<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 September 30, 1996 Commission File Number 0-1227
---------------------
CHICAGO RIVET & MACHINE CO.
--------------------------------------------------------------
(Exact name of registrant as specified in its charter)
ILLINOIS 36-0904920
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
P. O. Box 3061
90l Frontenac Road
Naperville, Illinois 60566
- ------------------------------------ ------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (630) 357-8500
------------------------
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at September 30, 1996
------------ ---------------------------------
COMMON STOCK, $2.00 PAR VALUE 585,748 SHARES
- ----------------------------- --------------------
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
(1) Portions of the Company's Interim Report to Shareholders for the Quarter
ended September 30, 1996 are incorporated by reference in Part I of
this Report.
<PAGE> 2
CHICAGO RIVET & MACHINE CO.
INDEX
-----
PART I. FINANCIAL INFORMATION Page No.
--------
Balance Sheets at September 30, 1996 2-3
and December 31, 1995.
Statements of Operations for the Three and Nine
Months Ended September 30, 1996 and 1995. 4
Statements of Retained Earnings for the
Nine Months Ended September 30, 1996 and 1995. 5
Statements of Cash Flows for the Nine
Months Ended September 30, 1996 and 1995. 6
Notes to the Financial Statements. 7-8
Management's Discussion and Analysis of Financial
Condition and Results of Operations. 9-10
PART II. OTHER INFORMATION 11-15
<PAGE> 3
CHICAGO RIVET & MACHINE CO.
Balance Sheets
September 30, 1996 and December 31, 1995
Assets
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
--------------- ---------------
(unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 6,950,761 $ 1,349,093
Certificates of deposit 1,265,406 4,568,212
U. S. Government securities (Note 6) 396,913 2,703,533
Accounts receivable - net
of allowances 2,681,328 2,379,497
Inventories:
Raw materials 594,260 696,999
Work in process 768,095 900,888
Finished goods 2,135,346 2,504,519
----------- -----------
Total inventories 3,497,701 4,102,406
----------- -----------
Deferred income taxes (Note 4) 722,951 806,227
Other current assets 605,413 231,957
----------- -----------
Total Current Assets 16,120,473 16,140,925
----------- -----------
Goodwill, net of amortization 14,597 33,344
----------- -----------
Property, Plant and Equipment
At Cost:
Land and improvements 347,676 347,676
Buildings and improvements 3,756,545 3,715,915
Production equipment, leased
machines and other 14,330,316 14,233,135
----------- -----------
18,434,537 18,296,726
Less - Accumulated Depreciation 13,462,730 13,115,856
----------- -----------
Net Property, Plant and Equipment 4,971,807 5,180,870
----------- -----------
Total Assets $21,106,877 $21,355,139
=========== ===========
</TABLE>
See Notes to the Financial Statements
-2-
<PAGE> 4
CHICAGO RIVET & MACHINE CO.
Balance Sheets
September 30, 1996 and December 31, 1995
Liabilities and Shareholders' Equity
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- -------------
(unaudited)
<S> <C> <C>
Current Liabilities:
Accounts payable $ 792,170 $ 877,871
Contributions due profit - sharing
and pension plans 396,025 572,864
Wages and salaries 616,619 623,790
Other accrued expenses (Note 5) 931,704 744,410
Unearned lease revenue 76,819 70,120
Federal and state income taxes 92,234 541,045
----------- -----------
Total Current Liabilities 2,905,571 3,430,100
Deferred Income Taxes (Note 4) 1,031,190 1,041,930
Total Liabilities 3,936,761 4,472,030
Shareholders' Equity:
Preferred stock, no par value:
authorized 500,000 shares -
none outstanding ---- ----
Common stock, $2.00 par value:
authorized 2,000,000 shares -
issued and outstanding 585,748 1,171,496 1,171,496
Additional paid - in capital 460,252 460,252
Retained earnings 15,538,368 15,251,361
----------- -----------
Total Shareholders' Equity 17,170,116 16,883,109
----------- -----------
Commitments and Contingencies (Note 3) ---- ----
----------- -----------
Total Liabilities and Shareholders' Equity $21,106,877 $21,355,139
=========== ===========
</TABLE>
See Notes to the Financial Statements
-3-
<PAGE> 5
CHICAGO RIVET & MACHINE CO.
