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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, 1998
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 15, 1999, was approximately $2,055,000.
The number of shares outstanding of the registrant's common stock at March 15,
1999, was 4,263,036.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's proxy statement to be issued in connection with its
1999 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............................................................. 6
Item 3. Legal Proceedings ..................................................... 6
Item 4. Submission of Matters to a Vote of Security Holders ................... 6
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters . 7
Item 6. Selected Financial Data ............................................... 8
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations ................................................. 9
Item 7A. Quantitative and Qualitative Disclosures about Market Risk ............ 21
Item 8. Financial Statements and Supplementary Data ........................... 22
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure .................................................. 48
PART III
Item 10. Directors and Executive Officers of the Registrant .................... 49
Item 11. Executive Compensation ................................................ 49
Item 12. Security Ownership of Certain Beneficial Owners and Management ........ 49
Item 13. Certain Relationships and Related Transactions ........................ 49
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ...... 50
3
PART I
ITEM 1. BUSINESS
Lexington Precision Corporation (the "Company") is a Delaware
corporation that was incorporated in 1966. The Company's business is conducted
substantially in the continental United States. Through its two operating
segments, the Rubber Group and the Metals Group, the Company manufactures, to
customer specifications, rubber and metal component parts used primarily by
manufacturers of automobiles, automotive replacement parts, medical devices, and
industrial equipment. The Company has implemented a strategy of focusing each of
its manufacturing facilities on a particular product line with a well-defined
market. Operations are decentralized, with each division having a management
team that is responsible for all aspects of production, sales, and customer
service.
RUBBER GROUP
The Company's Rubber Group manufactures silicone and organic rubber
components. The Rubber Group consists of four divisions: Lexington Connector
Seals, Lexington Insulators, Lexington Medical, and Lexington Technologies. In
1998, net sales of the Rubber Group totaled $92,610,000, or 73.1% of the
Company's consolidated net sales.
LEXINGTON CONNECTOR SEALS. Lexington Connector Seals manufactures
molded rubber seals used in automotive wiring systems. The seals are designed to
ensure the electrical integrity of the many connections required throughout the
wiring systems. The Company believes that Lexington Connector Seals is the
largest manufacturer of seals for automotive wiring systems in North America,
with approximately 1.8 billion seals sold in 1998.
LEXINGTON INSULATORS. Lexington Insulators manufactures molded rubber
insulators used in ignition wire sets for automobiles and light trucks.
Insulators are used to shield the electrical connections made by the ignition
wire at the distributor and at the spark plug. In 1998, net sales of insulators
to original equipment manufacturers, or their tier-one suppliers, represented
51.4% of Lexington Insulators' net sales, and net sales of insulators to
manufacturers of aftermarket ignition wire sets represented 48.6% of Lexington
Insulators' net sales. The Company believes that Lexington Insulators is the
largest manufacturer of insulators for ignition wire sets in North America, with
approximately 300 million insulators sold by Lexington Insulators in 1998.
LEXINGTON MEDICAL. Lexington Medical manufactures molded rubber
components used in a variety of medical devices, such as drug delivery systems,
syringes, laparoscopic instruments, and catheters.
LEXINGTON TECHNOLOGIES. Lexington Technologies manufactures molds that
are sold to customers of the other divisions of the Rubber Group. The molds are
used by the Rubber Group to produce component parts. Lexington Technologies also
provides specialized engineering and design services to the other divisions of
the Rubber Group.
METALS GROUP
The Company's Metals Group manufactures aluminum, magnesium, and zinc
die castings and machines aluminum, brass, and steel components. The Metals
Group consists of three divisions: Lexington Die Casting and the Arizona and New
York Divisions of Lexington Machining. In
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1998, net sales of the Metals Group totaled $34,107,000, or 26.9% of the
Company's consolidated net sales.
LEXINGTON DIE CASTING. Lexington Die Casting manufactures aluminum,
magnesium, and zinc die castings used primarily by manufacturers of automotive
assemblies, industrial equipment, computers, and office equipment.
LEXINGTON MACHINING. Lexington Machining, through its Arizona and New
York Divisions, manufactures machined aluminum, brass, and steel components used
primarily by manufacturers of initiators and inflators for automotive airbag
systems, industrial equipment, automotive assemblies, recreational equipment,
and home appliances.
In December 1998, the Company changed the name of its machining
operation in Casa Grande, Arizona, from Lexington Safety Components to the
Arizona Division of Lexington Machining in order to reflect the broadening of
that division's focus to include customers other than manufacturers of airbag
initiators and inflators. The Company's machining operation in Rochester, New
York, which had been known as Lexington Machining, became the New York Division
of Lexington Machining.
FINANCIAL INFORMATION ABOUT THE COMPANY'S OPERATING SEGMENTS
Financial information about the Company's operating segments, including
revenues, income from operations, assets, depreciation and amortization, capital
expenditures, and certain other data is set forth in Part II, Item 7, and in
Note 10 to the consolidated financial statements in Part II, Item 8.
PRINCIPAL END USES FOR THE COMPANY'S PRODUCTS
The following table summarizes net sales of the Company during 1998,
1997, and 1996 by the type of product in which the Company's component parts
were utilized (dollar amounts in thousands):
YEARS ENDED DECEMBER 31
-------------------------------------------------------------------
1998 1997 1996
------------------- ------------------- -------------------
Automobiles and light trucks $ 103,052 81.3% $ 88,961 75.0% $ 79,832 69.5%
Medical devices 8,245 6.5 7,623 6.4 8,371 7.3
Industrial equipment 7,005 5.5 9,860 8.3 11,870 10.3
Recreational equipment and
home appliances 3,704 2.9 4,038 3.4 4,693 4.1
Computers and office equipment 3,109 2.5 5,636 4.8 6,016 5.2
Other 1,602 1.3 2,513 2.1 4,090 3.6
---------- ----- ---------- ----- ---------- -----
$ 126,717 100.0% $ 118,631 100.0% $ 114,872 100.0%
========== ===== ========== ===== ========== =====
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The following table summarizes net sales of the Rubber Group and the
Metals Group during 1998, 1997, and 1996 by the type of product in which each
Group's component parts were utilized (dollar amounts in thousands):
YEARS ENDED DECEMBER 31
----------------------------------------------------------------
1998 1997 1996
------------------- ------------------ ------------------
Rubber Group:
Automobiles and light trucks $ 84,098 90.8% $ 72,929 89.8% $ 65,420 87.1%
Medical devices 8,245 8.9 7,620 9.4 8,077 10.7
Other 267 0.3 661 0.8 1,625 2.2
--------- ----- --------- ----- --------- -----
$ 92,610 100.0% $ 81,210 100.0% $ 75,122 100.0%
========= ===== ========= ===== ========= =====
Metals Group:
Automobiles and light trucks $ 18,954 55.6% $ 16,032 42.8% $ 14,412 36.3%
Industrial equipment 7,005 20.5 9,789 26.2 11,723 29.5
Recreational equipment and
home appliances 3,704 10.9 4,038 10.8 4,693 11.8
Computers and office equipment 3,109 9.1 5,636 15.1 6,016 15.1
Other 1,335 3.9 1,926 5.1 2,906 7.3
--------- ----- --------- ----- --------- -----
$ 34,107 100.0% $ 37,421 100.0% $ 39,750 100.0%
========= ===== ========= ===== ========= =====
MAJOR CUSTOMERS
The Company's largest customer is Delphi Packard Electric Systems, a
division of Delphi Automotive Systems Corporation, of which General Motors
Corporation is the majority stockholder. During 1998, 1997, and 1996, net sales
to Delphi Packard totaled $26,233,000, $26,447,000, and $25,088,000, which
represented 20.7%, 22.3%, and 21.8%, respectively, of the Company's net sales
and 28.3%, 32.6%, and 33.4%, respectively, of the Rubber Group's net sales.
During 1998, net sales to Prestolite Wire Corporation totaled $14,431,000, or
11.4% of the Company's net sales and 15.6% of the Rubber Group's net sales. No
other customer accounted for more than 10% of the Company's net sales during
1998, 1997, or 1996. Loss of a significant amount of business from Delphi
Packard, Prestolite Wire, or any of the Company's other large customers could
have a material adverse effect on the Company if such business were not
substantially replaced by additional business from existing or new customers.
During the first quarter of 1997, the Company and Delphi Packard
entered into an agreement that will govern, through 2001, the purchase of
substantially all of the component parts that the Company currently sells to
Delphi Packard. Under the terms of the agreement, (1) the Company agreed to sell
and Delphi Packard agreed to purchase approximately 100% of Delphi Packard's
requirements for all specified component parts, (2) the Company warranted that
the specified components will remain competitive in terms of technology, design,
and quality, (3) the selling prices of the specified components will be adjusted
to reflect increases or decreases in material costs, and (4) the selling prices
of the specified components will be reduced by certain specified amounts in each
of the five years covered by the agreement. Although no assurance can be given,
the Company currently believes that a portion of the price reductions granted to
Delphi Packard will be offset through reductions in direct manufacturing
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costs and that a portion of the price reductions will be offset by greater
absorption of manufacturing overhead as a result of volume increases.
As a result of its performance as a supplier of rubber components to
Delphi Packard, the Company has received General Motors Corporation's "Supplier
of the Year" award for 1996, 1997, and 1998. In each of those years, fewer than
200 of the more than 30,000 suppliers to General Motors received the "Supplier
of the Year" award.
MARKETING AND SALES
The Company's marketing and sales effort is carried out by management
personnel and internal sales personnel. The Company has a sales office in
Detroit, which markets the Company's products to automotive industry customers
in that area, and a wholly-owned German subsidiary, Lexington Precision GmbH,
which primarily markets the Rubber Group's products in Europe.
RAW MATERIALS
The Company's principal raw materials are silicone and organic rubber
compounds and aluminum, steel, and brass. Each of the principal raw materials
used by the Company has been readily available at competitive prices from
several major manufacturers and the Company anticipates that such materials will
continue to be readily available at competitive prices for the foreseeable
future.
PATENTS AND TRADEMARKS
The Company does not currently hold any patents, trademarks, or
licenses that it considers to be material to the success or operation of its
business.
SEASONAL VARIATIONS
The Company's business generally is not subject to significant seasonal
variations.
BACKLOG
Sales of the Company's products are made pursuant to a variety of
purchasing arrangements and practices. Customers regularly revise release
schedules to correspond to their own production requirements, and for other
reasons. The Company believes that the aggregate value of scheduled releases
outstanding on its books at any time cannot be considered firm backlog since
they may be subject to revision at any time. The Company also believes that
increases or decreases in the aggregate value of scheduled releases are not
necessarily indicative of any trend in the Company's net sales.
COMPETITION
The Company competes for business primarily on the basis of quality,
service, engineering capability, and price. The Rubber Group and the Metals
Group encounter substantial competition from a large number of manufacturing
companies. Competitors range from small and medium-sized specialized firms to
large diversified companies, many of which have resources substantially greater
than those of the Company. Additionally, some of the Company's customers have
internal manufacturing operations that compete with the Company.
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PRODUCT LIABILITY RISKS
The Company is subject to potential product liability risks inherent in
the manufacture and sale of component parts. Although there are no claims
against the Company that the Company believes will have a material adverse
effect upon its business, financial position, or results of operations, there
can be no assurance that any existing or future claims will not have such a
material adverse effect. Although the Company maintains insurance coverage for
product liability, there can be no assurance that, in the event of a claim, such
insurance coverage would automatically apply or that, in the event of an award
arising out of a claim, the amount of such insurance coverage would be
sufficient to satisfy the award.
ENVIRONMENTAL COMPLIANCE
The Company's 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 the Company makes
expenditures relating to the protection of the environment, compliance with
environmental laws and regulations has not had a significant impact on the
capital spending requirements, earnings, or competitive position of the Company.
There can be no assurance that changes in environmental laws and regulations, or
in the interpretation or enforcement thereof, will not require material
expenditures by the Company in the future. (See also Part I, Item 3.)
EMPLOYEES
At December 31, 1998, the Company had 1,284 employees. The Rubber Group
and the Metals Group had 816 and 463 employees, respectively, and the Company's
corporate office had five employees. At December 31, 1998, 62 hourly workers at
one plant location within the Rubber Group were subject to a collective
bargaining agreement. The Company believes that its employee relations are
generally good.
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ITEM 2. PROPERTIES
The following table shows the location and square footage of each of
the manufacturing facilities of the Rubber Group and the Metals Group at
December 31, 1998:
SQUARE
LOCATION FEET
---------------------- -----------
Rubber Group:
Lexington Connector Seals Vienna, OH 60,000(1)
Lexington Connector Seals LaGrange, GA 77,000(1)
Lexington Insulators Jasper, GA 101,000
Lexington Medical Rock Hill, SC 60,000(1)
Lexington Technologies North Canton, OH 41,000(1)
-----------
339,000
-----------
Metals Group:
Lexington Die Casting Lakewood, NY 91,000(1)(2)
Lexington Die Casting Manchester, NY 21,000
Lexington Machining, Arizona Division Casa Grande, AZ 64,000(1)
Lexington Machining, New York Division Rochester, NY 60,000
-----------
236,000
-----------
575,000
===========
(1) Encumbered by a mortgage.
(2) Leased from an industrial development authority pursuant to a lease
that expires in 2006 and provides the Company with an option to
purchase the facility for nominal consideration.
All of the plants are general manufacturing facilities suitable for the
Company's operations. The Company believes that the facilities are adequate to
meet the Company's current operating needs.
The Company occupies, in the aggregate, 6,000 square feet of office
space for corporate executive and administrative purposes. The Company leases an
office in Cleveland, Ohio, and reimburses an affiliate for a portion of the cost
of leasing an office in New York City.
ITEM 3. LEGAL PROCEEDINGS
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, including actions naming the Company as one of numerous potentially
responsible parties under applicable environmental laws for restoration costs at
waste-disposal sites, as a third-party defendant in cost-recovery actions
pursuant to applicable environmental laws, and as a defendant or potential
defendant in various other matters. 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 be a party in the future are at various stages of completion. Although there
can be no assurance as to the outcome of existing or potential litigation, in
the event such litigation were commenced, based upon the information currently
available to the Company, the Company currently believes that the outcome of
such actions would not have a material adverse effect upon its financial
position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the fourth quarter of 1998.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is traded in the over-the-counter market. At
March 12, 1999, there were approximately 980 holders of record of the Company's
common stock. Trading in shares of the Company's common stock is limited. During
1998 and 1997, trading data for the Company's 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 trades in the Company's
common stock were reported on the OTC Bulletin Board:
YEARS ENDED DECEMBER 31
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1998 1997
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HIGH LOW HIGH LOW
---------- ----------- ---------- ----------
First quarter $3.00 $2.00 $2.25 $1.875
Second quarter $2.00 $1.375 $2.125 $1.625
Third quarter $1.6875 $1.2813 $3.75 $1.9375
Fourth quarter $1.75 $1.3125 $3.625 $2.25
The Company is not able to determine whether retail markups, markdowns,
or commissions were included in the above prices. The Company believes that
eleven brokerage firms currently make a market in the Company's common stock,
although both bid and asked quotations may at times be limited.
