<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 June 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 (708) 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 June 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 June 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 June 30, 1996 2-3
and December 31, 1995.
Statements of Operations for the Three and Six
Months Ended June 30, 1996 and 1995. 4
Statements of Retained Earnings for the
Six Months Ended June 30, 1996 and 1995. 5
Statements of Cash Flows for the Six
Months Ended June 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
PART II. OTHER INFORMATION 10-14
<PAGE> 3
CHICAGO RIVET & MACHINE CO.
Balance Sheets
June 30, 1996 and December 31, 1995
Assets
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------------ ------------------
(unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 4,993,852 $ 1,349,093
Certificates of deposit 2,074,355 4,568,212
U. S. Government securities (Note 6) 698,568 2,703,533
Accounts receivable - net of allowances 3,328,485 2,379,497
Inventories:
Raw materials 600,116 696,999
Work in process 775,665 900,888
Finished goods 2,156,393 2,504,519
------------ -----------
Total inventories 3,532,174 4,102,406
------------ -----------
Deferred income taxes (Note 4) 808,639 806,227
Other current assets 443,541 231,957
------------ -----------
Total Current Assets 15,879,614 16,140,925
------------ -----------
Goodwill, net of amortization 20,846 33,344
------------ -----------
Property, Plant and Equipment
At Cost:
Land and improvements 347,676 347,676
Buildings and improvements 3,749,735 3,715,915
Production equipment, leased
machines and other 14,201,038 14,233,135
------------ -----------
18,298,449 18,296,726
Less - Accumulated Depreciation 13,360,028 13,115,856
------------ -----------
Net Property, Plant and Equipment 4,938,421 5,180,870
------------ -----------
Total Assets $20,838,881 $21,355,139
============ ===========
</TABLE>
See Notes to the Financial Statements
-2-
<PAGE> 4
CHICAGO RIVET & MACHINE CO.
Balance Sheets
June 30, 1996 and December 31, 1995
Liabilities and Shareholders' Equity
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------------------- -------------------
(unaudited)
<S> <C> <C>
Current Liabilities:
Accounts payable $ 561,373 $ 877,871
Contributions due profit - sharing
and pension plans 305,404 572,864
Wages and salaries 663,530 623,790
Other accrued expenses (Note 5) 962,514 744,410
Unearned lease revenue 104,746 70,120
Federal and state income taxes 240,835 541,045
----------- -----------
Total Current Liabilities 2,838,402 3,430,100
Deferred Income Taxes (Note 4) 1,036,412 1,041,930
----------- -----------
Total Liabilities 3,874,814 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 15,332,319 15,251,361
----------- -----------
Total Shareholders' Equity 16,964,067 16,883,109
----------- -----------
Commitments and Contingencies (Note 3) ---- ----
----------- -----------
Total Liabilities and Shareholders' Equity $20,838,881 $21,355,139
=========== ===========
</TABLE>
See Notes to the Financial Statements
-3-
<PAGE> 5
CHICAGO RIVET & MACHINE CO.
Statements of Operations
For the Three and Six Months Ended June 30, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------------- ---------------------------
June 30, June 30,
1996 1995 1996 1995
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Net sales $ 6,055,187 $ 6,853.109 $ 11,273,509 $13,180,570
Lease revenue 107,525 129,638 212,835 260,834
----------- ------------ ------------ -----------
$ 6,162,712 $ 6,982,747 $ 11,486,344 $13,441,404
Cost of goods sold and costs
related to lease revenue 4,254,019 4,521,996 7,858,995 8,738,219
----------- ------------ ------------ -----------
Gross profit 1,908,693 2,460,751 3,627,349 4,703,185
Shipping, selling and
administrative expenses 1,254,577 1,260,877 2,430,936 2,477,903
Profit sharing and pension
expenses 47,500 150,000 105,000 225,000
----------- ------------ ------------ -----------
606,616 1,049,874 1,091,413 2,000,282
Other income and expenses:
Interest income from
U.S. Government securities
and certificates of deposit 89,049 71,611 187,323 142,955
Gain (loss) from sale of leased
machines and other equipment 10,360 530 250 1,109
Amortization expense (6,249) (6,249) (12,498) (12,498)
Other income, net of other expense 2,469 142 7,368 303
----------- ------------ ------------ -----------
Income before income taxes 702,245 1,115,908 1,273,856 2,132,151
Provision for income taxes 269,018 447,000 490,000 874,000
----------- ------------ ------------ -----------
Net income $ 433,227 $ 668,908 $ 783,856 $ 1,258,151
=========== ============ ============ ===========
Average common shares outstanding 585,748 586,645 585,748 586,646
=========== ============ ============ ===========
Per share data:
Net income per share $ .74 1.14 $ 1.34 $ 2.14
=========== ============ ============ ===========
Cash dividends declared per share $ .30 $ .30 $ 1.20 $ 1.15
=========== ============ ============ ===========
</TABLE>
See Notes to the Financial Statements
-4-
<PAGE> 6
CHICAGO RIVET & MACHINE CO.