Statements of Operations
For the Three and Nine Months Ended September 30, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 4,700,714 $ 4,855,400 $15,974,223 $18,035,970
Lease revenue 106,314 135,960 319,149 396,794
----------- ----------- ----------- -----------
$ 4,807,028 $ 4,991,360 $16,293,372 $18,432,764
Cost of goods sold and costs
related to lease revenue 3,212,631 3,390,433 11,071,626 12,128,652
----------- ----------- ----------- ----------
Gross profit 1,594,397 1,600,927 5,221,746 6,304,112
Shipping, selling and
administrative expenses 1,092,249 1,097,267 3,523,185 3,575,170
Profit sharing and pension
expenses 45,000 45,000 150,000 270,000
----------- ----------- ----------- -----------
457,148 458,660 1,548,561 2,458,942
Other income and expenses:
Interest income from
U.S. Government securities
and certificates of deposit 95,614 85,500 282,937 228,455
Gain from sale of leased
machines and other equipment 62,339 9,809 62,589 10,918
Amortization expense (6,249) (6,249) (18,747) (18,747)
Other income, net of other expense 2,921 111 10,289 414
----------- ----------- ----------- -----------
Income before income taxes 611,773 547,831 1,885,629 2,679,982
Provision for income taxes 230,000 213,000 720,000 1,087,000
----------- ----------- ----------- -----------
Net income $ 381,773 $ 334,831 $ 1,165,629 $ 1,592,982
=========== =========== =========== ===========
Average common shares outstanding 585,748 586,548 585,748 586,613
=========== =========== =========== ===========
Per share data:
Net income per share $ .65 $ .58 $ 1.99 $ 2.72
=========== =========== =========== ===========
Cash dividends declared per share $ .30 $ .30 $ 1.50 $ 1.45
=========== =========== =========== ===========
</TABLE>
See Notes to the Financial Statements
-4-
<PAGE> 6
CHICAGO RIVET & MACHINE CO.
Statements of Retained Earnings
For the Nine Months Ended September 30, 1996 and 1995
(unaudited)
September 30,
---------------------------
1996 1995
----------- -----------
<TABLE>
<CAPTION>
<S> <C> <C>
Retained earnings at beginning
of period $15,251,361 $14,067,745
Net income for the nine months ended 1,165,629 1,592,982
Treasury stock retired at cost --- (2,641)
Cash dividends declared in the period -
$1.50 per share in 1996 and $1.45 per
share in 1995. (878,622) (850,639)
----------- -----------
Retained earnings at end of period $15,538,368 $14,807,447
=========== ==========
</TABLE>
See Notes to the Financial Statements
-5-
<PAGE> 7
CHICAGO RIVET & MACHINE CO.
Statements of Cash Flows
For the Nine Months Ended September 30, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
September 30,
-------------------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,165,629 $ 1,592,982
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 491,607 500,101
Net gain on the sale of properties (62,589) (10,918)
Deferred income taxes 72,536 19,834
Changes in current assets and current liabilities:
Accounts receivable, net (301,831) (103,568)
Inventories 604,706 592,781
Accounts payable (85,701) (427,757)
Other, net (812,284) 107,351
----------- -----------
Net cash provided by operating activities 1,072,073 2,270,806
----------- -----------
Cash flows from investing activities:
Capital expenditures (314,417) (226,419)
Net proceeds from the sale of properties 113,208 41,130
Proceeds from the maturity of
held-to-maturity securities 979,253 5,838,137
Purchases of held-to-maturity securities (687,120) (7,913,119)
Proceeds from the maturity of available
for sale securities 7,917,080 ----
Purchases of available for sale securities (2,599,787) ----
----------- -----------
Net cash used by investing activities 5,408,217 (2,260,271)
----------- -----------
Cash flows from financing activities:
Cash dividends (878,622) (850,639)
Purchase of Treasury Stock ---- (2,920)
----------- -----------
Net cash used by financing activities (878,622) (853,559)
----------- -----------
Net increase (decrease) in cash and
cash equivalents 5,601,668 (843,024)
Cash and cash equivalents at beginning
of period 1,349,093 2,225,445
----------- -----------
Cash and cash equivalents at end of period $ 6,950,761 $ 1,382,421
=========== ===========
Cash paid during the period for:
Income taxes $ 1,096,293 $ 1,156,930
</TABLE>
See Notes to the Financial Statements
-6-
<PAGE> 8
CHICAGO RIVET & MACHINE CO.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the
financial position of the Company as of September 30, 1996 and December 31,
1995 and the results of operations and changes in cash flow for the
indicated periods. The unaudited financial statements reflect certain
estimated inventories as of the end of the interim periods.