No dividends have been paid on the Company's common stock since 1979
and the Company has no current plans to reinstate the payment of dividends. The
future payment of dividends is dependent upon, among other things, (1) the
Company's earnings, (2) the Company's capital requirements, (3) compliance with
the Company's loan covenants, and (4) compliance with the terms of the Company's
preferred stock.
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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data of
the Company for each of the years in the five-year period ended December 31,
1998 (dollar amounts in thousands, except per share amounts). The financial data
has been taken from the consolidated financial statements of the Company, which
have been audited by Ernst & Young LLP, independent certified public
accountants. The information set forth below is not necessarily indicative of
the results of future operations; it 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 the consolidated financial
statements in Part II, Item 8.
YEARS ENDED DECEMBER 31
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1998 1997 1996 1995 1994
---- ---- ---- ---- ----
SUMMARY OF OPERATIONS:
Net sales $ 126,717 $ 118,631 $ 114,872 $ 104,298 $ 88,532
========== ========== ========== ========== ==========
Income from operations $ 7,198 $ 7,784 $ 8,565 $ 9,657 $ 8,102
Interest expense 9,772 9,065 8,542 7,585 6,272
Other income, net - 425 - 641 536
Provision for income taxes 132 672 40 425 34
---------- ---------- ---------- ---------- ----------
Net income/(loss) $ (2,706) $ (1,528) $ (17) $ 2,288 $ 2,332
========== ========== ========== ========== ==========
Net income/(loss) per diluted common
share $ (0.65) $ (0.38) $ (0.02) $ 0.49 $ 0.51
========== ========== ========== ========== ==========
OTHER DATA:
Average number of employees 1,258 1,220 1,166 1,147 968
Depreciation and amortization $ 11,649 $ 10,009 $ 8,696 $ 6,449 $ 5,060
Capital expenditures $ 14,877 $ 15,790 $ 15,708 $ 17,902 $ 15,319
DECEMBER 31
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1998 1997 1996 1995 1994
---- ---- ---- ---- ----
FINANCIAL POSITION:
Current assets $ 32,198 $ 31,828 $ 30,845 $ 24,478 $ 22,752
Current liabilities 40,228 36,003 35,167 29,253 24,330
---------- ---------- ---------- ---------- ----------
Net working capital deficit $ (8,030) $ (4,175) $ (4,322) $ (4,775) $ (1,578)
========== ========== ========== ========== ==========
Total assets $ 108,325 $ 104,124 $ 97,030 $ 81,876 $ 67,396
Long-term debt, excluding current
portion $ 74,953 $ 72,622 $ 65,148 $ 56,033 $ 49,627
Redeemable preferred stock, at
par value $ 375 $ 420 $ 465 $ 510 $ 555
Total stockholders' deficit $ (9,451) $ (6,667) $ (5,057) $ (4,976) $ (7,215)
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Various statements in this Item 7 that are not historical facts are
"forward-looking statements" (as such term is defined in the Private Securities
Litigation Reform Act of 1995). Forward-looking statements usually can be
identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "will," "should," "anticipates," "estimates," "projects," or
the negative thereof. They may include discussions of strategy, which involve
risks and uncertainties, and they typically are based upon projections and
estimates, as distinct from past or historical facts and events.
Forward-looking statements are subject to a number of risks,
uncertainties, contingencies, and other factors that could cause the actual
results or performance of the Company to be materially different from the future
results or performance expressed in or implied by such statements. Such risks
and uncertainties for the Company include (1) increases and decreases in
business awarded to the Company by its various customers, (2) unanticipated
price reductions for the Company's products as a result of competition, (3)
unanticipated operating results and cash flows, (4) increases or decreases in
capital expenditures, (5) unforeseen product liability claims, (6) changes in
economic conditions, (7) changes in the competitive environment, (8) changes in
the capital markets, (9) labor interruptions at the Company or at its customers,
(10) disruptions that may be caused by year 2000 software and/or hardware
problems, (11) the inability of the Company to obtain additional borrowings
and/or to refinance its existing indebtedness, and (12) a number of other
factors.
Because the Company operates with substantial financial leverage and
limited liquidity, the impact of any negative event may have a greater adverse
effect upon the Company than if the Company operated with lower financial
leverage and greater liquidity.
The results of operations for any particular fiscal period of the
Company are not necessarily indicative of the results to be expected for any one
or more succeeding fiscal periods. Consequently, the use of forward-looking
statements should not be regarded as a representation that any such projections
or estimates will be realized, and actual results may vary materially. There can
be no assurance that any of the forward-looking statements contained herein will
prove to be accurate.
All forward-looking statements, projections, or estimates attributable
to the Company are expressly qualified by the foregoing cautionary statements.
RESULTS OF OPERATIONS -- COMPARISON OF 1998, 1997, AND 1996
The Company manufactures, to customer specifications, component parts
through two operating segments, the Rubber Group and the Metals Group. The
Rubber Group consists of four divisions, Lexington Connector Seals, Lexington
Insulators, Lexington Medical, and Lexington Technologies. The Metals Group
consists of three divisions, Lexington Die Casting and the Arizona and New York
Divisions of Lexington Machining.
RUBBER GROUP
The Rubber Group manufactures silicone and organic rubber components.
During 1998, 1997, and 1996, automotive industry customers of the Rubber Group
represented 90.8%, 89.8%, and 87.1%,
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respectively, of the Rubber Group's net sales. Any material reduction in the
level of activity in the automotive industry may have a material adverse effect
on the results of operations of the Rubber Group and the Company.
The three largest customers of the Rubber Group accounted for 50.1%,
53.0%, and 53.4% of the Rubber Group's net sales during 1998, 1997, and 1996,
respectively. Loss of a significant amount of business from any of the Rubber
Group's large customers could have a material adverse effect upon the Rubber
Group and the Company as a whole if such business were not substantially
replaced by additional business from existing or new customers.
The following table sets forth the operating results of the Rubber
Group for 1998, 1997, and 1996 (dollar amounts in thousands):
YEARS ENDED DECEMBER 31
-----------------------------------------------------------------
1998 1997 1996
------------------- ------------------ ------------------
Net sales $ 92,610 100.0% $ 81,210 100.0% $ 75,122 100.0%
Cost of sales 73,209 79.0 64,696 79.7 59,515 79.2
--------- ----- -------- ----- -------- -----
Gross profit 19,401 21.0 16,514 20.3 15,607 20.8
Selling and administrative expenses 6,100 6.6 5,055 6.2 4,785 6.4
--------- ----- -------- ----- -------- -----
Income from operations $ 13,301 14.4% $ 11,459 14.1% $ 10,822 14.4%
========= ===== ======== ===== ======== =====
During 1998, net sales of the Rubber Group increased by $11,400,000, or
14.0%, compared to 1997. This increase was primarily due to increased unit sales
of insulators for automotive ignition wire sets and, to a lesser extent,
increased unit sales of seals for automotive wiring systems and components for
medical devices, offset, in part, by price reductions on certain automotive
components.
During 1998, income from operations totaled $13,301,000, an increase of
$1,842,000, or 16.1%, compared to 1997. Cost of sales as a percentage of net
sales decreased during 1998, primarily due to a credit of $622,000 resulting
from a special rebate from the State of Ohio Bureau of Workers' Compensation,
which represented the Company's share of a distribution of excess funds
accumulated by the Bureau.
Selling and administrative expenses as a percentage of net sales
increased during 1998 compared to 1997, primarily because of the hiring of
additional personnel, the opening, in September 1997, of a sales office in
Germany, and increased costs associated with the installation of new computer
systems.
During 1998, depreciation and amortization at the Rubber Group totaled
$7,476,000, or 8.1% of net sales, compared to $6,676,000, or 8.2% of net sales,
during 1997. Earnings before interest, taxes, depreciation, and amortization
("EBITDA") increased to $20,777,000 in 1998 from $18,135,000 in 1997. (EBITDA is
not a measure of performance under generally accepted accounting principles.
While EBITDA should not be used as a substitute for net income, cash flows from
operating activities, or other operating or cash flow statement data prepared in
accordance with generally accepted accounting principles, management believes
that it may be used by certain investors as supplemental information to evaluate
a company's financial performance, including its ability to incur and/or service
debt. In addition, the definition of EBITDA used in this Form 10-K may not be
the same as the definition of EBITDA used by other companies.)
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The Company's largest customer, Delphi Packard, is a division of Delphi
Automotive Systems Corporation, which, until recently, was a wholly-owned
subsidiary of General Motors Corporation. In February 1999, General Motors sold
to the public approximately 20% of the ownership of Delphi Automotive as a first
step in the planned sale or spinoff of Delphi Automotive. Although there can be
no assurance, the Company does not believe that the sale or spinoff of Delphi
Automotive will have a material effect on the Company.
During 1997, net sales of the Rubber Group increased by $6,088,000, or
8.1%, compared to 1996. This increase was primarily due to increased unit sales
of seals for automotive wiring systems and insulators for automotive ignition
wire sets and, to a lesser extent, increased sales of tooling, offset, in part,
by reduced sales of components for medical devices and price reductions on
certain automotive components.
During 1997, income from operations totaled $11,459,000, an increase of
$637,000, or 5.9%, compared to 1996. Cost of sales as a percentage of net sales
increased during 1997, primarily due to (1) increased depreciation and
amortization, and (2) increased indirect labor expense resulting primarily from
(a) the hiring of technical and supervisory personnel in connection with the
engineering and start-up of production of a new style of connector seal and (b)
continuing start-up expenses incurred at Lexington Technologies, the Rubber
Group's mold manufacturing and engineering operation.
Selling and administrative expenses as a percentage of net sales
decreased during 1997 compared to 1996, primarily because such expenses are
partially fixed in nature.
During 1997, depreciation and amortization at the Rubber Group totaled
$6,676,000, or 8.2% of net sales, compared to $5,596,000, or 7.5% of net sales,
during 1996. EBITDA increased to $18,135,000 in 1997 from $16,418,000 in 1996.
During the first quarter of 1997, the Company and Delphi Packard
entered into an agreement that will govern, through 2001, the purchase of
substantially all of the component parts that the Company currently sells to
Delphi Packard. Under the terms of the agreement, (1) the Company agreed to sell
and Delphi Packard agreed to purchase approximately 100% of Delphi Packard's
requirements for all specified component parts, (2) the Company warranted that
the specified components will remain competitive in terms of technology, design,
and quality, (3) the selling prices of the specified components will be adjusted
to reflect increases or decreases in material costs, and (4) the selling prices
of the specified components will be reduced by certain specified amounts in each
of the five years covered by the agreement. Although no assurance can be given,
the Company currently believes that a portion of the price reductions granted to
Delphi Packard will be offset through reductions in direct manufacturing costs
and that a portion of such price reductions will be offset by greater absorption
of manufacturing overhead as a result of volume increases.
METALS GROUP
The Metals Group manufactures aluminum, magnesium, and zinc die
castings and machines aluminum, brass, and steel components. During 1998, 1997,
and 1996, net sales to automotive industry customers represented 55.6%, 42.8%,
and 36.3%, respectively, of the Metals Group's net sales. The three largest
customers of the Metals Group accounted for 35.3%, 23.5%, and 20.4% of the
Metals Group's net sales during 1998, 1997, and 1996, respectively. Loss of a
significant amount of business from any of the Metals Group's large customers
could have a material adverse effect upon the Metals Group and the
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Company as a whole if such business were not substantially replaced by
additional business from existing or new customers.
The following table sets forth the operating results of the Metals
Group for 1998, 1997, and 1996 (dollar amounts in thousands):
YEARS ENDED DECEMBER 31
----------------------------------------------------------------
1998 1997 1996
----------------- ------------------ ------------------
Net sales $ 34,107 100.0% $ 37,421 100.0% $ 39,750 100.0%
Cost of sales 35,304 103.5 34,726 92.8 35,536 89.4
-------- ----- --------- ----- --------- -----
Gross profit/(loss) (1,197) (3.5) 2,695 7.2 4,214 10.6
Selling and administrative expenses 2,877 8.4 4,275 11.4 4,433 11.2
-------- ----- --------- ----- --------- -----
Loss from operations $ (4,074) (11.9)% $ (1,580) (4.2)% $ (219) (0.6)%
======== ===== ========= ===== ========= =====
During 1998, net sales of the Metals Group decreased by $3,314,000, or
8.9%, compared to 1997. This reduction resulted primarily from lower net sales
of a variety of components at Lexington Die Casting and the New York Division of
Lexington Machining caused by the Company's planned elimination of certain
customers who generated short-run production and by a decline in sales of
components to remaining customers of the Metals Group. These reductions were
offset, in part, by increased sales at the Arizona Division of Lexington
Machining.
During 1998, the Metals Group incurred a loss from operations of
$4,074,000, compared to a loss from operations of $1,580,000 during 1997. Cost
of sales as a percentage of net sales increased during 1998, primarily due to
underabsorption of fixed overhead caused by low sales levels. Despite lower
sales, manufacturing overhead expenses increased by $1,400,000 during 1998
compared to 1997, primarily because of (1) increased depreciation and
amortization, (2) increased indirect labor costs resulting from the hiring of
additional technical and supervisory personnel, and (3) a charge of $368,000 to
write down to net realizable value certain equipment held for sale. To a lesser
extent, material and direct labor costs as a percentage of net sales also
increased during 1998 compared to 1997, primarily because of changes in product
mix, lower production efficiencies resulting from the start-up of new products,
and costs related to the retention of experienced equipment operators during a
period of low sales.
Selling and administrative expenses decreased during 1998, primarily
because of reduced personnel costs, the elimination of commissions previously
paid to sales representatives who were terminated during the last quarter of
1996 and the first quarter of 1997, and the settlement of certain litigation for
less than had been previously estimated by the Company.
During 1998, depreciation and amortization at the Metals Group totaled
$3,957,000, or 11.6% of net sales, compared to $3,141,000, or 8.4% of net sales,
during 1997. EBITDA decreased to negative $117,000 in 1998 from $1,561,000 in
1997.
During 1997, net sales of the Metals Group decreased by $2,329,000, or
5.9%, compared to 1996. This reduction resulted primarily from lower net sales
of a variety of components at Lexington Die Casting and the New York Division of
Lexington Machining, caused primarily by the Company's planned elimination of
certain customers who generated short-run production and a $1,400,000 reduction
in sales to a customer who decided to manufacture internally most of the
components previously
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manufactured for it by the New York Division of Lexington Machining. These
reductions were offset, in part, by an increase in net sales of airbag
components by the Arizona Division of Lexington Machining.
