<PAGE> 1
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 February 29, 2000
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 April 14, 2000 was 3,379,609.
1.
<PAGE> 2
PART I
FINANCIAL INFORMATION
INDEX
Page
No.
Item 1. Financial Statements
Balance Sheets as of February 29, 2000 and August 31, 1999 3
Statements of Operations for the Three Months and Six Months
Ended February 29,2000 and February 28,1999 4
Statements of Cash Flows for the Six Months Ended February 29,
2000 and February 28, 1999 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk - --
None
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.
On February 1, 2000 an additional 160,865 common shares were issued
as a stock dividend.
Item 3. Default Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
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>
FEBRUARY 29, AUGUST 31,
ASSETS 2000 1999
--------------- ------------
CURRENT ASSETS NOTE (UNAUDITED) (AUDITED)
--------------- ------------
<S> <C> <C> <C>
Cash $ 8,082 $ 113,183
Accounts receivable 7,256,987 6,821,519
Costs and estimated gross profit in excess
of billings on contracts in process 2 7,233,582 7,829,744
Inventories 431,167 451,167
Prepaid expenses and other current assets 246,567 84,189
--------------- ------------
Total current assets 15,176,385 15,299,802
PROPERTY, PLANT AND EQUIPMENT, NET 3 17,813,951 17,941,659
PERISHABLE TOOLING 581,026 550,634
OTHER ASSETS 210,770 135,770
--------------- ------------
Total assets $ 33,782,132 $ 33,927,865
=============== ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt 4 $ 1,983,962 $ 1,889,415
Accounts payable 1,181,424 1,398,483
Accrued liabilities 619,167 1,030,984
--------------- ------------
Total Current liabilities 3,784,553 4,318,882
LONG-TERM DEBT 4 10,476,957 9,239,636
DEFERRED TAX LIABILITY 837,681 1,386,278
ACCRUED LEASE EXPENSE 680,416 671,073
--------------- ------------
Total liabilities 15,779,607 15,615,869
--------------- ------------
PREFERRED STOCK - no par value, $100 mandatory redemption value:
Authorized - 5,000 shares
Issued and outstanding - None -- --
STOCKHOLDERS' EQUITY:
Preferred Stock - no par value,
Authorized - 200,000 shares
Issued and outstanding - None -- --
Common stock - No par value:
Authorized - 9,785,575 shares 1
Issued and outstanding - 3,379,609 shares at
February 29, 2000 and 3,218,744 shares at
August 31, 1999 15,115,466 14,512,185
Retained earnings 1 2,887,059 3,799,811
--------------- ------------
Total stockholders' equity 18,002,525 18,311,996
--------------- ------------
Total liabilities and stockholders' equity $ 33,782,132 $ 33,927,865
=============== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3.
<PAGE> 4
RIVIERA TOOL COMPANY
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED ENDED
----------------------------- -------------------------------
FEBRUARY 29, FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
2000 1999 2000 1999
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
SALES $ 5,175,600 $ 5,071,088 $ 11,030,621 $ 10,628,084
COST OF SALES 5,148,571 3,439,293 9,806,604 7,655,161
------------ ------------- ------------- -------------
GROSS PROFIT 27,029 1,631,795 1,224,017 2,972,923
SELLING AND ADMINISTRATIVE EXPENSES 778,445 551,034 1,232,934 986,318
------------ ------------- ------------- -------------
INCOME (LOSS) FROM OPERATIONS (751,416) 1,080,761 (8,917) 1,986,605
OTHER INCOME (EXPENSE)
Interest expense (203,479) (109,424) (408,086) (232,402)
Other expense -- -- (51,893) --
Gain (Loss) on asset disposals (50,691) 4,872 -- 6,442
------------ ------------- ------------- -------------
TOTAL OTHER EXPENSE - NET (254,170) (104,552) (457,979) (225,960)
INCOME (LOSS) BEFORE TAXES ON INCOME (1,005,586) 976,209 (468,896) 1,760,645
------------ ------------- ------------- -------------
INCOME TAX EXPENSE (CREDIT) (341,899) 280,937 (159,425) 547,645
------------ ------------- ------------- -------------
NET INCOME (LOSS) AVAILABLE FOR COMMON SHARES $ (663,687) $ 695,272 $ (309,471) $ 1,213,000
============ ============= ============= =============
BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE $ (.20) $ .21 $ (.10) $ .37
============ ============= ============= =============
BASIC AND DILUTED COMMON SHARES OUTSTANDING 3,243,629 3,243,629 3,243,629 3,243,629
============ ============= ============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4.