2. The results of operations for the nine month period ending September
30, 1996 are not necessarily indicative of the results to be expected for
the year.
3. The Company is, from time to time, involved in litigation, including
environmental claims, in the normal course of business. With regard to
environmental claims, the Company has been named by state and/or federal
government agencies as a "potentially responsible party" with respect to
certain waste disposal sites. As a potentially responsible party, the
Company may be considered jointly and severally liable, along with other
potentially responsible parties, for the cost of remediation of these waste
sites. The actual cost of remediation is presently unknown; however,
estimates currently available suggest that the cost of remediation at these
sites will be between $54 and $88 million. Despite the joint and several
nature of the liability, these proceedings are frequently resolved on the
basis of the quantity and type of waste disposed by the parties. The
actual amount of liability for the Company is unknown due to disagreement
concerning allocation of responsibility, uncertainties regarding the amount
of contribution that will be available from other parties and uncertainties
related to insurance coverage. After investigation of the quantities and
type of waste disposed at these sites, it is management's opinion that any
liability will not be material to the Company's financial condition.
Nevertheless, it is unlikely that the Company will not incur significant
costs associated with these proceedings and accordingly has recorded a
liability of $504,345 related to these matters. The adequacy of his
reserve will be reviewed periodically as more definitive cost information
becomes available.
4. At September 30, 1996 significant deferred tax liabilities and assets were
comprised of the following:
<TABLE>
<S> <C>
Depreciation $(1,056,246)
-----------
(1,056,246)
Environmental accruals 201,738
Inventory valuations 209,391
Accrued vacation 149,198
Accrued Pension 74,954
Doubtful accounts 46,557
Unearned rental revenue 30,728
Other, net 35,441
-----------
748,007
-----------
$ (308,239)
-----------
</TABLE>
-7-
<PAGE> 9
CHICAGO RIVET & MACHINE CO.
NOTES TO THE FINANCIAL STATEMENTS (CON'T.)
------------------------------------------
(Unaudited)
5. Other Accrued Expenses - accrued expenses consist of the following:
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
------------------ -----------------
<S> <C> <C>
Payroll taxes $ 74,578 $ 45,819
Property taxes 55,101 60,137
Environmental costs 504,345 638,875
Accrued insurance 222,613 ----
All other items 75,067 (421)
$ 931,704 $ 744,410
========== =========
</TABLE>
6. At September 30, 1996 the Company has recorded $396,913 of U. S. Government
Securities as held-to-maturity.
-8-
<PAGE> 10
CHICAGO RIVET & MACHINE CO.
---------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Sales and lease revenues totaled $4,807,028 during the recently ended
quarter, compared to $4,991,360 recorded during the third quarter of 1995, a
decline of approximately 3.7%. For the first nine months, sales and lease
revenues amounted to $16,293,372 in 1996, a decline of approximately 11.6% from
the year earlier total of $18,432,764. As previously reported, demand for all
of our products has consistently trailed the robust levels enjoyed during 1995.
While revenue comparisons between the third quarter of 1996 and 1995 are more
favorable than similar comparisons between the first two quarters of 1996 and
1995, our outlook for the balance of the year remains cautious. Revenue from
the sales of automatic rivet setting machines and related tools and parts has
shown a larger percentage decrease between the current period of 1996 and the
corresponding period of 1995.
