<PAGE> 1
U.S SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - Q
-----------
Quarterly Report Under Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For The Quarter Ended November 30, 1999
Commission File Number 001 - 12673
RIVIERA TOOL COMPANY
A Michigan Corporation
I.R.S. Employer Identification No. 38- 2828870
5460 Executive Parkway S.E., Grand Rapids, Michigan 49512
Telephone: (616) 698 - 2100
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ -----
The number of Common Shares outstanding at January 12, 2000 was 3,218,744.
1.
<PAGE> 2
PART I
FINANCIAL INFORMATION
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
Item 1. Financial Statements
Balance Sheets as of November 30, 1999 and August 31, 1999........................................ 3
Statements of Income for the Three Months Ended November 30, 1999 and 1998........................
4
Statements of Cash Flows for the Three Months Ended November 30, 1999 and 1998....................
5
Notes to Financial Statements..................................................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............
8
Item 3. Quantitative and Qualitative Disclosures about Market Risk - None --
</TABLE>
PART II
OTHER INFORMATION
INDEX
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - On November 24, 1999, the Company's
Board of Directors declared a five-percent common stock
dividend, payable on February 1, 2000 to all shareholders of
record on December 29, 1999.
Item 3. Default Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - The
following matters were submitted to a vote of the Company's
common shareholders at its annual shareholders meeting on
December 15, 1999:
a. The following director was elected to serve until the meeting of
shareholders in 2002 and until his successor is elected (amounts
shown in parentheses represent the number of votes cast for,
against or withheld, and abstentions, respectively):
(i) Kenneth K. Rieth ( 2,565,362, 3,655 )
The following directors of the Company continued until the annual
meeting of shareholders in the year indicated parenthetically and
until their successors are elected:
John C. Kennedy (2000) Thomas H. Highley (2000)
Leonard H. Wood (2001) Daniel W. Terpsma (2001)
b. Ratification of Selection of Independent Auditors-(amounts shown
in parentheses represent the number of votes cast for, against or
withheld, and abstentions, respectively): (2,558,618, 7,774)
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8 - K.
6(a) Exhibits - None
6(b) Reports on Form 8-K - None.
Exhibit 27 Financial Data Schedule
2.
<PAGE> 3
RIVIERA TOOL COMPANY
FINANCIAL STATEMENTS
BALANCE SHEETS
<TABLE>
<CAPTION>
NOVEMBER 30, AUGUST 31, 1999
ASSETS 1999 1999
------ ------------------- -------------------
CURRENT ASSETS NOTE (UNAUDITED)
- -------------- ---- ------------------- -------------------
<S> <C> <C> <C>
Cash.................................................................... $ 160,907 $ 113,183
Accounts receivable..................................................... 6,232,873 6,821,519
Costs and estimated gross profit in excess
of billings on contracts in process................................ 2 7,770,118 7,829,744
Inventories............................................................. 451,167 451,167
Prepaid expenses and other current assets............................... 212,816 84,189
------------------ ------------------
Total current assets.......................................... 14,827,881 15,299,802
PROPERTY, PLANT AND EQUIPMENT, NET........................................ 3 17,887,315 17,941,659
PERISHABLE TOOLING........................................................ 582,890 550,634
OTHER ASSETS.............................................................. 135,770 135,770
------------------ ------------------
Total assets.................................................. $ 33,433,856 $ 33,927,865
================== ==================
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt....................................... 4 $ 1,889,415 $ 1,889,415
Accounts payable........................................................ 1,266,756 1,398,483
Accrued liabilities..................................................... 541,280 1,030,984
------------------ ------------------
Total Current liabilities..................................... 3,697,451 4,318,882
LONG-TERM DEBT............................................................ 4 8,825,697 9,239,636
DEFERRED TAX LIABILITY.................................................... 1,568,753 1,386,278
ACCRUED LEASE EXPENSE..................................................... 675,744 671,073
------------------ ------------------
Total liabilities............................................. 14,767,645 15,615,869
------------------ ------------------
PREFERRED STOCK - no par value, $100 mandatory redemption value:
Authorized - 5,000 shares
Issued and outstanding - no shares................................. -- --
STOCKHOLDERS' EQUITY:
Preferred Stock - no par value,
Authorized - 200,000 shares
Issued and outstanding - no shares................................... -- --
Common stock - No par value:
Authorized - 9,785,575 shares 1
Issued and outstanding - 3,218,744 shares at
November 30, 1999 and 3,218,744 shares at
August 31, 1999...................................................... 14,512,185 14,512,185
Retained earnings....................................................... 1 4,154,026 3,799,811
------------------ ------------------
Total stockholders' equity.................................... 18,666,211 18,311,996
================== ==================
Total liabilities and stockholders'
Equity...................................................... $ 33,433,856 $ 33,927,865
================== ==================
</TABLE>
See notes to financial statements
3.
