not undertake any obligation to publicly release any revisions to these forward looking statements to reflect events, circumstances or changes in expectations after the date of this Form 10-Q or to reflect the occurrence of Management's Discussion and Analysis (cont'd) unanticipated events. The forward looking statements in this document are intended to be subject to safe harbor protection provided by Sections 27A of the Securities Act and 21E of the Exchange Act. 2003 Outlook The Aerospace business unit should outperform 2002 results due mainly to Minuteman III PRP component shipments and additional sales of rocket nozzles. The CompositAir business unit may be unable to match 2002 results due to the impact of the continued slowdown experienced in the commercial airline industry. The Commercial business unit should generate financial results comparable to 2002. NP Aerospace has experienced a significant increase in sales of personal protection products (military helmets and body armor). Although future sales of these products are largely dependent on unpredictable foreign government spending, NP Aerospace should outperform 2002 results. At Bingham, our financial performance continues to suffer due to poor economic conditions in the printing marketplace. Additional sales expansion and cost reduction efforts are continuing. This business unit continues to receive the highest levels of management focus. Recent Accounting Pronouncements The effective recent accounting pronouncements are included in the notes to the condensed consolidated financial statements included herein. Item 3. Quantitative and Qualitative Disclosures About Market Risk There are no material changes to the disclosures made in the Annual Report on Form 10-K for the year ended December 31, 2002. Item 4. Controls and Procedures (a) Evaluation of Disclosure Controls and Procedures As of September 30, 2003, an evaluation was performed by the Chief Executive Officer and Chief Financial Officer of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14 and 15d-14. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective in ensuring that all material information required to be filed in this annual report has been made known to them in a timely fashion. (b) Changes in Internal Controls There have been no significant changes in internal controls or in factors that could significantly affect internal controls subsequent to the date the Chief Executive Officer and Chief Financial Officer completed their evaluation. PART II - OTHER INFORMATION Item 1. Legal Proceedings The information required in this section is included in Part I under the heading "LEGAL PROCEEDINGS". Item 4. Results of Votes of Security Holders NONE Item 6. Exhibits and Reports on Form 8-K a. Exhibits 2.1 Keene Corporation's Fourth Amended Plan of Reorganization Under Chapter 11 of the Bankruptcy Code dated March 11, 1996, incorporated herein by reference to Exhibit 99(a) to Keene Corporation's Form 8-K filed with the Commission on June 28, 1996. 2.2 Motion to Approve Modifications to the Keene Corporation Fourth Amended Plan of Reorganization Under Chapter 11 of the Bankruptcy Code dated June 12, 1996, incorporated herein by reference to Exhibit 99(b) to Keene Corporation's Form 8-K filed with the Commission on June 28, 1996. 2.3 Finding of Fact, Conclusions of Law and Order Confirming Keene's Fourth Amended Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, as modified, entered June 14, 1996, incorporated herein by reference to Exhibit 99(c) to Keene Corporation's Form 8-K filed with the Commission on June 28, 1996. 3.1 Amended and restated Certificate of Incorporation of Reinhold Industries, Inc., incorporated herein by reference to Exhibit 99(a), Exhibit A to the Plan, to Keene Corporation's Form 8-K filed with the Commission on June 28, 1996. 3.2 Amended and restated By-laws of Reinhold Industries, Inc. (Formerly Keene Corporation), incorporated herein by reference to Exhibit 99(a), Exhibit B to the Plan, to Keene Corporation's Form 8-K filed with the Commission on June 28, 1996. 3.3 Certificate of Merger of Reinhold Industries, Inc. into Keene Corporation, incorporated herein by reference to Exhibit 99(a), Exhibit C to the Plan, to Keene Corporation's Form 8-K filed with the Commission on June 28, 1996. 