Earnings for the third quarter of 1996 improved approximately 14% from
$334,831, or $.58 per share on 586,548 average shares outstanding during the
third quarter of 1995 to $381,771, or $.65 per share on 585,748 average shares
outstanding during the third quarter of this year. Earnings for the quarter
include a one-time gain of approximately $.06 per share from the sale of
certain leased rivet setting machinery to the current leaseholder. Earnings
for the first nine months of 1996 amounted to $1,165,629 or $1.99 per share on
585,748 average shares outstanding, down from the strong earnings of $1,592,982
or $2.72 per share on 586,613 average shares outstanding during the first nine
months of 1995. The change in year to date earnings reflects the effect of
reduced sales volumes recorded in 1996.
Working capital increased slightly during the third quarter to
approximately $13.2 million. As more fully discussed below, the Company plans
to borrow between approximately $8 and $9 million in connection with its
acquisition of H & L Tool Company, Inc. ("H & L Tool"). The Company believes
that its existing cash, cash equivalents, short-term investments and future
borrowings (including the borrowings related to the acquisition of H & L Tool.)
will be sufficient to fund necessary purchases of equipment and to provide
adequate working capital through at least the next twelve months.
On September 18, 1996, the Company executed a purchase and sale agreement
related to its previously announced intention to acquire substantially all the
assets of H & L Tool, of Madison Heights, Michigan. The agreement, which is
subject to various conditions typical in transactions of this type, is expected
to close before year-end 1996. H & L Tool, produces screw machine products, as
well as specialty cold-formed parts, primarily for the automotive industry. The
acquisition represents a significant enhancement to the Company's fastener
line. Although the exact purchase price will be adjusted by any changes in the
values of certain assets acquired as of the closing date, the purchase price is
expected to be approximately $19.1 million in the combination of cash and the
assumption of certain liabilities. Financing will be consist of a combination
of available cash, a $4.8 million credit against the purchase price, in
consideration of H & L Tool's retention of all cash and cash equivalents, and
borrowing of $8 to $9 million. The assets to be purchased include all of H & L
Tool's production equipment and facilities located in Madison Heights, Michigan.
Upon completion of the transaction, the Company intends to continue operations
at that location under the H & L Tool name.
-9-
<PAGE> 11
CHICAGO RIVET & MACHINE CO.
---------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (CON'T.)
---------------------------------------------
The following important factors, among others, in some cases have
affected, and in the future could affect, the Company's actual results and
could cause the Company's actual results for the fourth quarter of 1996, and
thereafter, to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, the Company.
The Company's operating results are subject to quarterly and other
fluctuations due to a variety of factors including availability and cost of raw
materials and other products purchased from the Company's suppliers, changes in
the mix of products sold, the gain or loss of significant customers, the timing
of significant orders, increased competitive pressure or changes in general
economic conditions. Many of these factors are beyond the control of the
Company. While these factors are difficult to forecast, these or other factors
could materially affect the Company's quarterly or annual operating results.
Furthermore, while the Company fully expects that its acquisition of
substantially all of the assets of H & L Tool will close before year-end 1996,
there can be no assurance that the transaction will be consummated. While the
acquisition of H & L Tool is expected to have a positive impact on the
operating results, the Company recognizes that there are risks associated with
any acquisition which may adversely effect the Company's operating results.
.
See the Company's Interim Report to Shareholders for the Quarter ended
September 30, 1996 for additional information. This section is incorporated
herein by reference. The Interim Report is filed as an exhibit to this report
on pages 12 and 13.
-10-
<PAGE> 12
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K -- A Form 8-K was filed on
September 24, 1996.
-11-
<PAGE> 13
SIGNATURES
Pursuant to the requirements 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.
CHICAGO RIVET & MACHINE CO.
---------------------------
(Registrant)
Date: November 13, 1996
John A. Morrissey
----------------------------------
Chairman of the Board of Directors
and Chief Executive Officer
Date: November 13, 1996
John C. Osterman
----------------------------------
President, Chief Operating
Officer and Treasurer (Principal
Financial Officer)
Date: November 13, 1996
Stephen D. Voss
----------------------------------
Assistant Treasurer and Controller
-12-
<PAGE> 14
E X H I B I T S
To Our Shareholders:
The comparative results of operations of Chicago Rivet & Machine Co. for
the third quarter and first nine months of 1996 and 1995 are summarized
below.