<PAGE> 4
RIVIERA TOOL COMPANY
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
NOVEMBER 30
-------------------------------------
1999 1998
----------------- ---------------
<S> <C> <C>
SALES.................................................................. $ 5,855,021 $ 5,556,996
COST OF SALES.......................................................... 4,658,033 4,215,868
---------------- ---------------
GROSS PROFIT..................................................... 1,196,988 1,341,128
SELLING AND
ADMINISTRATIVE EXPENSES............................................ 454,489 435,284
---------------- ---------------
INCOME FROM OPERATIONS........................................... 742,499 905,844
OTHER INCOME/(EXPENSE)
INTEREST EXPENSE.................................................... (205,809) (122,978)
OTHER INCOME........................................................ -- 1,570
---------------- ---------------
TOTAL OTHER EXPENSE - NET........................................ (205,809) (121,408)
INCOME BEFORE TAXES ON INCOME.......................................... 536,690 784,436
INCOME TAX EXPENSE..................................................... 182,475 266,708
---------------- ---------------
NET INCOME AVAILABLE FOR COMMON
SHARES.............................................................. $ 354,215 $ 517,728
================ ===============
BASIC EARNINGS PER COMMON SHARE........................................ $ .11 $ .16
================ ===============
BASIC COMMON SHARES OUTSTANDING........................................ 3,218,744 3,218,744
================ ===============
DILUTED EARNINGS PER COMMON SHARE...................................... $ .11 $ .16
================ ===============
DILUTED COMMON SHARES OUTSTANDING...................................... 3,218,744 3,218,744
================ ===============
</TABLE>
See notes to financial statements
4.
<PAGE> 5
RIVIERA TOOL COMPANY
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
NOVEMBER 30,
----------------------------------------
1999 1998
------------------ ----------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income........................................................... $ 354,215 $ 517,728
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization.................................... 472,766 407,977
Deferred taxes................................................... 182,475 266,708
(Increase) decrease in assets:
Accounts receivable........................................... 588,646 (1,191,836)
Costs and estimated gross profit in
excess of billings on contracts in
process....................................................... 59,626 (2,473,862)
Perishable tooling............................................ (32,256) 9,858
Prepaid expenses and other current assets..................... (128,627) (142,350)
Increase (decrease) in liabilities:
Accounts payable.............................................. (131,727) 5,408
Accrued lease expense......................................... 4,671 7,009
Accrued liabilities........................................... (489,704) 64,805
----------------- ----------------
Net cash provided by(used in) operating activities..................... $ 880,085 $ (2,528,555)
----------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment........................... (418,422) (863,686)
----------------- ----------------
Net cash used in investing activity.................................... $ (418,422) $ (863,686)
----------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal(payments)/proceeds from revolving
credit line........................................................ (30,710) 1,118,843
Principal(payments)/proceeds from
long-term debt..................................................... (383,229) 2,299,075
----------------- ----------------
Net cash provided by (used in) financing activities....................
$ (413,939) $ 3,417,918
----------------- ----------------
NET INCREASE IN CASH................................................... $ 47,724 $ 25,677
----------------- ----------------
CASH - Beginning of Period............................................. 113,183 4,206
----------------- ----------------
CASH - End of Period................................................... $ 160,907 $ 29,883
================= ================
</TABLE>
See notes to financial statements
5.
<PAGE> 6
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1999
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements (the "Financial
Statements") of Riviera Tool Company (the "Company") have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission.
Accordingly, the Financial Statements do not include all the information and
footnotes normally included in the annual financial statements prepared in
accordance with generally accepted accounting principles.
In the opinion of management, the Financial Statements reflect all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
such information in accordance with generally accepted accounting principles.