During 1997, the Metals Group incurred a loss from operations of
$1,580,000, compared to a loss from operations of $219,000 during 1996. While
material and direct labor costs as a percentage of net sales decreased during
1997, manufacturing overhead as a percentage of net sales increased, primarily
due to (1) underabsorption of fixed overhead caused by reduced sales at
Lexington Die Casting and the New York Division of Lexington Machining and
lower-than-anticipated net sales at the Arizona Division of Lexington Machining,
(2) start-up expenses related to the production of new airbag components and the
installation of new metal machining equipment at the Arizona Division of
Lexington Machining, (3) increased depreciation, (4) increased indirect labor
costs resulting, in part, from the hiring of additional technical and
professional staff, and (5) the write-down of certain equipment held for sale.
Reduced selling and administrative expenses resulted primarily from a reduction
in commissions paid to sales representatives who were terminated during the last
quarter of 1996 and the first quarter of 1997, offset, in part, by increased
personnel expense and the accrual of certain litigation expenses.
During 1997, depreciation and amortization at the Metals Group totaled
$3,141,000, or 8.4% of net sales, compared to $2,638,000, or 6.6% of net sales,
during 1996. EBITDA decreased to $1,561,000 in 1997 from $2,419,000 in 1996.
During 1997 and 1998, the Company implemented a strategy to improve the
profitability and growth potential of the Metals Group by eliminating the
production of a large number of diverse, short-run components and by
repositioning productive capacity to manufacture higher-volume components in
target markets. The repositioning entails a shift to a new customer base and
requires that the Company's manufacturing facilities be structured and equipped
to run high-volume parts efficiently and accurately. The repositioning of the
Metals Group has caused the Company to experience underabsorption of fixed
overhead resulting from the cut-back in short-run business. The Metals Group has
incurred expenses for the implementation of improved quality systems, expenses
related to moving and reinstalling equipment, non-capitalized costs related to
building upgrades, costs related to establishing relationships with major new
customers, and costs resulting from inefficiencies experienced during the
rollout of new production parts. These factors and the fact that new high-volume
business is limited at this stage of the transition adversely affected the
operating profit and cash flow of the Metals Group during 1997 and 1998.
CORPORATE OFFICE
Corporate office expenses, which are consolidated with selling and
administrative expenses of the Rubber Group and the Metals Group in the
Company's consolidated financial statements, totaled $2,029,000, $2,095,000, and
$2,038,000 during 1998, 1997, and 1996, respectively.
During 1998, 1997, and 1996, depreciation at the corporate office
totaled $18,000, $21,000, and $33,000, respectively.
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INTEREST EXPENSE
During 1998, 1997, and 1996, interest expense totaled $9,772,000,
$9,065,000, and $8,542,000, respectively. The increases in 1998 and 1997 were
caused primarily by increases in average borrowings outstanding in both years.
OTHER INCOME
In December 1997, the Company received a payment in the amount of
$425,000 in settlement of litigation.
PROVISION FOR INCOME TAXES
During 1998, the provision for income taxes consisted primarily of
state income taxes.
During 1997, the provision for income taxes consisted primarily of (1)
federal alternative minimum taxes and (2) the reversal of a tax credit that had
been recorded in 1996 based on the then-projected utilization of federal net
operating loss carryforwards in 1997.
During 1996, the provision for income taxes consisted of (1) federal
alternative minimum taxes, (2) state income taxes, (3) the reversal of a tax
credit that had been recorded in 1995 based on the then-projected utilization of
federal net operating loss carryforwards in 1996, and (4) a tax credit that had
been based on the then-projected utilization of federal net operating loss
carryforwards in 1997.
(For additional information concerning income taxes and related
matters, see Note 9 to the consolidated financial statements in Part II, Item
8.)
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES
During 1998, the operating activities of the Company provided
$8,013,000 of cash.
Inventory increased by $1,139,000, primarily because the Company is
attempting to increase service levels for certain key customers. Trade accounts
payable decreased by $1,337,000, primarily because payables related to the
purchase of plant, equipment, and customer-owned tooling decreased by $1,568,000
during 1998, from $3,456,000 at December 31, 1997, to $1,888,000 at December 31,
1998.
INVESTING ACTIVITIES
During 1998, the investing activities of the Company used $15,034,000
of cash. During 1998, capital expenditures were $14,877,000 and expenditures
used to pay a portion of the cost of customer-owned tooling were $1,901,000.
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The following table sets forth capital expenditures for the Rubber
Group, the Metals Group, and the corporate office during 1998, 1997, and 1996
(dollar amounts in thousands):
YEARS ENDED DECEMBER 31
------------------------------------
1998 1997 1996 TOTAL
---- ---- ---- -----
Rubber Group:
Equipment $ 8,277 $ 6,632 $ 5,869 $ 20,778
Land and buildings 105 203 2,959 3,267
--------- -------- --------- ---------
8,382 6,835 8,828 24,045
--------- -------- --------- ---------
Metals Group:
Equipment 6,184 5,542 6,012 17,738
Land and buildings 238 3,393 840 4,471
--------- -------- --------- ---------
6,422 8,935 6,852 22,209
--------- -------- --------- ---------
Corporate office:
Equipment 73 20 28 121
Land and buildings - - - -
--------- -------- --------- ---------
73 20 28 121
--------- -------- --------- ---------
Total Company:
Equipment 14,534 12,194 11,909 38,637
Land and buildings 343 3,596 3,799 7,738
--------- -------- --------- ---------
$ 14,877 $ 15,790 $ 15,708 $ 46,375
========= ======== ========= =========
The Company presently projects that capital expenditures will total
approximately $13,500,000 in 1999, including $13,100,000 for equipment and
$400,000 for land and buildings. Capital expenditures for the Rubber Group, the
Metals Group, and the corporate office are projected to total $9,000,000,
$4,400,000, and $100,000, respectively. The Company projects that approximately
$3,100,000 will be expended to rebuild or replace existing equipment and
buildings, approximately $3,700,000 will be expended to effect cost reductions,
and approximately $6,700,000 will be expended to expand productive capacity.
At December 31, 1998, the Company had commitments outstanding for
capital expenditures totaling approximately $2,462,000. Although no assurance
can be given, the Company anticipates that, the funds needed for capital
expenditures in 1999 will be provided by cash flows from operations, borrowings
available to the Company under existing financing agreements, and additional
borrowings that the Company believes it will be able to obtain. (See also
"Liquidity" in this Item 7.)
FINANCING ACTIVITIES
During 1998, the financing activities of the Company provided
$6,916,000 of cash.
During 1998, the Company obtained new term loans in the aggregate
amount of $5,041,000, which refinanced loans outstanding under the Company's
revolving line of credit. In addition, at December 31, 1998, $3,850,000 of loans
outstanding under the revolving line of credit were classified as long-term
borrowings because they were refinanced under long-term agreements before the
consolidated financial statements for the period were issued.
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18
Borrowings under the Company's revolving line of credit that were
classified as short-term debt increased by $4,155,000 during 1998, in part,
because the Company utilized the revolving line of credit to fund certain
capital expenditures that had not been refinanced by borrowings under the
Company's equipment line of credit or through other financing.
LIQUIDITY
The Company finances its operations with cash from operating activities
and a variety of financing arrangements, including term loans and loans under
the Company's revolving line of credit. The ability of the Company to borrow
under its revolving line of credit is subject to, among other things, covenant
compliance and certain availability formulas based on the levels of accounts
receivable and inventories of the Company. In January 1999, the revolving line
of credit was amended to extend the expiration date of the revolving line of
credit to April 1, 2002.
The Company operates with substantial financial leverage and limited
liquidity. As a result of increased borrowings during 1998, aggregate
indebtedness of the Company, excluding trade accounts payable, increased by
$7,043,000 to $94,545,000. During 1999, interest and scheduled principal
payments are projected to be approximately $9,400,000 and $7,500,000,
respectively.
The Company had a net working capital deficit of $8,030,000 at December
31, 1998. Loans of $12,995,000 outstanding under the revolving line of credit
were classified as short-term debt at December 31, 1998. Although the expiration
date of the revolving line of credit is April 1, 2002, these loans are
classified as current liabilities because the Company's cash receipts are
automatically used to reduce such loans on a daily basis, by means of a lock-box
sweep arrangement, and the lender has the ability to modify certain terms of the
revolving line of credit without the prior approval of the Company.
At March 26, 1999, availability under the Company's revolving line of
credit totaled $1,701,000 before outstanding checks of $705,000 were deducted.
During the first quarter of 1999, the Company obtained new term loans
in the aggregate amount of $6,542,000. Proceeds from the new term loans
refinanced $2,090,000 of existing term loans and $4,452,000 of loans outstanding
under the revolving line of credit (including $3,850,000 of such loans which
were outstanding at December 31, 1998).
In January 1999, one of the Company's lenders provided the Company with
an equipment line of credit in the amount of $5,000,000 that can be used to
finance a portion of the cost of certain equipment. During the first quarter of
1999, the Company had not borrowed under the line of credit. In March 1999,
another of the Company's lenders provided the Company with an equipment line of
credit in the amount of $1,822,000. During the first quarter of 1999, the
Company borrowed $1,222,000 under the line of credit.
Substantially all of the assets of the Company and its subsidiary
Lexington Components, Inc. ("LCI"), and the stock of LCI, are pledged as
collateral for certain of the Company's indebtedness. In addition, certain of
the Company's financing arrangements contain covenants with respect to the
maintenance of minimum levels of working capital, net worth, and cash flow
coverage. The covenants also place certain restrictions on the Company's
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 the Company's assets, the purchase of plant
and equipment, the purchase of
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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, certain of the financial covenants contained in the
Company's various loan agreements have been amended in order to maintain or
otherwise ensure current or future compliance by the Company. During the first
quarter of 1998, a covenant that limited the Company's ratio of debt to tangible
net worth was amended. During the third quarter of 1998, certain net worth
covenants and the covenant that limited the Company's ratio of debt to tangible
net worth were amended. During the first quarter of 1999, a net worth covenant
was amended and the covenant that limited the Company's ratio of debt to
tangible net worth was eliminated.
Because certain of the Company's long-term indebtedness matures during
the first half of 2000, those amounts will be classified as short-term
liabilities of the Company during the first and second quarters of 1999. During
July 1998, certain covenants were amended in order to avoid any defaults that
would have been caused by such reclassification.
The Company estimates that, in addition to cash flow from operations
and borrowings under its revolving line of credit, the Company will require
approximately $10,000,000 of new borrowings during 1999 to meet its working
capital and debt service requirements and to fund projected capital
expenditures. Of the aggregate new borrowings required in 1999, the Company had
obtained new borrowings of $4,500,000 during the first quarter of 1999. The
Company currently believes, although there can be no assurance, that the
remaining new borrowings required will be available to the Company under its
equipment lines of credit or under other financing arrangements that the Company
may negotiate. Although no assurance can be given, the Company currently
believes that cash flows from operations, borrowings available to the Company
under existing financing arrangements, and additional borrowings that the
Company believes it will be able to obtain should be adequate to meet its
projected working capital and debt service requirements and to fund projected
capital expenditures through December 31, 1999. If cash flows from operations or
availability under existing and new financing agreements fall below
expectations, the Company may be forced to delay anticipated capital
expenditures, reduce operating expenses, extend trade accounts payable balances
beyond terms that the Company believes are customary in the industries in which
it operates, and/or consider other alternatives designed to improve the
Company's liquidity. Certain of such actions could have a material adverse
effect upon the Company.
As previously discussed, indebtedness totaling $38,129,000, matures
during the first and second quarters of 2000. The Company's operations will not
generate cash sufficient to satisfy such obligations at their maturities. The
Company may attempt to refinance all or a portion of these obligations (and
possibly other indebtedness that has later maturity dates) by issuing new debt
securities in the private or public market. The Company has commenced
discussions with underwriters relating to the issuance of new debt securities to
refinance substantially all of the Company's existing debt. Although there can
be no assurance, based on the discussions to date, current market conditions in
the high-yield debt markets, and the Company's historical and projected
operating results, cash flows, and capital structure, the Company believes that
it will be able to issue new debt securities with terms and interest rates
reasonably satisfactory to the Company and in sufficient amounts to refinance
substantially all of its outstanding debt securities prior to their maturity
dates. In the alternative, the Company may attempt to reach agreements to amend
the terms of its debt securities by extending the maturity dates thereof or to
exchange new debt securities that have maturity dates later than 2000 for
existing debt obligations that mature in 2000. The Company's ability to
refinance, amend, or exchange these securities on or before their maturity dates
will depend on many factors, including, but not limited to, conditions in the
high
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yield debt market. Accordingly, there can be no assurance that the Company will
be successful in refinancing, amending, or exchanging such securities. To date
the Company has not attempted to refinance, amend, or exchange the obligations
maturing in 2000. In the event that the Company is not successful in
refinancing, amending, or exchanging such obligations, defaults may occur under
the agreements relating to such obligations. If a default occurs, it may trigger
other defaults pursuant to cross-default provisions under other indebtedness of
the Company. Holders of indebtedness on which defaults exist would be entitled
to accelerate the maturity thereof, to cease making any further advances
otherwise permitted under the related credit facilities, to seek to foreclose
upon any assets securing such indebtedness, and to pursue other remedies. If any
such actions were to be taken, the Company might be required to consider
alternatives, including seeking relief from its creditors. Any such action by
creditors could have a material adverse effect upon the Company.
ACQUISITIONS
The Company is seeking to acquire assets and businesses related to its
current operations in order to expand its existing operations. Depending on the
size, terms, and other aspects of such acquisitions, the Company may be required
to obtain additional financing and, in some cases, the consents of its existing
lenders. The Company's ability to effect acquisitions may be dependent upon its
ability to obtain such financing and, to the extent applicable, consents.
INFLATION
Many customers of the Company will not accept price increases from the
Company to compensate for increases in labor and overhead expenses that result
from inflation. Fluctuations in material costs generally are passed through to
customers. In cases in which the Company commits to a fixed material cost for a
specified time period, the Company generally obtains a similar offsetting
commitment from its material supplier. To offset inflationary costs that the
Company cannot pass through to its customers and to maintain or improve its
operating margins, the Company attempts to improve its production efficiencies
and manufacturing processes.
ENVIRONMENTAL MATTERS
The Company has 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 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 be a party in the future are at
various stages of completion; although there can be no assurance as to the
outcome of existing or potential environmental litigation, in the event such
litigation were commenced, based upon the information currently available to the
Company, the Company believes that the outcome of such actions will not have a
material adverse effect upon its financial position. (For information concerning
certain other commitments and contingencies of the Company, see Note 13 to the
consolidated financial statements in Part II, Item 8.)