Sales and lease revenues totaled $4,807,028 during the recently ended
quarter, compared to $4,991,360 recorded during the third quarter of 1995, a
decline of approximately 3.7%. For the first nine months, sales and lease
revenues amounted to $16,293,372 in 1996, a decline of approximately 11.6% from
the year earlier total of $18,432,764. As previously reported, demand for all
of our products has consistently trailed the robust levels enjoyed during 1995.
While revenue comparisons between the third quarter of 1996 and 1995 are more
favorable than similar comparisons between the first two quarters of 1996 and
1995, our outlook for the balance of the year remains cautious.
Earnings for the third quarter of 1996 improved approximately 14% compared
to the year earlier period, totaling $381,773, or $.65 per share on 585,748
average shares outstanding during the third quarter this year. Earnings for
the quarter include a one time gain of approximately $.06 per share from the
sale of certain leased rivet setting machinery to the current leaseholder.
Earnings for the first nine months of 1996 amounted to $1,165,629 or $1.99 per
share on 585,748 average shares outstanding, down from the strong earnings of
$1,592,982 or $2.72 per share on 586,613 average shares outstanding during the
first nine months of 1995. The change in year to date earnings reflects the
effect of reduced sales volumes recorded in 1996.
On September 18, 1996, the Company executed a purchase and sale agreement
related to its previously announced intention to acquire substantially all the
assets of H & L Tool Company, Inc., of Madison Heights, Michigan. The
agreement, which is subject to various conditions typical in transactions of
this type, is expected to close before year end 1996. H & L Tool Company,
produces screw machine products, as well as specialty cold-formed parts,
primarily for the automotive industry. The acquisition represents a
significant enhancement to the Company's fastener line. Although the exact
purchase price will be adjusted by any changes in the values of certain assets
acquired as of the closing date, the purchase price is expected to be
approximately $19.1 million in the combination of cash and the assumption of
certain liabilities. Financing will consist of a combination of available cash,
a $4.8 million credit against the purchase price, in consideration of H & L
Tool's retention of all cash and cash equivalents, and borrowing of $8 to $9
million. The assets to be purchased include all of H & L Tool's production
equipment and facilities located in Madison Heights, Michigan. Upon completion
of the transaction, the Company intends to continue operations at that location
under the H & L Tool name.
Respectfully submitted,
John A. Morrissey John C. Osterman
Chairman President
October 29, 1996
-13-
<PAGE> 1
EXHIBIT 11
CHICAGO RIVET & MACHINE CO.
Summary of Results of Operations
For the Three and Nine Months Ended September 30
<TABLE>
<CAPTION>
Third Quarter First Nine Months
------------- -----------------
1996 1995 1996 1995
----------- ----------- ------------ ------------
<C> <C> <C> <C> <C>
Net sales and lease revenue ...... $ 4,807,028 $ 4,991,360 $ 16,293,372 $ 18,432,764
Income before taxes .............. 611,773 547,831 1,885,629 2,679,982
Income after taxes ............... 381,773 334,831 1,165,629 1,592,982
Net income per share.............. .65 .58 1.99 2.72
Average shares outstanding........ 585,748 586,548 585,748 586,613
- ------------------------- ------------------------------------------------------------------
</TABLE>
(All figures subject to year end audit)
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
<CASH> 6,950,761
<SECURITIES> 1,662,319
<RECEIVABLES> 2,797,721
<ALLOWANCES> 116,393
<INVENTORY> 3,497,701
<CURRENT-ASSETS> 16,120,473
<PP&E> 18,434,537
<DEPRECIATION> 13,462,730
<TOTAL-ASSETS> 21,106,877
<CURRENT-LIABILITIES> 2,905,571
<BONDS> 0
<COMMON> 1,171,496
0
0
<OTHER-SE> 15,998,620
<TOTAL-LIABILITY-AND-EQUITY> 21,106,877
<SALES> 4,700,714
<TOTAL-REVENUES> 4,807,028
<CGS> 3,212,631
<TOTAL-COSTS> 4,349,880
<OTHER-EXPENSES> (154,625)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 611,773
<INCOME-TAX> 230,000
<INCOME-CONTINUING> 381,773
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 381,773
<EPS-PRIMARY> 0.65
<EPS-DILUTED> 0.65
</TABLE>