3.4 Second amended and restated Certificate of Incorporation and amended By-laws of Reinhold Industries, Inc., on Form DEFS14A filed with the Commission on September 24, 1999. 3.5 Third amended and restated Certificate of Incorporation of Reinhold Industries, Inc., on Form DEF14C filed with the Commission on October 10, 2000. 4.1 Share Authorization Agreement, incorporated herein by reference to Exhibit 99(a), Exhibit H to the Plan, to Keene Corporation's Form 8-K filed with the Commission on June 28, 1996. 4.2 Registration Rights Agreement, incorporated herein by reference to Exhibit 99(a), Exhibit G to the Plan, to Keene Corporation's Form 8-K filed with the Commission on June 28, 1996. 9.1 Creditors' Trust Agreement, incorporated herein by reference to Exhibit 99(a), Exhibit D to the Plan, to Keene Corporation's Form 8-K filed with the Commission on June 28, 1996. 10.1 Reinhold Industries, Inc. Stock Incentive Plan, on Form S-8, filed with the Commission on November 10, 1997. 10.2 Reinhold Management Incentive Compensation Plan, incorporated by reference to Page 34 to Keene's (Predecessor Co.) Form 10, dated April 4, 1990, as amended by Form 8, Exhibit 10(e), dated July 19, 1990. 10.3 Lease, dated January 4, 1990, by and between Imperial Industrial Properties, Inc. and Reinhold Industries, incorporated by reference to Exhibit 10(b) to Keene's Form 10 dated April 4, 1990, as amended by Form 8, dated July 19, 1990. 10.4 Reinhold Industries, Inc. Retirement Plan (formerly Keene Retirement Plan), incorporated by reference to Exhibit 10(i) to Keene's Form 10 dated April 4, 1990, as amended by Form 8, dated July 19, 1990. 10.5 Management Agreement between Reinhold Industries, Inc. and Hammond, Kennedy, Whitney & Company, Inc. dated May 31, 1999 on Form 10-QSB filed with the Commission on August 16, 1999. 10.6 Stock Option Agreement between Reinhold Industries, Inc. and Michael T. Furry dated June 3, 1999 on Form 10-QSB filed with the Commission on August 16, 1999. 10.7 Stock Price Deficiency Payment Agreement between Reinhold Industries, Inc. and various stockholders dated June 16, 1999 on Form 10-QSB filed with the Commission on August 16, 1999. 10.8 Asset Purchase Agreement by and between Samuel Bingham Company, a Delaware corporation, and Samuel Bingham Enterprises, Inc. dated February 3, 2000 on Form 8-K/A filed with the Commission on May 23, 2000. 10.9 Credit Agreement between Reinhold Industries, Inc., Samuel Bingham Enterprises, Inc., NP Aerospace Limited (the "Borrowers") and LaSalle Bank National Association dated March 21, 2002 on Form 10-Q filed with the Commission on May 9, 2002. 10.10 Amended and Restated Reinhold Industries, Inc. Stock Incentive Plan, on Form S-8, filed with the Commission on December 1, 2002. 10.11 Directors Deferred Stock Plan, on Form 10-K filed with the Commission on March 28, 2003. 20.1 New Keene Credit Facility, incorporated herein by reference to Exhibit 99(a), Exhibit F to the Plan, to Keene Corporation's Form 8-K filed with the Commission on June 28, 1996. 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002. b. Reports on Form 8-K Form 8-K was filed on September 4, 2003 announcing that the Company had retained the services of William Blair & Company, LLC as its financial advisor to the Board of Directors to assist in identifying and exploring strategic alternatives to maximize shareholder value. The filing was made under Item 5 - Other Events. REINHOLD INDUSTRIES, INC. SIGNATURES Pursuant to the requirement of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. REINHOLD INDUSTRIES, INC. Registrant DATE: November 14, 2003 By: /S/ Brett R. Meinsen Brett R. Meinsen Vice President - Finance and Administration, Treasurer and Secretary (Principal Financial Officer) CERTIFICATIONS I, Michael T. Furry, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Reinhold Industries, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a - 14 and 15d - 14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /s/ MICHAEL T. FURRY Michael T. Furry President and Chief Executive Officer November 14, 2003 CERTIFICATIONS I, Brett R. Meinsen, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Reinhold Industries, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a - 14 and 15d - 14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /s/ BRETT R. MEINSEN Brett R. Meinsen Vice President - Finance and Administration November 14, 2003