<PAGE> 5
RIVIERA TOOL COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
----------------------------------------
FEBRUARY 29, FEBRUARY 28,
2000 1999
------------------ -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (309,471) $ 1,213,000
Adjustments to reconcile net income(loss) to net cash
from operating activities:
Depreciation and amortization 945,854 519,977
Loss (Gain) on disposal of assets 50,940 --
Deferred taxes (548,597) 625,203
(Increase) decrease in assets:
Accounts receivable (435,468) (2,131,546)
Costs and estimated gross profit in
excess of billings on contracts in
process 596,162 (1,801,380)
Inventory 20,000
Perishable tooling (30,392) 47,390
Prepaid expenses and other current assets (162,378) (130,844)
Increase (decrease) in liabilities:
Accounts payable (217,058) 2,906,040
Accrued lease expense 9,343 44,318
Accrued liabilities (411,821) 14,017
------------------ -----------------
Net Cash provided by (used in) operating activities $ (492,886) $ 1,306,175
------------------ -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease (increase) in other assets (75,000) --
Additions to property, plant and equipment (869,083) (4,664,983)
------------------ -----------------
Net cash used in investing activity $ (944,083) $ (4,664,983)
------------------ -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from revolving credit line 2,229,300 2,453,814
Principal (payments)/proceeds from long-term
debt (897,432) 900,788
------------------ -----------------
Net cash provided by financing activities $ 1,331,868 $ 3,354,602
------------------ -----------------
NET INCREASE IN CASH $ (105,001) $ (4,206)
------------------ -----------------
CASH - Beginning of Period 113,183 4,206
------------------ -----------------
CASH - End of Period $ 8,082 $ --
================== =================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5.
<PAGE> 6
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 29, 2000
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 and six month periods ended February 29,
2000 are not indicative of the results to be expected for the full year.
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. On February 1, 2000, 160,865 common shares were issued as
a stock dividend. All share and per share data presented for the periods ending
February 29, 2000 and February 28, 1999 have been adjusted to give effect to the
five percent dividend. On November 24, 1999, the Company's Board of Directors
granted stock options for 75,000 shares under the 1996 Incentive Stock Option
Plan, as amended, and 53,000 shares under the 1998 Key Employee Stock Option
Plan.
NOTE 2 - COSTS AND BILLINGS ON CONTRACTS IN PROCESS
Costs and billings on contracts in process are as follows:
<TABLE>
<CAPTION>
FEBRUARY 29, AUGUST 31,
2000 1999
------------------ -----------------
<S> <C> <C>
Costs incurred on contracts in process under the
percentage of completion method $ 18,655,610 $ 11,882,615
Estimated gross profit 2,636,185 3,418,400
------------------ -----------------
Total 21,291,795 15,301,015
Less progress payments received and progress
billings to date 14,058,213 7,532,371
Plus costs incurred on contracts in process under
the completed contract method -- 61,100
------------------ -----------------
Costs and estimated gross profit in excess
of billings on contracts in process $ 7,233,582 $ 7,829,744
================== =================
</TABLE>
Included in estimated gross profit for February 29, 2000 and August 31, 1999 are
jobs with losses accrued of $508,664 and $60,912, respectively.
6.
<PAGE> 7
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 29, 2000
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
FEBRUARY 29, AUGUST 31,
2000 1999
------------------ ----------------
<S> <C> <C>
Lease and leasehold improvements $ 1,293,844 $ 1,635,476
Office furniture and fixture 194,256 203,514
Machinery and equipment 21,546,139 21,781,835
Construction in Process 840,195 434,269
Computer equipment and software 1,886,195 1,923,856
Transportation equipment 126,365 126,365
------------------ ----------------
Total cost 25,886,994 26,105,315
Accumulated depreciation and amortization 8,073,043 8,163,656
------------------ ----------------
Net carrying amount $ 17,813,951 $ 17,941,659
================== ================
</TABLE>
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>
FEBRUARY 29, AUGUST 31,
2000 1999
-------------- ------------
<S> <C> <C>
REVOLVING WORKING CAPITAL CREDIT LINE
The Revolving Working Capital Credit Line is collateralized by
substantially all assets of the Company and provides for borrowing, subject
to certain collateral requirements of up to $10.0 million, is due September
1, 2001, and bears interest, payable monthly as follows:
London Interbank Offered Rate ("LIBOR") plus 2.25% (as of February 29,
2000, an effective rate of 8.6%). The LIBOR interest rate expires
August 24, 2000 at which time the interest rate will default to .25%
below the bank's prime rate or at LIBOR plus 2.25% $ 1,500,000 $ --
The bank's prime rate less .25%(as of February 29, 2000, an effective
rate of 8.5%) 2,761,796 2,032,494
NOTE PAYABLE TO BANK
The Note Payable to Bank is collateralized by substantially all assets of
the Company, is due July 19, 2002, and is payable in monthly principal
installments of $54,166.67 plus interest as follows:
LIBOR plus 2.25% (as of February 29, 2000, an effective rate of 8.6%).