RECENTLY ISSUED ACCOUNTING STANDARDS
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 130, REPORTING
COMPREHENSIVE INCOME
During 1998, the Company adopted "Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income" ("FAS 130"). FAS 130
establishes standards for the reporting and
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presentation of comprehensive income and its components (revenues, gains, and
losses) in a full set of general-purpose financial statements. The adoption of
FAS 130 by the Company during 1998 did not affect the results of operations or
financial position of the Company.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 131, DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
On December 31, 1998, the Company adopted "Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an Enterprise and
Related Information" ("FAS 131"). FAS 131 establishes standards for the way
public enterprises report information about operating segments in annual
financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports. FAS 131 also
establishes standards for related disclosures about products, geographic areas,
and major customers. FAS 131 superseded "Statement of Financial Accounting
Standards No. 14, Financial Reporting for Segments of a Business Enterprise."
FAS 131 requires financial information to be reported on the basis that is used
internally for evaluating segment performance and deciding how to allocate
resources to segments. The adoption of FAS 131 by the Company during 1998 did
not affect the results of operations or financial position of the Company.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 132, EMPLOYERS'
DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS
On December 31, 1998, the Company adopted "Statement of Financial
Accounting Standards No. 132, Employers' Disclosures about Pensions and Other
Postretirement Benefits" ("FAS 132"). FAS 132 does not change the recognition or
measurement of pension or postretirement benefit plans, but standardizes
disclosure requirements for pensions and other postretirement benefits.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board issued
"Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133"), which is effective for all
fiscal periods beginning after June 15, 1999. The statement provides standards
for the recognition and measurement of derivative and hedging activities. The
Company believes that the adoption of FAS 133 during the first quarter of 2000
will not affect the results of operations or financial position of the Company.
YEAR 2000
Software and/or hardware failures due to processing errors potentially
arising from calculations using the year 2000 date are a known risk. The Company
recognizes the risk and, in order to ensure that its operations will not be
adversely affected by year 2000 software or hardware problems, the Company has a
year 2000 compliance plan that includes (1) a company-wide inventory of all
information technology (software and hardware) (collectively, "IT systems") and
all non-IT systems, which include embedded technology such as microprocessors
commonly found in modern manufacturing equipment, (2) an evaluation of the
readiness of major trading partners, including suppliers of materials and
services and customers, (3) documenting the year 2000 compliance of the
Company's IT and non-IT systems through appropriate testing, (4) replacement of
non-compliant systems as necessary, (5) testing replaced systems for year 2000
compliance as necessary, and (6) developing contingency plans as appropriate.
The Company's year 2000 compliance plan calls for all formal documentation and
testing of IT and non-IT systems to be completed by June 30, 1999.
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Although the Company does not have a system in place for tracking costs
related to its year 2000 compliance plan, the Company believes that costs
incurred to date by the Company to assess, modify, or replace non-compliant
systems have been approximately $50,000. Furthermore, the Company anticipates,
based on the information currently available, that future costs to modify or
replace non-compliant systems will be approximately $600,000. Such costs are
being accounted for as part of normal, ongoing operations. The Company has not
developed a specific contingency plan to address the most reasonably likely
worst case scenario for year 2000, but it may develop one after it has assessed
the year 2000 readiness of its major trading partners since the Company believes
that any such scenario would most likely result from the lack of year 2000
readiness of one or more of those major trading partners.
Based upon the Company's review of its IT and non-IT systems to date,
the Company believes that there are no material internal issues regarding its
year 2000 compliance that will not be resolved through normal equipment and
software upgrades that will be made through 1999.
The status of the Company's year 2000 readiness effort is set forth in
the table below:
YEAR 2000 DISCLOSURE CHART
----------------------------------------------------------------------------------------------------------------
RESOLUTION
PHASES ASSESSMENT REMEDIATION TESTING IMPLEMENTATION
----------------------------------------------------------------------------------------------------------------
E Information 100% complete 70% complete Expected completion Expected completion
X technology second quarter 1999 second quarter 1999
P ----------------------------------------------------------------------------------------------------------------
O Operating 100% complete 85% complete Expected completion Expected completion
S equipment with second quarter 1999 second quarter 1999
U embedded chips
R or software
E ----------------------------------------------------------------------------------------------------------------
Products 100% complete 100% complete 100% complete Completed first
T quarter 1999
Y ----------------------------------------------------------------------------------------------------------------
P Third party 75% complete Developing Expected completion Expected completion
E contingency plans third quarter 1999 third quarter 1999
as appropriate
----------------------------------------------------------------------------------------------------------------
While the Company believes its planning efforts are adequate to address
its internal year 2000 concerns, there can be no assurance that the systems of
the Company's major trading partners, on which the Company's systems and
operations rely, will be year 2000 compliant. If a significant number of the
Company's major trading partners experience failures in their computer systems
or operations due to year 2000 non-compliance, such events could have a material
adverse affect on the business and revenues of the Company. Furthermore, if, for
any reason, the Company or its major trading partners fail to complete
appropriate remediation programs or fail to complete remediation programs on a
timely basis, such failure could have a material adverse effect on the business
and revenues of the Company.
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23
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For information about market risk, refer to "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Liquidity" in
Part II, Item 7 and Note 5 to the consolidated financial statements in Part II,
Item 8.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
TABLE OF CONTENTS
Page
----
Report of Independent Auditors.........................................................23
Consolidated Balance Sheet at December 31, 1998 and 1997...............................24
Consolidated Statement of Operations for the Years Ended
December 31, 1998, 1997, and 1996....................................................26
Consolidated Statement of Stockholders' Deficit for
the Years Ended December 31, 1998, 1997, and 1996....................................27
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1998, 1997, and 1996....................................................28
Notes to Consolidated Financial Statements.............................................29
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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 subsidiaries at December 31, 1998 and 1997,
and the related consolidated statements of operations, stockholders' deficit,
and cash flows for each of the three years in the period ended December 31,
1998. 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 generally accepted auditing
standards. 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 subsidiaries at December 31, 1998 and 1997,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. 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 Note 1, the Company has approximately $38 million of
long-term debt that becomes current in the first and second quarters of 1999.
Substantial doubt exists about the Company's ability to refinance, amend, or
exchange such obligations on or prior to their maturity dates. 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 30, 1999
-23-
26
LEXINGTON PRECISION CORPORATION
CONSOLIDATED BALANCE SHEET
(THOUSANDS OF DOLLARS)
DECEMBER 31
-------------------------------
1998 1997
---- ----
ASSETS:
Current assets:
Cash $ 103 $ 208
Accounts receivable 17,837 17,579
Inventories 10,170 9,031
Prepaid expenses and other assets 2,063 3,438
Deferred income taxes 2,025 1,572
---------- ----------
Total current assets 32,198 31,828
---------- ----------
Plant and equipment:
Land 1,549 1,533
Buildings 23,753 23,426
Equipment 90,306 78,922
---------- ----------
115,608 103,881
Accumulated depreciation 52,871 44,451
---------- ----------
Plant and equipment, net 62,737 59,430
---------- ----------
Excess of cost over net assets of businesses acquired, net 8,778 9,094
---------- ----------
Other assets, net 4,612 3,772
---------- ----------
$ 108,325 $ 104,124
========== ==========
See notes to consolidated financial statements. (continued on next page)
-24-
27
LEXINGTON PRECISION CORPORATION
CONSOLIDATED BALANCE SHEET (CONTINUED)
(THOUSANDS OF DOLLARS)
DECEMBER 31
-------------------------------
1998 1997
---- ----
LIABILITIES AND STOCKHOLDERS' DEFICIT:
Current liabilities:
Trade accounts payable $ 11,291 $ 12,628
Accrued expenses 9,345 8,495
Short-term debt 12,995 8,840
Current portion of long-term debt 6,597 6,040
---------- ----------
Total current liabilities 40,228 36,003
---------- ----------
Long-term debt, excluding current portion 74,953 72,622
---------- ----------
Deferred income taxes and other long-term liabilities 2,220 1,746
---------- ----------
Redeemable preferred stock, $100 par value, at
redemption value 750 840
Excess of redemption value over par value (375) (420)
---------- ----------
Redeemable preferred stock at par value 375 420
---------- ----------
Stockholders' deficit:
Common stock, $.25 par value, 10,000,000 shares
authorized, 4,348,951 shares issued 1,087 1,087
Additional paid-in-capital 12,235 12,313
Accumulated deficit (22,556) (19,850)
Cost of common stock in treasury, 85,915 shares (217) (217)
---------- ----------
Total stockholders' deficit (9,451) (6,667)
---------- ----------
$ 108,325 $ 104,124
========== ==========
See notes to consolidated financial statements.
-25-
28
LEXINGTON PRECISION CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
YEARS ENDED DECEMBER 31
----------------------------------------
1998 1997 1996
---- ---- ----
Net sales $ 126,717 $ 118,631 $ 114,872
Cost of sales 108,513 99,422 95,051
---------- ---------- ----------
Gross profit 18,204 19,209 19,821
Selling and administrative expenses 11,006 11,425 11,256
---------- ---------- ----------
Income from operations 7,198 7,784 8,565
Interest expense 9,772 9,065 8,542
Other income - 425 -
---------- ---------- ----------
Income/(loss) before income taxes (2,574) (856) 23
Provision for income taxes 132 672 40
---------- ---------- ----------
Net loss (2,706) (1,528) (17)
Preferred stock dividends 33 37 41
Excess of redemption value over par value of preferred
stock redeemed during year 45 45 45
---------- ---------- ----------
Net loss attributable to common
stockholders $ (2,784) $ (1,610) $ (103)
========== ========== ==========
Net loss per common share:
Basic $ (0.65) $ (0.38) $ (0.02)
========== ========== ==========
Diluted $ (0.65) $ (0.38) $ (0.02)
========== ========== ==========
See notes to consolidated financial statements.
-26-
29
LEXINGTON PRECISION CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(THOUSANDS OF DOLLARS)
Additional Total
Common Paid-in- Accumulated Treasury Stockholders'
Stock Capital Deficit Stock Deficit
---------- --------- ---------- ---------- ----------
Balance at December 31, 1995 $ 1,087 $ 12,547 $ (18,305) $ (305) $ (4,976)
========== ========= ========== ========== ==========
Net loss - - (17) - (17)
Preferred stock dividends
and redemptions - (86) - - (86)
Issuance of common shares - (66) - 88 22
---------- --------- ---------- ---------- ----------
Balance at December 31, 1996 $ 1,087 $ 12,395 $ (18,322) $ (217) $ (5,057)
========== ========= ========== ========== ==========
Net loss - - (1,528) - (1,528)
Preferred stock dividends
and redemptions - (82) - - (82)
---------- --------- ---------- ---------- ----------
Balance at December 31, 1997 $ 1,087 $ 12,313 $ (19,850) $ (217) $ (6,667)
========== ========= ========== ========== ==========
Net loss - - (2,706) - (2,706)
Preferred stock dividends
and redemptions - (78) - - (78)
---------- --------- ---------- ---------- ----------
Balance at December 31, 1998 $ 1,087 $ 12,235 $ (22,556) $ (217) $ (9,451)
========== ========= ========== ========== ==========
See notes to consolidated financial statements.
-27-
30
LEXINGTON PRECISION CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(THOUSANDS OF DOLLARS)
YEARS ENDED DECEMBER 31
----------------------------------------
1998 1997 1996
---- ---- ----
OPERATING ACTIVITIES:
Net loss $ (2,706) $ (1,528) $ (17)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 10,001 8,558 7,129
Amortization included in operating expense 1,450 1,280 1,138
Amortization included in interest expense 198 171 429
Deferred income taxes - 585 (320)
Changes in operating assets and liabilities that
provided/(used) cash:
Trade receivables (258) (759) (3,861)
Inventories (1,139) (132) (794)
Prepaid expenses and other assets 747 462 (971)
Trade accounts payable (1,337) (1,706) 3,706
Accrued expenses 850 213 1,710
Other 207 385 44
--------- ---------- ----------
Net cash provided by operating activities 8,013 7,529 8,193
--------- ---------- ----------
INVESTING ACTIVITIES:
Purchases of plant and equipment (14,877) (15,790) (15,708)
Decrease/(increase) in equipment deposits 261 (147) 37
Proceeds from sales of equipment 913 142 211
Expenditures for tooling owned by customers (1,901) (791) (949)
Other 570 (140) (851)
--------- ---------- ----------
Net cash used by investing activities (15,034) (16,726) (17,260)
--------- ---------- ----------
FINANCING ACTIVITIES:
Net increase/(decrease) in short-term debt 4,155 1,514 (196)
Proceeds from issuance of long-term debt 8,891 43,492 22,031
Repayment of long-term debt (6,003) (35,206) (12,257)
Other (127) (582) (442)
--------- ---------- ----------
Net cash provided by financing activities 6,916 9,218 9,136
--------- ---------- ----------
Net increase/(decrease) in cash (105) 21 69
Cash at beginning of year 208 187 118
--------- ---------- ----------
Cash at end of year $ 103 $ 208 $ 187
========= ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 9,567 $ 8,684 $ 8,167
Income taxes paid $ 136 $ 689 $ 381
See notes to consolidated financial statements.
-28-
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 (collectively, the "Company"). All
significant intercompany accounts and transactions have been eliminated.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management 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 amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities at
the time of purchase of less than three months to be cash equivalents.
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
-----------------------
1998 1997
---- ----
Finished goods $ 4,272 $ 3,654
Work in process 2,834 1,658
Raw materials and purchased parts 3,064 3,719
--------- --------
$ 10,170 $ 9,031
========= ========
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 property 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 are capitalized.
Maintenance and repair expenses were $5,169,000, $3,766,000, and $3,612,000 for
1998, 1997, and 1996, respectively.
-29-
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 1998 and 1997, accumulated amortization of goodwill was $3,211,000 and
$2,895,000, respectively. During each of 1998, 1997, and 1996, amortization of
goodwill totaled $316,000. In accordance with "Financial Accounting Standard No.
121, Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to
Be Disposed of," the carrying value of goodwill and other long-lived assets is
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. Based upon such review, the
Company believes that no impairment of long-lived assets existed at December 31,
1998.
DEFERRED FINANCING COSTS
Deferred financing costs are amortized over the lives of the related
debt instruments.
NET INCOME OR LOSS PER COMMON SHARE
During 1997, the Company adopted "Financial Accounting Standard No.
128, Earnings per Share" ("FAS 128"), which sets forth the procedures for
reporting basic and diluted income or loss per share. The recalculation of
income or loss per share data for 1996, using FAS 128 procedures, did not
require a restatement of the income or loss per share data for either of those
years.
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 and outstanding, using the treasury stock method. Potential common
shares are securities (such as stock options, 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 preferred stock dividends and the amount
by which payments made to redeem shares of preferred stock exceeded the par
value of such shares.
REVENUE RECOGNITION
Substantially all of the Company's revenues result from the sale of
rubber and metal component parts. The Company recognizes revenue from the sale
of component parts 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.