These Financial Statements should be read in conjunction with the financial
statements and footnotes thereto included in the Company's Form 10-K dated
November 18, 1999, for the fiscal year ended August 31, 1999.
The results of operations for the three month periods ended November 30, 1999
are not indicative of the results to be expected for the full year.
NOTE 2 - COSTS AND BILLINGS ON CONTRACTS IN PROCESS
Costs and billings on contracts in process are as follows:
<TABLE>
<CAPTION>
NOVEMBER 30, AUGUST 31, 1999
1999 1999
----------------- -----------------
<S> <C> <C>
Costs incurred on contracts in process under the
percentage of completion method..................................... $ 15,444,379 $ 11,882,615
Estimated gross profit................................................. 3,604,000 3,418,000
----------------- -----------------
Total.......................................................... 19,048,379 15,301,015
Less progress payments received and progress
billings to date.................................................... 11,881,241 7,532,371
Plus costs incurred on contracts in process under
the completed contract method....................................... 602,980 61,600
----------------- -----------------
Costs and estimated gross profit in excess
of billings on contracts in process.......................... $ 7,770,118 $ 7,829,744
================= =================
</TABLE>
Included in estimated gross profit for August 31, 1999 and November 30, 1999 are
jobs with losses accrued of $60,912 and $145,169, respectively.
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30, AUGUST 31,
1999 1999
----------------- ---------------
<S> <C> <C>
Lease and leasehold improvements................................................ $ 1,635,267 $ 1,635,476
Office furniture and fixtures................................................... 203,514 203,514
Machinery and equipment......................................................... 21,885,361 21,781,835
Construction in Process......................................................... 722,739 434,269
Computer equipment and software................................................. 1,950,491 1,923,856
Transportation equipment........................................................ 126,365 126,365
----------------- ---------------
Total cost................................................................. 26,523,737 26,105,315
Accumulated depreciation and amortization....................................... 8,636,422 8,163,656
----------------- ---------------
Net carrying amount........................................................ $ 17,887,315 $ 17,941,659
================= ===============
</TABLE>
6.
<PAGE> 7
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1999
NOTE 4 - LONG-TERM DEBT
The Company's long-term debt, which is subject to certain covenants discussed
below, consists of the following:
<TABLE>
<CAPTION>
NOVEMBER 30, AUGUST 31,
LONG-TERM DEBT 1999 1999
----------------- -----------------
<S> <C> <C>
Revolving bank working capital credit line, collateralized by substantially all
assets of the Company, provides for borrowing, subject to certain collateral
requirements of up to $10.0 million, and bears interest, payable monthly, at
.25% below the bank's prime rate or Libor plus 2.25% (as of November 30, 1999,
an effective rate of 8.0%), due December 1, 2000. The agreement requires a
commitment fee of .25% per annum on the average daily unused portion of the
revolving credit line.......................................................... $ 2,001,784 $ 2,032,494
Note payable to bank, collateralized by substantially all assets of the Company,
payable in monthly installments of $54,166.67 plus interest of .25% below the
bank's prime rate or Libor plus 2.25% (as of November 30, 1999,an effective rate
of 8.0%), due July 19, 2002.................................................... 1,679,167 1,841,667
Note payable to bank, collateralized by specific assets of the Company, payable
in monthly installments of $55,566, plus simple interest of 7.26%, due December
31, 2003....................................................................... 3,444,440 3,611,108
Non-revolving, $3,271,000 equipment line of credit, collateralized by specific
assets of the Company, payable in monthly installments of $38,941 plus interest
at .25% below the bank's prime rate (as of November 30, 1999, an effective rate
of 8.0%) due November 1, 2004.................................................. 2,623,055 2,643,782
Note payable to bank, collateralized by specific assets of the Company, payable
in monthly installments of $16,666, plus simple interest of 8.04%, due
September 1, 2004.............................................................. 966,666 1,000,000
--------------- ---------------
Total long-term debt...................................................... 10,715,112 11,129,051
Total current portion..................................................... 1,889,415 1,889,415
--------------- ---------------
Long-term debt - Net...................................................... $ 8,825,697 $ 9,239,636
=============== ===============
</TABLE>
The debt agreements require the company to maintain certain ratios/levels of
tangible net worth, working capital, liabilities to tangible net worth, earnings
before interest, taxes, depreciation and amortization to debt service and
prohibit the payment of common stock cash dividends. The Company was in
compliance with all of these covenants.