The LIBOR interest rate expires August 24, 2000 at which time the
interest rate will default to .25% below the bank's prime rate or at
LIBOR plus 2.25% 1,000,000 --
The bank's prime rate less .25% (as of February 29, 2000, an effective
rate of 8.5%) 516,667 1,841,667
</TABLE>
7.
<PAGE> 8
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 29, 2000
NOTE 4 - LONG-TERM DEBT -- CONTINUED
<TABLE>
<CAPTION>
FEBRUARY 29, AUGUST 31,
2000 1999
------------------- -----------------
<S> <C> <C>
NON-REVOLVING EQUIPMENT LINE OF CREDIT
$3,271,000 equipment line of credit collateralized by specific assets of the
Company, is due November 1, 2004, and is payable in monthly principal
installments of $38,941 plus interest as follows:
LIBOR plus 2.25% (as of February 29, 2000, an effective rate of 8.6%).
The LIBOR interest rate expires August 24, 2000 at which time the
interest rate will default to .25% below the bank's prime rate or at
LIBOR plus 2.25% 2,000,000 --
The bank's prime rate less .25% (as of February 29, 2000, an effective
rate of 8.5%), due December 1, 2000 488,019 2,643,782
NOTE PAYABLE TO BANK
The Note Payable to Bank is collateralized by specific assets of the Company,
payable in monthly installments of $55,566, plus simple interest of 7.26%, due
December 31, 2003 3,277,770 3,611,108
NOTE PAYABLE TO BANK
The Note Payable to Bank is collateralized by specific assets of the Company,
payable in monthly installments of $16,666, plus simple interest of 8.04%, due
September 1, 2004 916,667 1,000,000
----------------- -----------------
Total long-term debt 12,460,919 11,129,051
Total current portion 1,983,962 1,889,415
----------------- -----------------
Long-term debt - Net $ 10,476,957 $ 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.
8.
<PAGE> 9
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 Operations as a percentage of sales.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX
ENDED MONTHS ENDED
-------------------------- --------------------------
FEB.29, FEB.28, FEB.29, FEB.28,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
SALES 100.0% 100.0% 100.0% 100.0%
COST OF SALES 99.5% 67.8% 88.9% 72.0%
----------- ----------- ----------- -----------
GROSS PROFIT 0.5% 32.2% 11.1% 28.0%
SELLING AND ADMINISTRATIVE EXPENSE 15.0% 10.9% 11.2% 9.3%
----------- ----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS (14.5%) 21.3% (0.1%) 18.7%
OTHER INCOME (EXPENSE)
INTEREST EXPENSE (3.9%) (2.2%) (3.7%) (2.2%)
OTHER -- -- -- --
GAIN (LOSS) ON ASSET DISPOSALS (1.0%) .1% (0.5%) .1%
----------- ----------- ----------- -----------
TOTAL OTHER EXPENSE - NET (4.9%) (2.1%) (4.2%) (2.1%)
INCOME (LOSS) BEFORE TAXES ON INCOME (19.4%) 19.3% (4.3%) 16.6%
INCOME TAX EXPENSE (CREDIT) (6.6%) 5.7% (2.8%) 5.2%
----------- ----------- ----------- -----------
NET INCOME (LOSS) (12.8%) 13.6% (2.8%) 11.4%
=========== =========== =========== ===========
</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 FEBRUARY 29, 2000 TO THE THREE MONTHS ENDED
FEBRUARY 28, 1999.
REVENUES - Revenues for the three months ended February 29, 2000 totaled $5.2
million as compared to $5.1 million for the three months ended February 28,
1999, a increase of $0.1 million or 2%. During the second quarter of 2000 the
Company realized operating margins on jobs shipped of approximately $206,000 as
compared to $765,440 during the second quarter of 1999. In addition, the Company
increased its jobs with losses in estimated gross profit from $145,169 as of
November 30, 1999 to $508,664 as of February 29, 2000. These items
9.
<PAGE> 10
combined negatively impacted revenues for the second quarter of 2000 by
approximately $923,000.