REPORTING COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued
"Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income" ("FAS 130"), which is effective for fiscal periods beginning after
December 15, 1997. This statement established standards for reporting and
display of comprehensive income and its components (revenues, gains, and losses)
in a full set of general-purpose financial statements. The adoption of FAS 130
by the Company during the first quarter of 1998 did not have a material effect
on the results of operations or financial position of the Company.
-30-
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
RECLASSIFICATIONS
Certain amounts in the consolidated financial statements for 1996 have
been reclassified to conform to the 1998 presentation.
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.
Indebtedness totaling $38,129,000 matures during the first and second
quarters of 2000. The Company's operations will not generate cash sufficient to
satisfy such obligations at their maturities. The Company may attempt to
refinance all or a portion of these obligations (and possibly other indebtedness
that has later maturity dates) by issuing new debt securities in the private or
public market. The Company has commenced discussions with underwriters relating
to the issuance of new debt securities to refinance substantially all of the
Company's existing debt. Although there can be no assurance, based on the
discussions to date, current market conditions in the high-yield debt markets,
and the Company's historical and projected operating results, cash flows, and
capital structure, the Company believes that it will be able to issue new debt
securities with terms and interest rates reasonably satisfactory to the Company
and in sufficient amounts to refinance substantially all of its outstanding debt
securities prior to their maturity dates. In the alternative, the Company may
attempt to reach agreements to amend the terms of its debt securities by
extending the maturity dates thereof or to exchange new debt securities that
have maturity dates later than 2000 for existing debt securities that mature in
2000. The Company's ability to refinance, amend, or exchange these securities on
or before their maturity dates will depend on many factors, including, but not
limited to, conditions in the high yield debt market. Accordingly, there can be
no assurance that the Company will be successful in refinancing, amending, or
exchanging such securities. To date the Company has not attempted to refinance,
amend, or exchange the obligations maturing in 2000. In the event that the
Company is not successful in refinancing, amending, or exchanging such
obligations, defaults may occur under the agreements relating to such
obligations. If a default occurs, it may trigger other defaults pursuant to
cross-default provisions under other indebtedness of the Company. Holders of
indebtedness on which defaults exist would be entitled to accelerate the
maturity thereof, to cease making any further advances otherwise permitted under
the related credit facilities, to seek to foreclose upon any assets securing
such obligations, and to pursue other remedies. If any such actions were to be
taken, the Company might be required to consider alternatives, including seeking
relief from its creditors. Any such action by creditors could have a material
adverse effect upon the Company. The consolidated financial statements do not
include any adjustments that might result should the Company be unable to
refinance, amend, or exchange these obligations on or before their maturity
dates.
NOTE 2 -- PREPAID EXPENSES AND OTHER ASSETS
At December 31, 1998 and 1997, other current assets included $1,414,000
and $2,379,000, respectively, of tooling manufactured or purchased by the
Company pursuant to purchase orders issued by 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.
-31-
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 component
parts. The payments have been recorded as a noncurrent asset and are 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, 1998 and
1997, other noncurrent assets included $2,043,000 and $1,276,000, respectively,
representing the unamortized portion of such capitalized payments. During 1998,
1997, and 1996, the Company amortized $1,134,000, $964,000, and $822,000,
respectively, of such capitalized payments.
NOTE 4 -- ACCRUED EXPENSES
Accrued expenses at December 31, 1998 and 1997, are summarized below
(dollar amounts in thousands):
DECEMBER 31
---------------------
1998 1997
---- ----
Employee fringe benefits $ 3,196 $ 2,763
Interest 1,971 1,964
Salaries and wages 2,289 1,580
Taxes 989 1,040
Other 900 1,148
------- --------
$ 9,345 $ 8,495
======= ========
NOTE 5 -- DEBT
At December 31, 1998 and 1997, short-term debt consisted of loans
outstanding under the Company's revolving line of credit. Except for certain
loans outstanding at December 31, 1998 in the amount of $3,850,000 that were
refinanced under long-term agreements before the consolidated financial
statements were issued, the loans outstanding under the revolving line of credit
at December 31, 1998 and 1997, have been classified as short-term debt because
the Company's cash receipts are automatically used to reduce such loans on a
daily basis, by means of a lock-box sweep agreement, and the lender has the
ability to modify certain terms of the revolving line of credit without approval
of the Company. At December 31, 1998, availability under the revolving line of
credit totaled $1,974,000, before outstanding checks of $1,402,000 were
deducted. At December 31, 1998, loans outstanding under the revolving line of
credit accrued interest at the prime rate plus 0.25% and the London Interbank
Offered Rate ("LIBOR") plus 2.75%. At December 31, 1998, 1997, and 1996, the
weighted-average interest rates on borrowings under the revolving line of credit
were 8.00%, 8.74%, and 9.04%, respectively. In January 1999, the revolving line
of credit was amended to extend the expiration date to April 1, 2002.
-32-
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Long-term debt at December 31, 1998 and 1997, is set forth below
(dollar amounts in thousands):
DECEMBER 31
---------------------------------
1998 1997
---- ----
Long-term secured debt:
Revolving line of credit, prime rate plus 0.25% and LIBOR plus
2.75% (8% at December 31, 1998) $ 3,850(1) $ -
Term loan payable in increasing monthly principal installments,
final maturity in 2000, 12% - 1,573
Term loan, due 2000, 12% 1,370 -
Term loans payable in equal monthly principal installments based on
a 180-month amortization schedule, final maturities in 2001, 8.37% 2,921 3,153
Term loans payable in equal monthly principal installments, final
maturities in 2002, LIBOR plus 2.75% (8.3% at December 31,
1998) 2,584 3,330
Term loan payable in equal monthly principal installments based on
a 180-month amortization schedule, final maturity in 2002, 9.37% 1,404 1,511
Term loan payable in equal monthly principal installments based on
a 180-month amortization schedule, final maturity in 2002, 9% 2,732 2,933
Term loan, interest only until March 1, 1998, then payable in
equal monthly principal installments, final maturity in 2003, prime
rate plus 0.25% (8% at December 31, 1998) 770 468
Term loan payable in equal monthly principal installments, final
maturity in 2003, prime rate plus 0.25% and LIBOR plus 2.75%
(8% at December 31, 1998) 492(2) 613(2)
Term loan payable in equal monthly principal installments, final
maturity in 2004, prime rate plus 0.25% and LIBOR plus 2.75%
(average of 7.81% at December 31, 1998) 1,471 1,742
Term loans payable in equal monthly principal installments, final
maturity in 2004, prime rate plus 0.25% and LIBOR plus 2.75%
(8% at December 31, 1998) 18,967(2) 22,580(2)
Term loan payable in equal monthly principal installments, final
maturity in 2005, LIBOR plus 2.75% (8.31% at December 31, 1998) 1,388 -
Term loan payable in equal monthly principal installments, final
maturity in 2005, prime rate plus 0.25% and LIBOR plus 2.75%
(8% at December 31, 1998) 1,579(2) -
Term loan payable in equal monthly principal installments, final
maturity in 2006, prime rate plus 0.25% and LIBOR plus 2.75%
(8% at December 31, 1998) 1,300(2) -
-------- ---------
Total long-term secured debt 40,828 37,903
-------- ---------
(continued on next page)
-33-
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued from previous page)
DECEMBER 31
---------------------------------
1998 1997
---- ----
Long-term unsecured debt:
10.5% senior note, due 2000 $ 7,500 $ 7,500
12.75% senior subordinated notes, due 2000 31,720 31,720
14% junior subordinated convertible notes, due 2000, convertible
into 440,000 shares of common stock 1,000 1,000
14% junior subordinated nonconvertible notes, due 2000 347 347
Other unsecured obligations 155 192
-------- ---------
Total long-term unsecured debt 40,722 40,759
-------- ---------
Total long-term debt 81,550 78,662
Less current portion 6,597 6,040
-------- ---------
Total long-term debt, excluding current portion $ 74,953 $ 72,622
======== =========
(1) Refinanced under long-term agreements before the consolidated financial
statements for the period were issued. Amounts classified as secured or
unsecured and amounts reflected in current portion are based upon the terms
of the new borrowings.
(2) Maturity date can be accelerated by the lender if the Company's revolving
line of credit expires prior to the stated maturity date of the term loan.
The loans outstanding under the Company's revolving line of credit and
the secured term loans listed above are collateralized by substantially all of
the assets of the Company, including trade receivables, inventories, equipment,
certain real estate, and the stock of Lexington Components, Inc., a subsidiary
of the Company.
During the first quarter of 1999, the Company obtained new term loans
in the aggregate amount of $6,542,000. Proceeds from the new term loans
refinanced $2,090,000 of existing term loans and $4,452,000 of loans outstanding
under the revolving line of credit (including $3,850,000 of such loans which
were outstanding at December 31, 1998). The new term loans are collateralized by
substantially all of the assets of the Company, including trade receivables,
inventories, equipment, certain real estate, and the stock of Lexington
Components, Inc.
-34-
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SCHEDULED MATURITIES OF LONG-TERM DEBT
Scheduled maturities of long-term debt for the years ending December 31
are listed below (dollar amounts in thousands):
1999 $ 6,597
2000 47,477
2001 8,872
2002 8,922
2003 and future years 9,682
--------
$ 81,550
========
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/or 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, certain of the financial covenants contained in the
Company's various loan agreements have been amended in order to maintain or
otherwise ensure current or future compliance by the Company. During the first
quarter of 1998, a covenant that limited the Company's ratio of debt to tangible
net worth was amended. During the third quarter of 1998, certain net worth
covenants and the covenant that limited the Company's ratio of debt to tangible
net worth were amended. During the first quarter of 1999, a net worth covenant
was amended and the covenant that limited the Company's ratio of debt to
tangible net worth was eliminated.
Because certain of the Company's long-term indebtedness matures in the
first half of 2000, those amounts will be classified as short-term liabilities
of the Company during the first and second quarters of 1999. During July 1998,
certain working capital and cash flow covenants were amended in order to avoid
any defaults that would have been caused by such reclassification.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company believes that, at December 31, 1998, the fair values of the
secured term loans and the loans outstanding under the revolving line of credit
approximately equaled the principal amounts of such loans.
Since August 1998, the Company believes that there has been minimal
trading in the Company's 12.75% senior subordinated notes, except for the
Company's repurchase in January 1999 of $3,808,000 principal amount of the notes
for $1,980,000 plus accrued interest (See Note 15 - Subsequent Event).
Notwithstanding its purchase of 12.75% senior subordinated notes in January
1999, the Company
-35-
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
estimates, based upon discussion with several market makers, that, as of
December 31, 1998, the 12.75% senior subordinated notes had a fair value in the
range of 75% to 85% of their principal amount. Based on the estimated fair value
of the 12.75% senior subordinated notes, the Company believes that, as of
December 31, 1998, (1) the 14% junior subordinated nonconvertible notes had a
fair value in the range of 75% to 85% of their principal amount, (2) the
14% junior subordinated convertible notes had a fair value in the range of 80%
to 110% of their principal amount, and (3) the 10.5% senior note had a fair
value approximately equal to its principal amount.
Estimates of the fair values of the Company's indebtedness are
subjective in nature and involve uncertainties and matters of judgment and
therefore cannot be determined definitively. Any change in the market for
similar indebtedness, the financial performance of the Company, or interest
rates could materially affect the fair value of all of the Company's
indebtedness.
FINANCIAL LEVERAGE AND LIQUIDITY
The Company operates with substantial financial leverage and limited
liquidity. As a result, the impact of any negative event may have a greater
adverse effect upon the Company than if the Company operated with lower
financial leverage and greater liquidity.
NOTE 6 -- PREFERRED STOCK
REDEEMABLE PREFERRED STOCK
At December 31, 1998, there were outstanding 3,750 shares of the
Company's $8 cumulative convertible redeemable preferred stock, series B, par
value $100 ("Redeemable Preferred Stock"). Each share of Redeemable 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. On
November 30, 1998, 450 shares of Redeemable Preferred Stock were redeemed for
$90,000. Further redemptions of $90,000 are scheduled on November 30 of each
year in order to retire 450 shares of Redeemable Preferred Stock annually.
Scheduled redemptions for the years 1999 through 2003 aggregate $450,000. For
accounting purposes, when Redeemable Preferred Stock is redeemed, the redeemable
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 Redeemable Preferred Stock,
the Company may not declare any cash dividends on its common stock if there
exists a dividend arrearage on the Redeemable Preferred Stock. During 1998, the
Company paid dividends aggregating $33,000 on the Redeemable Preferred Stock. No
dividends were in arrears at December 31, 1998.
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, $100 par value. At December 31, 1998 and 1997, no
shares of the series A preferred stock were issued or outstanding.
The Company's restated certificate of incorporation also provides that
the Company is authorized to issue 2,500,000 shares of preferred stock having a
par value of $1 per share. At December 31, 1998 and 1997, no shares of the $1
par value preferred stock were issued or outstanding.
-36-
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 -- COMMON STOCK
COMMON STOCK, $.25 PAR VALUE
At December 31, 1998 and 1997, there were 4,263,036 shares of the
Company's common stock outstanding, 440,000 shares reserved for issuance on the
conversion of the Company's 14% junior subordinated convertible notes, 55,555
shares reserved for issuance on the conversion of the Redeemable Preferred
Stock, and 350,000 shares reserved for issuance under the Company's restricted
stock award plan.
RESTRICTED STOCK AWARD PLAN
During 1998, 1997, and 1996, no shares of restricted shares of common
stock were awarded or outstanding. Unless otherwise amended, the restricted
stock award plan will expire on December 31, 2001.
STOCK OPTION PLAN
Options to purchase shares of the Company's common stock were last
granted in 1990. At December 31, 1996, the Company's stock option plan was no
longer in effect because no options to purchase common stock were outstanding
and no options were available for future grant.
NOTE 8 -- EMPLOYEE BENEFIT PLANS
RETIREMENT AND SAVINGS PLAN
The Company maintains a retirement and savings plan (the "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 Plan after meeting
the eligibility requirements. Generally, employees may contribute up to 15% of
their annual compensation but not more than prescribed amounts as 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 1998, 1997, and 1996, matching contributions made by the Company totaled
$574,000, $474,000, and $443,000, respectively. In addition, the Company has the
option to make a profit-sharing contribution to the Plan. The size of the
profit-sharing contribution is set annually at the end of each plan year by the
Company's Board of Directors and is typically paid in March of the following
year. Provisions for profit-sharing contributions totaled $650,000, $550,000,
and $489,000 during 1998, 1997, and 1996, respectively. Company contributions to
the Plan vest at a rate of 20% per year commencing in the participant's third
year of service until the participant becomes fully vested after seven years of
service.