7.
<PAGE> 8
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1999
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table presents, for the periods indicated, the components of the
Company's Statement of Income as a percentage of sales.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
NOVEMBER 30
-----------------------------
1999 1998
------------- ----------
<S> <C> <C>
SALES................................................................... 100.0% 100.0%
COST OF SALES........................................................... 79.5% 75.9%
----------- ----------
GROSS PROFIT............................................... 20.5% 24.1%
SELLING AND ADMINISTRATIVE EXPENSE...................................... 7.8% 7.8%
----------- ----------
INCOME FROM OPERATIONS.................................... 12.7% 16.3%
OTHER INCOME/ (EXPENSE)
INTEREST EXPENSE...................................................... (3.5%) (2.2%)
OTHER INCOME.......................................................... -- --
----------- ----------
TOTAL OTHER EXPENSE - NET...................................... (3.5%) (2.2%)
INCOME BEFORE TAXES ON INCOME........................................... 9.2% 14.1%
INCOME TAXES............................................................ 3.1% 4.8%
----------- ----------
NET INCOME.................................................. 6.1% 9.3%
=========== ==========
</TABLE>
THE MATTERS DISCUSSED IN THIS QUARTERLY REPORT ON FORM 10-Q CONTAIN CERTAIN
FORWARD-LOOKING STATEMENTS. FOR THIS PURPOSE, ANY STATEMENTS CONTAINED IN THIS
REPORT THAT ARE NOT STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE
FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING THE FOREGOING, WORDS SUCH AS "MAY,"
"WILL," "EXPECT," BELIEVE," "ANTICIPATE," OR "CONTINUE," THE NEGATIVE OR OTHER
VARIATION THEREOF, OR COMPARABLE TERMINOLOGY, ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS. THESE STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL
RISKS AND UNCERTAINTIES, AND ACTUAL RESULTS MAY DIFFER MATERIALLY DEPENDING UPON
A VARIETY OF FACTORS, INCLUDING CONTINUED MARKET DEMAND FOR THE TYPES OF
PRODUCTS AND SERVICES PRODUCED AND SOLD BY THE COMPANY.
COMPARISON OF THE THREE MONTHS ENDED NOVEMBER 30, 1999 TO THE THREE MONTHS ENDED
NOVEMBER 30, 1998.
REVENUES - Revenues for the three months ended November 30, 1999 totaled $5.9
million as compared to $5.6 million for the three months ended November 30,
1998, a increase of $0.3 million or 5%. The Company in previous periods has been
constrained in revenue growth due to its limited manufacturing capacity. This
constraint resulted in the Company implementing a $10.6 million engineering and
manufacturing expansion to support increased future revenues. This expansion was
completed in August 1999. The Company has recently begun marketing this
additional capacity to its customers. Due to the fact that the contracts the
Company receives are long-term in nature, this additional
8.
<PAGE> 9
capacity has not had a significant impact on revenues. However, management
continues to believe growth opportunities exist and the Company will be
successful in securing additional volume utilizing the increased manufacturing
capacity. Additionally, certain labor and interest costs incurred in fiscal 1999
were required to be capitalized as part of the capital expansion, which in the
first quarter and throughout the remainder of fiscal 2000 will negatively impact
the comparison of fiscal 2000 and fiscal 1999 results of operations. The Company
continues to expect the increase in revenue and gross profit to be more than
offset the depreciation and interest expense resulting from the 1998 and 1999
capital expansion.
COST OF SALES - Cost of sales was $4.7 million or 79.6% of sales for the three
months ended November 30, 1999 as compared to $4.2 million or 75.9% of sales for
the three months ended November 30, 1998. The decrease in gross margin was
largely due to an increase in the Company's direct costs expense of $341,000 or
5.8% of sales, an increase in engineering expense of $31,000 or 0.5% of sales
and an increase in manufacturing overhead expense of $70,000 or 1.2% of sales.
The increase in direct cost expense was primarily due to an increase of $377,000
in labor expense for the first three months ended November 30, 1999 over the
same period last year. The increase in labor was due to the Company incurring
more labor hours during the first quarter ended November 30, 1999 over the same
period last year. Additionally, during the first quarter ended November 30, 1998
the Company had direct labor personnel involved in completing the manufacturing
expansion and accordingly such labor was capitalized as a part of the expansion.