Prior to fiscal 2000, the Company was constrained in revenue growth due to
limited manufacturing capacity. This constraint was alleviated by the Company's
$10.6 million engineering and manufacturing capital expansion, which was
completed in August 1999. The Company has since been marketing this additional
capacity to its customers. Due to the fact that the contracts the Company
receives are long-term in nature, the marketing efforts have not yet generated
additional revenues. However, recently awarded contracts to the Company have
resulted in a record backlog, which will be recorded as revenue in the remainder
of fiscal year 2000 and in fiscal year 2001. Management continues to believe
additional growth opportunities exist and the Company will continue to 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 and second quarters and throughout the remainder of fiscal 2000 will
negatively impact the comparative results of operations. The Company continues
to expect the increase in revenue and gross profit to more than offset the
depreciation and interest expense resulting from the engineering and
manufacturing capital expansion.
COST OF SALES - Cost of sales were $5.2 million or 99.5% of sales for the three
months ended February 29, 2000 as compared to $3.4 million or 67.8% of sales for
the three months ended February 28, 1999.
The gross margin decrease was largely due to increases in the Company's direct
costs expense of $1,388,000 or 26.2% of sales, primarily due to negative
adjustments in the expected gross margin on certain contracts and significant
increases in outside machining and overtime expenses, and $301,000 or 5.8% in
manufacturing overhead expense.
The increase in direct cost expense was primarily due to an increase of $799,000
in labor expense for the three months ended February 28, 2000 over the same
period last year. The increase in labor was due to the Company incurring more
labor hours, at overtime rates, during the quarter ended February 29, 2000 over
the same period last year, necessary to process the Company's additional
backlog. Additionally, during the quarter ended February 28, 1999 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 quarter ended February 29, 2000, the amount of such capitalized labor was
lower in comparison to the previous comparable quarter and resulted in the labor
expense increase this quarter.
Direct materials and outside services increased by $589,000 for the quarter
ended February 29, 2000 over the same period last year. The largest increase was
in outside machining, an increase of $388,000, resulting from the Company's
product mix during the second quarter. This product mix created machining
requirements beyond the Company's capacity and resulted in outsourcing some
machining requirements. Services purchased increased by $127,000 for the quarter
ended February 29, 2000 over the same period last year. This increase was
largely due to the increased shipping costs resulting from shipping dies to and
from a certain customer facilities.
Manufacturing overhead expense increased from $1,491,000 or 29.4% of sales for
the three months ended February 28, 1999 to $1,792,000 or 34.6% of sales for the
three months ended February 29, 2000. This change was due to increases in
depreciation expense, perishable tooling costs, machinery repairs and
maintenance, and medical insurance premiums.
SELLING & ADMINISTRATIVE EXPENSES - Selling and administrative expenses
increased from approximately $551,000 or 10.9% of sales for the three months
10.
<PAGE> 11
ended February 28, 1999 to approximately $778,000 or 15.0% of sales for the
three months ended February 29, 2000. This increase was due to State of Michigan
Single Business Tax obligation increases, additional salaries expenses and
increased legal and professional expenses.
INTEREST EXPENSE - Interest expense for the three months ended February 29, 2000
was approximately $204,000 as compared to approximately $109,000 for the same
period last year. As a percentage of sales, interest expense increased from 2.2%
in the quarter ended February 28, 1999 as compared to 3.9% for the quarter ended
February 29, 2000.
The increase in interest expense was a result of the Company capitalizing
$153,000 of interest on its construction in process during the quarter ended
February 28, 1999.
COMPARISON OF THE SIX MONTHS ENDED FEBRUARY 29, 2000 TO THE SIX MONTHS ENDED
FEBRUARY 28, 1999
REVENUES - Revenues for the six months ended February 29, 2000 totaled $11.0
million as compared to $10.6 million for the six months ended February 28, 1999,
a increase of $0.4 million or 3.7%. During the six months ended February 29,
2000 the Company realized operating margins on jobs shipped of approximately
$277,000 as compared to $484,000 during the first six months of 1999. In
addition, the Company increased it's jobs with losses in estimated gross profit
from $60,912 as of August 31, 1999 to $508,664 as of February 29, 2000, for a
negative impact of revenue of $447,752. This compares to a decrease in its jobs
with losses in estimated gross profit from $309,565 as of August 31, 1998 to
$90,295 as of February 28, 1999, for a positive impact on revenue of $219,270.
These items combined negatively impacted revenues for the six months ended
February 29, 2000 by approximately $874,000.
COST OF SALES - Cost of sales were $9.8 million or 88.9% of sales for the six
months ended February 29, 2000 as compared to $7.7 million or 72.0% of sales for
the six months ended February 28, 1999.