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 plan and approves the cash bonus awards. Bonus awards for
eligible divisional employees are based upon the attainment of predetermined
profit targets at each division. Bonus awards for corporate officers are based
upon the attainment of predetermined
-37-
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
consolidated profit targets. The provisions for bonuses totaled $878,000,
$387,000, and $858,000 during 1998, 1997, and 1996, respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
On December 31, 1998, the Company adopted "Statement of Financial
Accounting Standards No. 132, Employers' Disclosures about Pensions and Other
Postretirement Benefits" ("FAS 132"). FAS 132 does not change the recognition or
measurement of pension or postretirement benefit plans, but standardizes
disclosure requirements for pensions and other postretirement benefits.
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, 1998, the Company's accumulated postretirement benefit obligation
totaled $328,000. The Company is amortizing its transition obligation over the
remaining life expectancy of the participants (i.e., an annual rate of $57,000).
A reconciliation of the changes in the plan benefit obligations and a
statement of the funded status of the plan at December 31, 1998 and 1997 is set
forth below (dollar amounts in thousands):
DECEMBER 31
-------------------------
1998 1997
---- ----
Accumulated postretirement benefit obligation at
beginning of year $ (370) $ (447)
Service cost (2) (2)
Interest cost (24) (32)
Benefits paid 38 44
Actuarial gain 30 67
------ -------
Accumulated postretirement benefit obligation at
end of year (328) (370)
Plan assets at fair market value - -
------ -------
Funded status (328) (370)
Unrecognized transition obligation 350 407
Unrecognized prior service cost - -
Unrecognized net gain (237) (230)
------ -------
Accrued benefit cost $ (215) $ (193)
====== =======
-38-
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net annual postretirement benefit costs for 1998, 1997, and 1996 are
summarized below (dollar amounts in thousands):
YEARS ENDED DECEMBER 31
---------------------------------
1998 1997 1996
---- ---- ----
Service cost $ 2 $ 2 $ 1
Interest cost 24 32 39
Net amortization and deferral 35 39 46
------ ------ ------
Net annual postretirement benefit cost $ 61 $ 73 $ 86
====== ====== ======
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 8% in
1999 and is projected to decrease gradually thereafter until it reaches 5% in
2005. 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, 1998 and 1997, was 6.75% and
7%, respectively. The change in the discount rate at December 31, 1998, reflects
lower prevailing interest rates.
NOTE 9 -- INCOME TAXES
The components of the provisions for income taxes in 1998, 1997, and
1996 are set forth below (dollar amounts in thousands):
YEARS ENDED DECEMBER 31
--------------------------------
1998 1997 1996
---- ---- ----
Current:
Federal $ - $ 104 $ 255
State 132 (17) 105
------ ------ ------
132 87 360
Deferred:
Federal - 585 (320)
------ ------ ------
Provision for income taxes $ 132 $ 672 $ 40
====== ====== ======
During 1998, the provision for income taxes consisted of state income
taxes.
During 1997, the provision for income taxes consisted primarily of (1)
federal alternative minimum taxes and (2) the reversal of a tax credit that had
been recorded in 1996 based on the then-projected utilization of federal net
operating loss carryforwards in 1997.
-39-
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During 1996, the provision for income taxes consisted of (1) federal
alternative minimum taxes, (2) state income taxes, (3) the reversal of a tax
credit that had been recorded in 1995 based on the then-projected utilization of
federal net operating loss carryforwards in 1996, and (4) a tax credit that had
been based on the then-projected utilization of federal net operating loss
carryforwards in 1997.
The difference between the Company's recorded provision for income
taxes in 1998, 1997, and 1996 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
---------------------------------
1998 1997 1996
---- ---- ----
Federal statutory income tax provision $ (875) $ (291) $ 8
Change in valuation allowance 1,164 1,216 53
Amortization of nondeductible goodwill 107 107 107
State income taxes, net of federal benefit 87 (71) 105
Other (351) (289) (233)
------- -------- ------
Recorded income tax provision $ 132 $ 672 $ 40
======= ======== ======
The following table sets forth the deferred tax assets and the deferred
tax liabilities of the Company at December 31, 1998 and 1997 (dollar amounts in
thousands):
DECEMBER 31
---------------------
1998 1997
---- ----
Deferred tax assets:
Tax carryforwards:
Federal net operating losses $ 4,146 $ 3,308
State net operating losses 1,419 951
Federal alternative minimum taxes 1,046 1,059
Investment tax credit 101 101
Other tax credit 81 81
-------- --------
Total tax carryforwards 6,793 5,500
Asset loss reserves 379 250
Tax inventory over book 738 642
Deferred compensation liabilities 53 65
Vacation accruals 317 265
Other accruals 236 397
Deferred financing costs and other 65 100
-------- --------
Total deferred tax assets 8,581 7,219
Valuation allowance (5,315) (4,151)
-------- --------
Net deferred tax assets 3,266 3,068
Deferred tax liabilities - tax over book depreciation 3,266 3,068
-------- --------
Net deferred taxes $ - $ -
======== ========
-40-
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During 1998 and 1997, the Company's valuation allowance increased by
$1,164,000 and $1,216,000, respectively, primarily due to increased federal net
operating loss carryforwards that the Company fully reserved for at December 31,
1998 and 1997.
At December 31, 1998, the Company had net operating loss carryforwards
for federal income tax purposes of $12,195,000, which expire in the years 2005
through 2013, and alternative minimum tax credits of $1,046,000, which can be
used to offset future payments of regular federal income taxes, if any, without
any time limitations.
NOTE 10 -- SEGMENTS
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 131, DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
At December 31, 1998, the Company adopted "Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an Enterprise and
Related Information" ("FAS 131"). FAS 131 establishes standards for the way
public enterprises report information about operating segments in annual
financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports. FAS 131 also
establishes standards for related disclosures about products, geographic areas,
and major customers. FAS 131 superseded "Statement of Financial Accounting
Standards No. 14, Financial Reporting for Segments of a Business Enterprise."
FAS 131 requires financial information to be reported on the basis that is used
internally for evaluating segment performance and deciding how to allocate
resources to segments. The adoption of FAS 131 by the Company during 1998 did
not affect the results of operations or the financial position of the Company.
DESCRIPTION OF PRODUCTS
Lexington Precision Corporation has two operating segments, the Rubber
Group and the Metals Group. The Rubber Group consists of four divisions,
Lexington Connector Seals, Lexington Insulators, Lexington Medical, and
Lexington Technologies. The Rubber Group produces seals used in automotive
wiring systems and insulators for automotive ignition wire
sets. The Rubber Group also produces components for medical devices. Lexington
Technologies manufactures molds that are sold to customers of the other
divisions of the Rubber Group. The molds are used by the other divisions to make
components for their customers. The Metals Group consists of three divisions,
Lexington Die Casting and the Arizona and New York Divisions of Lexington
Machining. The Metals Group produces metal components for sale 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 on several measures, including
income from operations and earnings before interest, income taxes, depreciation,
and amortization ("EBITDA"). (EBITDA is not a measure of performance under
generally accepted accounting principles. While EBITDA should not be used as a
substitute for net income, cash flows from operating activities, or other
operating or cash flow statement data prepared in accordance with generally
accepted accounting
-41-
44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
principles, management believes that it may be used by certain investors as
supplemental information to evaluate a company's financial performance,
including its ability to incur and/or service debt. In addition, the definition
of EBITDA used in this Form 10-K may not be the same as the definition of 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, interest expense, and income tax expense are recorded at the
parent company level and not allocated to the segments. Expenses at the parent
Company level that are not considered direct expenses of the operating segments,
are not allocated to the segments for purposes of evaluating operating
performance.
FACTORS MANAGEMENT USED TO IDENTIFY REPORTABLE SEGMENTS
Although all of the Company's production divisions are similar
manufacturing operations, selling to similar customers, the Company presents
financial data for two operating segments because of the significant difference
in financial performance between operations that manufacture components from
rubber (the "Rubber Group") and those operations that manufacture components
from metal (the "Metals Group").
INDUSTRY CONCENTRATION; RELIANCE ON LARGE CUSTOMERS
During 1998, 1997, and 1996, net sales to customers in the automotive
industry totaled $103,052,000, $88,961,000, and $79,832,000, respectively, which
represented 81.3%, 75.0%, and 69.5%, respectively, of the Company's net sales.
At December 31, 1998 and 1997, accounts receivable from automotive customers
totaled $15,047,000 and $13,649,000, respectively. The Company provides for
credit losses based upon historical experience and ongoing credit evaluations of
its customers' financial condition but does not generally require collateral
from its customers to support the extension of trade credit. At December 31,
1998 and 1997, the Company had reserves for credit losses of $197,000 and
$211,000, respectively.
During 1998, 1997, and 1996, net sales to Delphi Packard Electric
Systems, a division of Delphi Automotive Systems Corporation, of which General
Motors Corporation is the majority shareholder, totaled $26,233,000,
$26,447,000, and $25,088,000, which represented 20.7%, 22.3%, and 21.8%,
respectively, of the Company's net sales and 28.3%, 32.6%, and 33.4%,
respectively, of the Rubber Group's net sales. Also in 1998, net sales to
Prestolite Wire Corporation totaled $14,431,000, which represented 11.4% of the
Company's net sales and 15.6% of the Rubber Group's net sales. No other customer
of the Company accounted for more than 10% of the Company's net sales during
1998, 1997, or 1996. In 1998, the three largest customers of the Rubber Group,
including Delphi Packard and Prestolite Wire, accounted for 50.1% of the Rubber
Group's net sales. In 1998, the three largest customers of the Metals Group
accounted for 35.3% of the Metals Group's net sales. At December 31, 1998,
accounts receivable from the Company's three largest customers totaled
$5,769,000. The Company believes that there is limited credit risk in the
accounts receivable from its three largest customers. Loss of a significant
amount of business from Delphi Packard, Prestolite Wire, or any of the Company's
other large customers could have a severe impact on the Company if such business
were not substantially replaced by additional business from existing or new
customers.
-42-
45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the first quarter of 1997, the Company and Delphi Packard
entered into an agreement that will govern, through 2001, the purchase of
substantially all of the component parts that the Company currently sells to
Delphi Packard. Under the terms of the agreement, (1) the Company agreed to sell
and Delphi Packard agreed to purchase approximately 100% of Delphi Packard's
requirements for all specified component parts, (2) the Company warranted that
the specified components will remain competitive in terms of technology, design,
and quality, (3) the selling prices of the specified components will be adjusted
to reflect increases or decreases in material costs, and (4) the selling prices
of the specified components will be reduced by certain specified amounts in each
of the five years covered by the agreement. Although no assurance can be given,
the Company currently believes that a portion of the price reductions granted to
Delphi Packard will be offset through reductions in direct manufacturing costs
and that a portion of the price reductions will be offset by greater absorption
of manufacturing overhead as a result of volume increases.
-43-
46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEGMENT FINANCIAL DATA
Information relating to the Company's operating segments and the
corporate office for 1998, 1997, and 1996 is summarized below (dollar amounts in
thousands):
YEARS ENDED DECEMBER 31
----------------------------------------
1998 1997 1996
---- ---- ----
NET SALES:
Rubber Group $ 92,610 $ 81,210 $ 75,122
Metals Group 34,107 37,421 39,750
---------- ---------- ----------
Total net sales $ 126,717 $ 118,631 $ 114,872
========== ========== ==========
INCOME/(LOSS) FROM OPERATIONS:
Rubber Group $ 13,301 $ 11,459 $ 10,822
Metals Group (4,074) (1,580) (219)
---------- ---------- ----------
Subtotal 9,227 9,879 10,603
Corporate office (2,029) (2,095) (2,038)
---------- ---------- ----------
Total income from operations $ 7,198 $ 7,784 $ 8,565
========== ========== ==========
ASSETS:
Rubber Group $ 67,255 $ 64,782 $ 63,008
Metals Group 38,788 36,983 31,994
---------- ---------- ----------
Subtotal 106,043 101,765 95,002
Corporate office 2,282 2,359 2,028
---------- ---------- ----------
Total assets $ 108,325 $ 104,124 $ 97,030
========== ========== ==========
DEPRECIATION AND AMORTIZATION:
Rubber Group $ 7,476 $ 6,676 $ 5,596
Metals Group 3,957 3,141 2,638
---------- ---------- ----------
Subtotal 11,433 9,817 8,234
Corporate office 216 192 462
---------- ---------- ----------
Total depreciation and amortization $ 11,649 $ 10,009 $ 8,696
========== ========== ==========
CAPITAL EXPENDITURES:
Rubber Group $ 8,382 $ 6,835 $ 8,828
Metals Group 6,422 8,935 6,852
---------- ---------- ----------
Subtotal 14,804 15,770 15,680
Corporate office 73 20 28
---------- ---------- ----------
Total capital expenditures $ 14,877 $ 15,790 $ 15,708
========== ========== ==========
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47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 -- OTHER INCOME
In December 1997, the Company received a payment in the amount of
$425,000 in settlement of litigation.
NOTE 12 -- NET INCOME OR LOSS PER COMMON SHARE
The calculations of basic and diluted net income or loss per common
share for 1998, 1997, and 1996 are set forth below (in thousands, except per
share amounts). Because the effect of the Company's dilutive securities (the 14%
junior subordinated convertible notes, the $8 cumulative convertible redeemable
preferred stock, series B, and in 1996, employee stock options) was antidilutive
for 1998, 1997, and 1996, such conversion was not included in the calculation of
diluted net loss per common share set forth below.
YEARS ENDED DECEMBER 31
--------------------------------
1998 1997 1996
---- ---- ----
Net loss $ (2,706) $ (1,528) $ (17)
Preferred stock dividends (33) (37) (41)
Excess of redemption value over par value of preferred
stock redeemed during year (45) (45) (45)
--------- -------- --------
Net loss attributable to common stockholders (numerator) (2,784) (1,610) (103)
========= ======== ========
Weighted-average common shares (denominator) 4,263 4,263 4,250
========= ======== ========
Basic and diluted net loss per common share $ (0.65) $ (0.38) $ (0.02)
========= ======== ========
NOTE 13 -- COMMITMENTS AND CONTINGENCIES
PURCHASE COMMITMENTS
At December 31, 1998, the Company had commitments for the purchase of
plant and equipment totaling approximately $2,462,000.
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 $314,000, $298,000, and $263,000 for
1998, 1997, and 1996, respectively. At December 31, 1998, future minimum lease
commitments under noncancelable operating leases were not significant for any
year or in the aggregate.
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, including actions naming the Company
-45-
48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
as one of numerous potentially responsible parties under applicable
environmental laws for restoration costs at waste-disposal sites, as a
third-party defendant in cost-recovery actions pursuant to applicable
environmental laws, and as a defendant or potential defendant in various other
matters. 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 be a party in the future are
at various stages of completion. Although there can be no assurance as to the
outcome of existing or potential litigation, in the event such litigation were
commenced, based upon the information currently available to the Company, the
Company believes that the outcome of such actions would not have a material
adverse effect upon its financial position.