During the first quarter ended November 30, 1999, the amount of such capitalized
labor was lower in comparison to the previous comparable quarter and resulted in
the labor expense increase this year.
Engineering expense increased from $384,000 or 6.9% of sales for the three
months ended November 30, 1998 to $415,000 or 7.1% of sales for the three months
ended November 30, 1999. This change was due to increases in Engineering,
Project Management, and CNC Programmers Salaries expense as well as Engineering
Supplies and CAD Computer maintenance expense totaling $34,000.
Manufacturing overhead expense increased from $1,480,000 or 26.6% of sales for
the three months ended November 30, 1998 to $1,550,000 or 26.5% of sales for the
three months ended November 30, 1999. The largest increase in the first three
months of 1999 as compared to 1998 was the increase of $81,000 in depreciation
expense. This increase in depreciation expense was due to the Company's capital
expansion program, which resulted in a $5.5 million decrease in construction in
process and a $10.4 million increase in Machinery and Equipment as of November
30, 1999 as compared to November 30, 1998
SELLING & ADMINISTRATIVE EXPENSES - Selling and administrative expenses
increased from approximately $435,000 or 7.8% of sales for the three months
ended November 30, 1998 to approximately $454,000 or 7.8% of sales for the three
months ended November 30, 1999. This increase was primarily due to increased
marketing activities.
INTEREST EXPENSE - Interest expense for the three months ended November 30, 1999
was approximately $206,000 as compared to approximately $123,000 for the three
months ended November 30, 1998. As a percentage of sales, interest expense
increased from 2.2% in the quarter ended November 30, 1998 as compared to 3.5%
for the quarter ended November 30, 1999.
The increase in interest expense was a result of the Company capitalizing
$120,800 of interest on its construction in process during the quarter ended
November 30, 1998.
9.
<PAGE> 10
FEDERAL INCOME TAXES
The effective federal income tax rate was 34% for the three months ended
November 30, 1998 and 1999. As of August 31, 1999, the Company had approximately
$187,000 of alternative minimum tax credits that do not expire.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended November 30, 1999, the Company's cash from
operating activities was $880,085. From investing activities, the Company
acquired additional machinery and equipment of $418,422. From financing
activities, the Company used $413,939 to reduce long-term debt. The Company
believes that the unused portion of the revolving bank working capital credit
line and the funds generated from operations will be sufficient to cover
anticipated cash needs through fiscal 2000. However, depending on the level of
future sales, an expanded credit line may be necessary to finance increases in
trade accounts receivable and contracts in process. The Company believes it will
be able to obtain such expanded credit line, if required, on generally the same
terms as the existing credit line.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: January 14, 2000
Riviera Tool Company
/s/ Kenneth K. Rieth
----------------------
Kenneth K. Rieth
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Peter C. Canepa
----------------------
Peter C. Canepa
Chief Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)
10.
<PAGE> 11
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Part I
financial information, Item 1, Financial Statements and is qualified in its
entirety by reference to such SEC Form 10Q for the first quarter ended
November 30, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-2000
<PERIOD-START> SEP-01-1999
<PERIOD-END> NOV-30-1999
<CASH> 160,907
<SECURITIES> 0
<RECEIVABLES> 6,232,873
<ALLOWANCES> 0
<INVENTORY> 8,221,285
<CURRENT-ASSETS> 14,827,881
<PP&E> 26,523,737
<DEPRECIATION> 8,636,422
<TOTAL-ASSETS> 33,433,856
<CURRENT-LIABILITIES> 4,302,452
<BONDS> 8,825,697
0
0
<COMMON> 14,512,185
<OTHER-SE> 4,154,026
<TOTAL-LIABILITY-AND-EQUITY> 33,433,856
<SALES> 5,855,021
<TOTAL-REVENUES> 5,855,021
<CGS> 4,658,033
<TOTAL-COSTS> 454,489
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 205,809
<INCOME-PRETAX> 536,690
<INCOME-TAX> 182,475
<INCOME-CONTINUING> 354,215
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 354,215
<EPS-BASIC> .11
<EPS-DILUTED> .11
</TABLE>