The gross margin decrease was largely due to increases in the Company's direct
costs expense of $1,728,000 or 15.7% of sales and $371,000 or 2.3% in
manufacturing overhead expense offset by the minor increase in revenue growth
during the six months ended February 29, 2000.
The increase in direct cost expense was primarily due to an increase of
$1,176,000 in labor expense for the six months ended February 28, 2000 over the
same period last year. The increase in labor was due to the Company incurring
more labor hours during the six months ended February 29, 2000 over the same
period last year. Additionally, during the six months ended February 28, 1999
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 six months ended February 29, 2000, the amount of such
capitalized labor was lower in comparison to the previous comparable quarters
and resulted in the labor expense increase this year.
Direct materials and outside services increased by $552,000 for the six months
ended February 29, 2000 over the same period last year. The largest increase was
in outside machining, an increase of $583,000, resulting from the Company's
product mix during the six months ended February 29, 2000. This product mix
created machining requirements beyond the Company's capacity and resulted in
outsourcing some machining requirements. Services purchased increased by
$473,000 for the six months ended February 29, 2000 over the same
11.
<PAGE> 12
period last year. This increase was largely due to the increased shipping
requirements to and from certain customers.
Manufacturing overhead expense increased from $2,971,000 or 27.9% of sales for
the six months ended February 28, 1999 to $3,342,000 or 30.3% of sales for the
six months ended February 29, 2000. The largest increase was $162,000 in
depreciation expense, as a result of the Company's recent capital expansion
program. Other increases included additional perishable tooling expense,
machinery repairs and maintenance expenses, medical insurance premiums expenses
and payroll tax expenses.
SELLING & ADMINISTRATIVE EXPENSES - Selling and administrative expenses
increased from approximately $986,000 or 9.3% of sales for the six months ended
February 28, 1999 to approximately $1,233,000 or 11.1% of sales for the six
months ended February 29, 2000. This increase was due to additional State of
Michigan Single Business Tax obligations, salaries and wages expenses and legal
and professional expenses.
INTEREST EXPENSE - Interest expense for the six months ended February 29, 2000
was approximately $408,000 as compared to approximately $232,000 for the same
period last year. As a percentage of sales, interest expense increased from 2.2%
for the six months ended February 28, 1999 as compared to 3.7% for the six
months ended February 29, 2000.
The increase in interest expense was a result of the Company capitalizing
$274,000 of interest on its construction in process during the six months ended
February 28, 1999.
FEDERAL INCOME TAXES
The effective federal income tax rate was 34% for the six months ended February
29, 2000 as compared to 31.1% for the same period last year. 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 six months ended February 29, 2000, the Company's cash used in
operating activities was $492,887. The Company invested in additional machinery
and equipment of $869,083 and reduced its long-term debt obligations by
$877,432. The Company financed these activities by borrowing $2,229,300 on its
revolving bank working capital credit line. 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.
12.
<PAGE> 13
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: April 17, 2000
Riviera Tool Company
/s/ Kenneth K. Rieth /s/ Peter C. Canepa
- -------------------- --------------------
Kenneth K. Rieth Peter C. Canepa
President and Chief Executive Officer Chief Financial Officer,
(Principal Executive Officer) Treasurer and Secretary
(Principal Financial and
Accounting Officer)
13.
<PAGE> 14
Exhibit Index
-------------
Exhibit No. Description
- ----------- -----------
27 Financial Data Schedule
<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 SECOND QUARTER ENDED FEBRUARY
29, 2000.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-2000
<PERIOD-START> SEP-01-1999
<PERIOD-END> FEB-29-2000
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 7,256,987
<ALLOWANCES> 0
<INVENTORY> 7,664,749
<CURRENT-ASSETS> 15,176,385
<PP&E> 25,886,994
<DEPRECIATION> 8,073,043
<TOTAL-ASSETS> 33,782,132
<CURRENT-LIABILITIES> 3,784,554
<BONDS> 10,476,957
0
0
<COMMON> 15,115,466
<OTHER-SE> 2,887,059
<TOTAL-LIABILITY-AND-EQUITY> 33,782,132
<SALES> 11,030,621
<TOTAL-REVENUES> 11,030,621
<CGS> 9,806,604
<TOTAL-COSTS> 1,232,934
<OTHER-EXPENSES> 51,893
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 408,086
<INCOME-PRETAX> (468,896)
<INCOME-TAX> (159,425)
<INCOME-CONTINUING> (309,471)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (309,471)
<EPS-BASIC> (.10)
<EPS-DILUTED> (.10)
</TABLE>