LETTERS OF CREDIT
At December 31, 1998 and 1997, the Company had outstanding irrevocable
letters of credit totaling $736,000 and $1,068,000, 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
that it may potentially be exposed to, 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, 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 14 -- 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 14% junior
subordinated notes, and the beneficial owners of $200,000 principal amount of
the 12.75% senior subordinated notes. In addition, the Chairman of the Board and
certain of his affiliates hold an aggregate of $1,300,000 principal amount of
the 12.75% senior subordinated notes.
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 1999. 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 1998 and 1997, the Company paid the firm fees of $400,000 and
reimbursed it for direct and indirect expenses of $200,000. During 1996, the
Company paid the firm fees of $400,000 and incentive compensation of $150,000 as
a result of the Company's operating performance during 1995 and reimbursed it
for direct and indirect expenses of $200,000.
-46-
49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Secretary of the Company, who is also a member of the Company's
Board of Directors, was a stockholder of a professional corporation that was,
until December 31, 1997, a partner in a law firm that serves as general counsel
to the Company. During 1997 and 1996, the Company made payments to the law firm
for legal services in the amounts of $395,000 and $442,000, respectively.
NOTE 15 -- SUBSEQUENT EVENT
In January 1999, the Company repurchased $3,808,000 principal amount of
its 12.75% senior subordinated notes for $1,980,000 plus accrued interest. Funds
for the repurchase were provided by increased borrowings under the Company's
revolving line of credit. The Company estimates that the extraordinary gain from
the repurchase, net of estimated taxes, will total approximately $1,462,000.
-47-
50
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-48-
51
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 1999 Annual
Meeting of Stockholders and to be filed with the Securities and Exchange
Commission (the "Commission") not later than 120 days after December 31, 1998.
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 1999 Annual
Meeting of Stockholders and to be filed with the Commission not later than 120
days after December 31, 1998.
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 1999 Annual
Meeting of Stockholders and to be filed with the Commission not later than 120
days after December 31, 1998.
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 1999 Annual
Meeting of Stockholders and to be filed with the Commission not later than 120
days after December 31, 1998.
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52
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 (the "Company") and its wholly owned subsidiaries,
Lexington Components, Inc. ("LCI") 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 58. 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
-50-
53
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
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 the Company and L&D Precision Limited
Partnership ("L&D Precision") and exhibits thereto
4-3 Amendment Agreement dated as of April 27, 1990,
between the Company and L&D Precision with respect to
Purchase Agreement dated as of February 7, 1985
-51-
54
4-4 Recapitalization Agreement dated as of April 27,
1990, between the Company 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 the
Company 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 the Company and Nomura Holding America, Inc.
("Nomura")
4-10 Specimen of 10.5% Senior Unsecured Note due February
1, 2000, from the Company to Nomura
10-1 Purchase Agreement dated as of February 7, 1985,
between the Company and L&D Precision and exhibits
thereto
10-2 Amendment Agreement dated as of April 27, 1990,
between the Company 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 1998 Compensation Arrangements with
Lubin, Delano, & Company
10-7 *Corporate Office 1998 Management Cash Bonus Plan
10-8 Consent and Amendment Letter Agreement between
Chemical Bank of New Jersey and the Company dated as
of December 29, 1993
10-9 Promissory Note dated November 30, 1988, of LCI
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 the
Company to Paul H. Pennell
10-11 Amendment Agreement dated as of November 30, 1991,
between LCI and Paul H. Pennell
-52-
55
10-12 Release and Notice Agreement dated as of March 31,
1993, between LCI and Paul H. Pennell
10-13 Recapitalization Agreement dated as of April 27,
1990, between the Company 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 the Company
10-15 Accounts Financing Agreement [Security Agreement]
dated as of January 11, 1990, between Congress and
LCI
10-16 Covenants Supplement to Accounts Financing Agreement
[Security Agreement] dated as of January 11, 1990,
between Congress and the Company
10-17 Covenants Supplement to Accounts Financing Agreement
[Security Agreement] dated as of January 11, 1990,
between Congress and LCI
10-18 Letter dated April 11, 1990, from the Company and
Wise Die Casting, Inc. to Congress
10-19 Letter Agreement dated February 28, 1991, between the
Company and Congress amending certain financing
agreements and consent thereto of LCI
10-20 Letter Agreement dated February 28, 1991, between LCI
and Congress amending certain financing agreements
and consent thereto of the Company
10-21 Letter Agreement dated January 14, 1994, between the
Company and Congress amending certain financing
agreements and consent thereto of LCI
10-22 Letter Agreement dated January 14, 1994, between LCI
and Congress amending certain financing agreements
and consent thereto of the Company
10-23 Letter Agreement dated March 25, 1994, between
Congress and the Company, and consent thereto of LCI
10-24 Letter Agreement dated March 25, 1994, between
Congress and LCI, and consent thereto of the Company
10-25 Letter Agreement dated as of August 1, 1994, between
the Company and Congress amending certain financing
agreements and consent thereto of LCI
10-26 Letter Agreement dated as of August 1, 1994, between
LCI and Congress amending certain financing
agreements and consent thereto of the Company
10-27 Trade Financing Agreement Supplement to Accounts
Financing Agreement [Security Agreement] dated as of
July 19, 1994, between the Company and Congress
-53-
56
10-28 Letter Agreement dated January 13, 1995, between LCI
and Congress amending certain financing agreements
and consent thereto of the Company
10-29 Letter Agreement dated January 31, 1995, between the
Company and Congress amending certain financing
agreements and consent thereto of LCI
10-30 Letter Agreement dated January 31, 1995, between LCI
and Congress amending certain financing agreements
and consent thereto of the Company
10-31 Amendment to Financing Agreements dated August 1,
1995, from the Company in favor of Congress
10-32 Amendment to Financing Agreements dated August
1,1995, from LCI in favor of Congress
10-33 Amendment to Financing Agreements dated January 16,
1996, from the Company in favor of Congress
10-34 Term Promissory Note dated January 16, 1996, in the
amount of $375,000 from the Company in favor of
Congress
10-35 Term Promissory Note dated January 16, 1996, in the
amount of $450,000 from the Company in favor of
Congress
10-36 Letter Agreement dated February 28, 1996, from the
Company in favor of Congress amending certain
financing agreements and consent thereto of Congress
10-37 Amendment to Financing Agreements and Consent dated
March 14, 1996, from the Company in favor of Congress
10-38 Amendment to Financing Agreements and Consent dated
March 14, 1996, from LCI in favor of Congress
10-39 Term Note dated May 31, 1996, from the Company in
favor of Congress
10-40 Amendment to Financing Agreements dated August 21,
1996, from LCI in favor of Congress
10-41 Amendment to Financing Agreements dated August 21,
1996, from the Company in favor of Congress
10-42 Amendment to Financing Agreements dated January 31,
1997, from the Company in favor of Congress
10-43 Amendment to Financing Agreements dated January 31,
1997, from LCI in favor of Congress
-54-
57
10-44 Credit Facility and Security Agreement and Rider A to
Credit Facility and Security Agreement dated January
31, 1997, from the Company and LCI in favor of Bank
One, Akron, NA ("Bank One")
10-45 Promissory Note (Equipment Term Loan) dated January
31, 1997, from the Company and LCI in favor of Bank
One
10-46 Promissory Note (North Canton Term Loan) dated
January 31, 1997, from the Company and LCI in favor
of Bank One
10-47 Promissory Note (Vienna Term Loan) dated January 31,
1997, from the Company and LCI in favor of Bank One
10-48 Promissory Note (Casa Grande Note) dated January 31,
1997, from the Company and LCI in favor of Bank One
10-49 Promissory Note (LaGrange Term Loan) dated January
31, 1997, from the Company and LCI in favor of Bank
One
10-50 Promissory Note (North Canton Equipment Loan) dated
January 31, 1997, from the Company and LCI in favor
of Bank One
10-51 Fourth Amended and Restated Promissory Note dated
March 11, 1997, from LCI in favor of Congress
10-52 Fourth Amended and Restated Promissory Note dated
March 11, 1997, from the Company in favor of Congress
10-53 Amendment to Financing Agreements dated March 11,
1997, from LCI in favor of Congress
10-54 Amendment to Financing Agreements dated March 11,
1997, from the Company in favor of Congress
10-55 Loan and Security Agreement and Rider A to Loan and
Security Agreement dated March 19, 1997, from the
Company in favor of The CIT Group/Equipment
Financing, Inc. ("CIT")
10-56 Promissory Note dated March 19, 1997, from the
Company in favor of CIT
10-57 **Additional Purchase Order Provisions Lifetime
Contract Between Delphi Packard Electric Systems and
Lexington Connector Seals
10-58 Amendment to Financing Agreements and Consent dated
April 17, 1997, between the Company and Congress
10-59 Amendment to Financing Agreements and Consent dated
April 17, 1997, between LCI and Congress
-55-
58
10-60 First Amendment Agreement dated April 17, 1997,
between the Company, LCI, and Bank One
10-61 Specimen of Amended and Restated Promissory Note
dated April 17, 1997, of the Company and LCI to Bank
One
10-62 Specimen of Promissory Note dated August 29, 1997,
from the Company to CIT
10-63 Note Purchase Agreement dated October 27, 1997,
between the Company and Nomura
10-64 Specimen of 10.5% Senior Unsecured Note due February
1, 2000, from the Company to Nomura
10-65 Amendment No. 1 to Credit Facility and Security
Agreement dated December 31, 1997, between the
Company, LCI, and Bank One
10-66 Amendment No. 2 to Credit Facility and Security
Agreement dated March 20, 1998, between the Company,
LCI, and Bank One
10-67 Promissory Note dated March 31, 1998, from the
Company in favor of CIT
10-68 New Equipment Term Note dated June 26, 1998, from the
Company in favor of Congress
10-69 Second Amendment Agreement dated May 1, 1998, from
LCI in favor of Paul H. Pennell
10-70 Amendment No. 1 to Loan and Security Agreement dated
June 30, 1998, between the Company and CIT
10-71 Amendment No. 3 to Credit Facility and Security
Agreement dated June 30, 1998, between the Company,
LCI, and Bank One
10-72 Amendment to Financing Agreements and Consent dated
August 13, 1998, between the Company and Congress
10-73 Amendment to Financing Agreements and Consent dated
August 13, 1998, between LCI and Congress
10-74 Amendment to Financing Agreements and Consent dated
October 20, 1998, between the Company and Congress
10-75 Amendment to Financing Agreements and Consent dated
October 20, 1998, between LCI and Congress
10-76 Amendment No. 2 to Loan and Security Agreement dated
November 30, 1998, between the Company and CIT
-56-
59
10-77 New Equipment Term Note dated December 16, 1998,
between the Company and Congress
10-78 Amendment to Financing Agreements dated January 28,
1999, between the Company and Congress
10-79 Amendment to Financing Agreements dated January 28,
1999, between LCI and Congress
10-80 Term Promissory Note dated January 28, 1999, between
LCI and Congress
10-81 Term Promissory Note dated January 28, 1999, between
LPC and Congress
10-82 Fifth Amended and Restated Promissory Note dated
January 28, 1999, between the Company and Congress
10-83 Amendment No. 6 to Credit Facility and Security
Agreement dated January 31, 1999, between the
Company, LCI, and Bank One
10-84 Fifth Amendment Agreement dated March 10, 1999,
between the Company, LCI, and Bank One
10-85 Promissory Note (Additional Equipment Term Loan)
dated March 10, 1999, between the Company, LCI, and
Bank One
10-86 Promissory Note dated March 30, 1999, between the
Company and CIT
10-87 Amendment No. 3 to Loan and Security Agreement dated
March 30, 1999, between the Company and CIT
21-1 Significant Subsidiary of Registrant
27-1 ***Financial Data Schedule
* 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 an
order granting confidential treatment, issued by the
Securities and Exchange Commission (the "Commission") dated
October 6, 1997
*** Not deemed filed for purposes of Section 11 of the Securities
Act of 1933, Section 18 of the Securities Exchange Act of
1934, and Section 323 of the Trust Indenture Act of 1939, or
otherwise subject to the liabilities of such sections and not
deemed part of any regulation statement to which such exhibit
relates.
Note: Pursuant to section (b)(4)(iii) of item 601 of Regulation
S-K, the Company agrees to furnish to the Commission upon
request documents defining the rights of other holders of
long-term debt.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended
December 31, 1998.
-57-
60
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, 1998 $ 211 $ 1 $ 15 $ 197
Year ended December 31, 1997 156 57 2 211
Year ended December 31, 1996 175 21 40 156
INVENTORY RESERVE
-----------------
Year ended December 31, 1998 $ 450 $ 208 $ 67 $ 591
Year ended December 31, 1997 321 212 83 450
Year ended December 31, 1996 374 37 90 321
-58-
61
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 30, 1999
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 30, 1999:
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
-59-
62
EXHIBIT INDEX
Exhibit
Number Exhibit Location
- ------ ------- --------
3-1 Articles of Incorporation and Incorporated by reference from Exhibit
Restatement thereof 3-1 Lexington 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 Filed with this Form 10-K
3-3 Certificate of Correction dated Incorporated by reference from Exhibit
September 21, 1976 3-3 to the 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 Incorporated by reference from Exhibit
Merger dated May 24, 1977 3-4 to 1983 10-K
3-5 Certificate of Ownership and Incorporated by reference from Exhibit
Merger dated May 31, 1977 3-5 to 1983 10-K
3-6 Certificate of Reduction of Incorporated by reference from Exhibit
Capital dated December 30, 1977 3-6 to 1983 10-K
3-7 Certificate of Retirement of Incorporated by reference
Preferred Shares dated from Exhibit 3-7 to 1983
December 30, 1977 10-K
3-8 Certificate of Reduction of Incorporated by reference from Exhibit
Capital dated December 28, 3-8 to 1983 10-K
1978
3-9 Certificate of Retirement of Incorporated by reference from Exhibit
Preferred Shares dated 3-9 to 1983 10-K
December 28, 1978
3-10 Certificate of Reduction of Incorporated by reference from Exhibit
Capital dated January 9, 3-10 to 1983 10-K
1979
3-11 Certificate of Reduction of Incorporated by reference from Exhibit 3-11
Capital dated December 20, 1979 to 1983 10-K
3-12 Certificate of Retirement of Preferred Incorporated by reference from Exhibit 3-12 to 1983
Shares dated December 20, 1979 10-K
3-13 Certificate of Reduction of Capital dated Incorporated by reference from Exhibit 3-13 to 1983
December 16, 1982 10-K
3-14 Certificate of Reduction of Capital dated Incorporated by reference from Exhibit 3-14 to 1983
December 17, 1982 10-K
63
-2-
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 May 31,
September 26, 1984 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 May 31,
November 21, 1986 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
Optional and Other Special Rights of November 30, 1989 located under Securities and
12% Cumulative Convertible Exchange Commission File No. 0-3252
Exchangeable Preferred Stock, Series C, ("November 30, 1989 10-Q")
and the Qualifications, Limitations and
Restrictions thereof dated January 10,
1990
3-24 Certificate of Ownership and Merger Incorporated by reference from Exhibit 3-24 to
dated April 25, 1990 December 31, 1989 10-K
64
-3-
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 1990
March 6, 1991 10-K
3-27 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-27 to 1994
April 29, 1994 10-K
3-28 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-28 to 1994
January 6, 1995 10-K
3-29 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-29 to 1995
January 5, 1996 10-K
3-30 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-30 to 1996
January 6, 1997 10-K
3-31 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-31 to 1997
January 9, 1998 10-K
3-32 Certificate of Retirement of Stock dated Filed with this Form 10-K
January 13, 1999
4-1 Certificate of Designations, Preferences, Incorporated by reference from Exhibit 3-3 to 1981
Rights and Number of Shares of 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 the Company Company's Form 8-K dated February 7, 1985 (date
and L&D Precision Limited Partnership of earliest event reported) located under Securities
("L&D Precision") and exhibits thereto and Exchange Commission File No. 0-3252
4-3 Amendment Agreement dated as of Incorporated by reference from Exhibit 10-2 to 1990
April 27, 1990, between the Company and 10-K
L&D 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 the Company and December 31, 1989 10-K
L&D 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
65
-4-
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 the Company and IBJ Schroder Company's Form 8-K dated January 18, 1994 (date
Bank & Trust Company, as Trustee of earliest event reported) located under Securities
and Exchange Commission File No. 0-3252
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 the Company Company's Form 10-Q for the quarter ended
and Nomura Holding America, Inc. June 30, 1997 located under Securities and
("Nomura") Exchange Commission File No. 0-3252 ("June 30,
1997 Form 10-Q")
4-10 Specimen of 10.5% Senior Unsecured Incorporated by reference from Exhibit 10-3 to
Note due February 1, 2000, from the June 30, 1997 Form 10-Q
Company to Nomura
10-1 Purchase Agreement dated as of See Exhibit 4-2 hereto
February 7, 1985, between the Company
and L&D Precision and exhibits thereto
10-2 Amendment Agreement dated as of See Exhibit 4-3 hereto
April 27, 1990, between the Company
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 Filed with this Form 10-K
Retirement and Savings Plan, as amended
10-6 Description of 1998 Compensation Filed with this Form 10-K
Arrangements with Lubin, Delano, &
Company
66
-5-
10-7 Corporate Office 1998 Management Cash Filed with this Form 10-K
Bonus Plan
10-8 Consent and Amendment Letter Incorporated by reference from Exhibit 10-1 to the
Agreement between Chemical Bank of Company's Form 8-K dated December 30, 1993
New Jersey and the Company dated as of (date of earliest event reported) located under
December 29, 1993 Securities and Exchange Commission File No.
0-3252
10-9 Promissory Note dated November 30, Incorporated by reference from Exhibit 10-32 to
1988, of LCI payable to the order of Paul May 31, 1989 10-K
H. Pennell in the original principal
amount of $3,530,000
10-10 Guaranty dated as of November 30, Incorporated by reference from Exhibit 10-33 to
1988, from the Company to Paul H. May 31, 1989 10-K
Pennell
10-11 Amendment Agreement dated as of Incorporated by reference from Exhibit 10-28 to
November 30, 1991, between LCI and 1991 10-K
Paul H. Pennell
10-12 Release and Notice Agreement dated as Incorporated by reference from Exhibit 10-40 to the
of March 31, 1993, between LCI and Company's Form 10-K for the year ended
Paul 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 the Company
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, November 30, 1989 10-Q
1990, between Congress Financial
Corporation ("Congress") and the
Company
10-15 Accounts Financing Agreement [Security Incorporated by reference from Exhibit 4-3 to
Agreement] dated as of January 11, November 30, 1989 10-Q
1990, between Congress and LCI
10-16 Covenants Supplement to Accounts Incorporated by reference from Exhibit 10-49 to
Financing Agreement [Security 1990 10-K
Agreement] dated as of January 11,
1990, between Congress and the
Company
10-17 Covenants Supplement to Accounts Incorporated by reference from Exhibit 10-50 to
Financing Agreement [Security 1990 10-K
Agreement] dated as of January 11,
1990, between Congress and LCI
67
-6-
10-18 Letter dated April 11, 1990, from the Incorporated by reference from Exhibit 10-51 to
Company and Wise Die Casting, Inc. to 1990 10-K
Congress
10-19 Letter Agreement dated February 28, Incorporated by reference from Exhibit 10-54 to
1991, between the Company and 1990 10-K
Congress amending certain financing
agreements and consent thereto of LCI
10-20 Letter Agreement dated February 28, Incorporated by reference from Exhibit 10-56 to
1991, between LCI and Congress 1990 10-K
amending certain financing agreements
and consent thereto of the Company
10-21 Letter Agreement dated January 14, Incorporated by reference from Exhibit 10-26 to the
1994, between the Company and Company's Form 10-K for the year ended
Congress amending certain financing December 31, 1993 located under Securities and
agreements and consent thereto of LCI Exchange Commission File No. 0-3252 ("1993
10-K")
10-22 Letter Agreement dated January 14, Incorporated by reference from Exhibit 10-27 to
1994, between LCI and Congress 1993 10-K
amending certain financing agreements
and consent thereto of the Company
10-23 Letter Agreement dated March 25, 1994, Incorporated by reference from Exhibit 10-30 to
between Congress and the Company, and 1993 10-K
consent thereto of LCI
10-24 Letter Agreement dated March 25, 1994, Incorporated by reference from Exhibit 10-31 to
between Congress and LCI, and consent 1993 10-K
thereto of the Company
10-25 Letter Agreement dated as of Incorporated by reference from Exhibit 10-1 to the
August 1, 1994, between the Company Company's Form 10-Q for the quarter ended
and Congress amending certain financing September 30, 1994 located under Securities and
agreements and consent thereto of LCI 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 LCI and September 30, 1994 10-Q
Congress amending certain financing
agreements and consent thereto of the
Company
10-27 Trade Financing Agreement Supplement Incorporated by reference from Exhibit 10-3 to
to Accounts Financing Agreement September 30, 1994 10-Q
[Security Agreement] dated as of July 19,
1994, between the Company and
Congress
68
-7-
10-28 Letter Agreement dated January 13, Incorporated by reference from Exhibit 10-32 to
1995, between LCI and Congress 1994 Form 10-K
amending certain financing agreements
and consent thereto of the Company
10-29 Letter Agreement dated January 31, Incorporated by reference from Exhibit 10-34 to
1995, between the Company and 1994 Form 10-K
Congress amending certain financing
agreements and consent thereto of LCI
10-30 Letter Agreement dated January 31, Incorporated by reference from Exhibit 10-36 to
1995, between LCI and Congress 1994 Form 10-K
amending certain financing agreements
and consent thereto of the Company
10-31 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-1 to the
dated August 1, 1995, from the Company Company's Form 10-Q for the quarter ended
in favor of 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 LCI 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 the Company's Form 10-K for the year ended
Company in favor 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 the Company 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 the Company in favor of
Congress
10-36 Letter Agreement dated February 28, Incorporated by reference from Exhibit 10-62 to
1996, from the Company in favor of 1995 Form 10-K
Congress amending certain financing
agreements and consent thereto of
Congress
10-37 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-63 to
and Consent dated March 14, 1996, from 1995 Form 10-K
the Company in favor of Congress
69
-8-
10-38 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-64 to
and Consent dated March 14, 1996, from 1995 Form 10-K
LCI in favor of Congress
10-39 Term Note dated May 31, 1996, from the Incorporated by reference from Exhibit 10-1 to the
Company 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 LCI 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 the September 30, 1996 Form 10-Q
Company in favor of Congress
10-42 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-42 to the
dated January 31, 1997, from the Company's Form 10-K for the year ended
Company in favor 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 LCI in favor 1996 Form 10-K
of Congress
10-44 Credit Facility and Security Agreement Incorporated by reference from Exhibit 10-44 to
and Rider A to Credit Facility and 1996 Form 10-K
Security Agreement dated January 31,
1997, from the Company and LCI 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 the 1996 Form 10-K
Company and LCI 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 the 1996 Form 10-K
Company and LCI in favor of Bank One
10-47 Promissory Note (Vienna Term Loan) Incorporated by reference from Exhibit 10-47 to
dated January 31, 1997, from the 1996 Form 10-K
Company and LCI in favor of Bank One
10-48 Promissory Note (Casa Grande Note) Incorporated by reference from Exhibit 10-48 to
dated January 31, 1997, from the 1996 Form 10-K
Company and LCI in favor of Bank One
70
-9-
10-49 Promissory Note (LaGrange Term Loan) Incorporated by reference from Exhibit 10-49 to
dated January 31, 1997, from the 1996 Form 10-K
Company and LCI in favor of Bank One
10-50 Promissory Note (North Canton Incorporated by reference from Exhibit 10-50 to
Equipment Loan) dated January 31, 1997, 1996 Form 10-K
from the Company and LCI 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 LCI 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 the 1996 Form 10-K
Company in favor of Congress
10-53 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-53 to
dated March 11, 1997, from LCI in favor 1996 Form 10-K
of Congress
10-54 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-54 to
dated March 11, 1997, from the Company 1996 Form 10-K
in favor of Congress
10-55 Loan and Security Agreement and Rider Incorporated by reference from Exhibit 10-55 to
A to Loan and Security Agreement dated 1996 Form 10-K
March 19, 1997, from the Company 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 the Company in favor of CIT 1996 Form 10-K
10-57 Additional Purchase Order Provisions Incorporated by reference in redacted form pursuant
Lifetime Contract Between Delphi to Rule 24b-2 from Exhibit 10-57 to 1996 Form
Packard Electric Systems and Lexington 10-K
Connector Seals
10-58 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-1 to the
and Consent dated April 17, 1997, Company's Form 10-Q for the quarter ended
between the Company and Congress March 31, 1997 located under Securities and
Exchange Commission File No. 0-3252 ("March 31,
1997 Form 10-Q")
10-59 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-2 to
and Consent dated April 17, 1997, March 31, 1997 Form 10-Q
between LCI and Congress
71
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10-60 First Amendment Agreement dated Incorporated by reference from Exhibit 10-3 to
April 17, 1997, among the Company, March 31, 1997 Form 10-Q
LCI, and Bank One
10-61 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
the Company and LCI to Bank One
10-62 Specimen of Promissory Note dated Incorporated by reference from Exhibit 10-1 to the
August 29, 1997, from the Company to Company's Form 10-Q for the quarter ended
CIT June 30, 1997 located under Securities and
Exchange Commission File No. 0-3252 ("June 30,
1997 Form 10-Q")
10-63 Note Purchase Agreement dated Incorporated by reference from Exhibit 10-2 to
October 27, 1997, between the Company June 30, 1997 Form 10-Q
and Nomura
10-64 Specimen of 10.5% Senior Unsecured Incorporated by reference from Exhibit 10-3 to
Note due February 1, 2000, from the June 30, 1997 Form 10-Q
Company to Nomura
10-65 Amended No. 1 to Credit Facility and Incorporated by reference from Exhibit 10-65 to the
Security Agreement dated December 31, Company's Form 10-K for the year ended
1997, between the Company, LCI, and December 31, 1997 located under Securities and
Bank One Exchange Commission File No. 0-3252 ("1997
Form 10-K")
10-66 Amendment No. 2 to Credit Facility and Incorporated by reference from Exhibit 10-66 to
Security Agreement dated March 20, 1997 Form 10-K
1998, between the Company, LCI, and
Bank One
10-67 Promissory Note dated March 31, 1998, Incorporated by reference from Exhibit 10-1 to the
from the Company 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")
10-68 New Equipment Term Note dated Incorporated by reference from Exhibit 10-1 to the
June 26, 1998, from the Company in Company's Form 10-Q for the quarter ended
favor of Congress June 30, 1998 located under Securities and
Exchange Commission File No. 0-3252 ("June 30,
1998 Form 10-Q")
10-69 Second Amendment Agreement dated Incorporated by reference from Exhibit 10-2 to the
May 1, 1998, from LCI 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")
72
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10-70 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
the Company and CIT September 30, 1998 located under Securities and
Exchange Commission File No. 0-3252
("September 30, 1998 Form 10-Q")
10-71 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
between the Company, LCI, and Bank September 30, 1998 located under Securities and
One Exchange Commission File No. 0-3252
("September 30, 1998 Form 10-Q")
10-72 Amendment to Financing Agreements and Incorporated by reference from Exhibit 10-3 to the
Consent dated August 13, 1998, between Company's Form 10-Q for the quarter ended
the Company 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 10-4 to the
Consent dated August 13, 1998, between Company's Form 10-Q for the quarter ended
LCI 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 10-5 to the
Consent dated October 20, 1998, between Company's Form 10-Q for the quarter ended
the Company and Congress September 30, 1998 located under Securities and
Exchange Commission File No. 0-3252
("September 30, 1998 Form 10-Q")
10-75 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
LCI and Congress September 30, 1998 located under Securities and
Exchange Commission File No. 0-3252
("September 30, 1998 Form 10-Q")
10-76 Amendment No. 2 to Loan and Security Filed with this Form 10-K
Agreement dated November 30, 1998,
between the Company and CIT
10-77 New Equipment Term Note dated Filed with this Form 10-K
December 16, 1998, between the
Company and Congress
10-78 Amendment to Financing Agreements Filed with this Form 10-K
dated January 28, 1999, between the
Company and Congress
10-79 Amendment to Financing Agreements Filed with this Form 10-K
dated January 28, 1999, between LCI and
Congress
73
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10-80 Term Promissory Note dated January 28, Filed with this Form 10-K
1999, between LCI and Congress
10-81 Term Promissory Note dated January 28, Filed with this Form 10-K
1999, between LPC and Congress
10-82 Fifth Amended and Restated Promissory Filed with this Form 10-K
Note dated January 28, 1999, between
the Company and Congress
10-83 Amendment No. 6 to Credit Facility and Filed with this Form 10-K
Security Agreement dated January 31,
1999, between the Company, LCI, and
Bank One
10-84 Fifth Amendment Agreement dated Filed with this Form 10-K
March 10, 1999, between the Company,
LCI, and Bank One
10-85 Promissory Note (Additional Equipment Filed with this Form 10-K
Term Loan) dated March 10, 1999,
between the Company, LCI, and Bank
One
10-86 Promissory Note dated March 30, 1999, Filed with this Form 10-K
between the Company and CIT
10-87 Amendment No. 3 to Loan and Security Filed with this Form 10-K
Agreement dated March 30, 1999,
between the Company and CIT
21-1 Significant Subsidiary of Registrant Filed with this Form 10-K
27-1 Financial Data Schedule Filed with this Form 10-K