Statements of Retained Earnings
For the Six Months Ended June 30, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
June 30,
------------------------------------
1996 1995
----------- -----------
<S> <C> <C>
Retained earnings at beginning
of period $15,251,361 $14,067,745
Net income for the three months ended 783,856 1,258,151
Treasury stock retired at cost --- (2,641)
Cash dividends declared in the period -
$1.20 per share in 1996 and $1.15 per
share in 1995. (702,898) (674,645)
----------- -----------
Retained earnings at end of period $15,332,319 $14,648,610
=========== ===========
</TABLE>
See Notes to the Financial Statements
-5-
<PAGE> 7
CHICAGO RIVET & MACHINE CO.
Statements of Cash Flows
For the Six Months Ended June 30, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
June 30,
--------------------------------------
1996 1995
-------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 783,856 $ 1,258,151
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 327,026 333,165
Net gain on the sale of properties (250) (1,109)
Deferred income taxes (7,930) (16,815)
Changes in current assets and current liabilities:
Accounts receivable, net (948,988) (809,504)
Inventories 570,232 491,288
Accounts payable (316,498) (207,442)
Other, net (486,782) 63,968
-------------- ------------
Net cash provided (used) by operating activities (79,334) 1,111,702
-------------- ------------
Cash flows from investing activities:
Capital expenditures (88,244) (191,878)
Net proceeds from the sale of properties 16,414 17,616
Proceeds from the maturity of
held-to-maturity securities 491,549 4,204,053
Purchases of held-to-maturity securities (294,092) (5,466,127)
Proceeds from maturities of
available-for-sale securities 5,895,745 --
Purchases of available-for-sale securities (1,594,381) --
-------------- ------------
Net cash provided (used) by investing activities 4,426,991 (1,436,336)
-------------- ------------
Cash flows from financing activities
Cash dividends declared (702,898) (674,645)
Purchase of Treasury Stock 0 (2,920)
-------------- ------------
Net cash used by financing activities (702,898) (677,565)
-------------- ------------
Net increase (decrease) in cash and
cash equivalents 3,644,759 (1,002,199)
Cash and cash equivalents at beginning
of period 1,349,093 2,225,445
-------------- ------------
Cash and cash equivalents at end of period $ 4,993,852 $ 1,223,246
============== ============
Cash paid during the period for:
Income taxes $ 798,158 $ 932,000
</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 June 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 three month period ending June 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, and a former subsidiary, W.S. & W.C.,
Inc., have been named by state and/or federal government agencies as
"potentially responsible parties" with respect to certain waste disposal
sites. As a potentially responsible party, the Company, or its former
subsidiary, 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 $100 and $133 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, and its former subsidiary, is unknown due to disagreement
concerning the 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
the Company has recorded a liability of $591,702 related to these matters.
The adequacy of this reserve will be reviewed periodically as more
definitive cost information becomes available.
4. At June 30, 1996 significant deferred tax liabilities and assets were
comprised of the following:
<TABLE>
<S> <C>
Depreciation $(1,059,629)
------------
(1,059,629)
Environmental accruals 236,681
Inventory valuations 203,689
Accrued vacation 167,660
Doubtful accounts 66,851
Accrued pension 76,819
Unearned rental revenue 41,898
Other, net 38,258
-----------
831,856
-----------
$ (227,773)
-----------
</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>
June 30, 1996 December 31, 1995
------------- ------------------
<S> <C> <C>
Payroll taxes $ 112,875 $ 45,819
Property taxes 87,803 60,137
Environmental costs 591,702 638,875
All other items 170,134 (421)
---------- ----------
$ 962,514 $ 744,410
========== ==========
</TABLE>
6. At June 30, 1996 the Company has recorded $498,988 of U. S. Government
securities as held-to-maturity, and $199,580 of U. S. Government
securities as available-for-sale.
-8-
<PAGE> 10
CHICAGO RIVET & MACHINE CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
As in the first quarter of 1996, demand for all of our products
continued to be relatively weak throughout the second quarter. During the
second quarter, sales and lease revenues amounted to $6,162,712 compared to
$6,982,747 for the second quarter of 1995. This is an 11.7% decline from the
year earlier period, and while revenues from the sale of all products declined,
the decrease was slightly more pronounced with regard to automatic rivet
setting machines and related tools and parts. On a year to date basis, sales
and lease revenues declined approximately 14.6% to $11,486,344 and the change
was again more pronounced with regard to machines and related tools and parts.
As would be expected, given lower sales volumes recorded in 1996, net
income is also lower, amounting to $433,227 or $.74 per share on 585,748
average shares outstanding during the second quarter of 1996 compared to
$668,908 or $1.14 per share on 586,645 average shares outstanding during the
second quarter of 1995. On a year to date basis, net income amounted to $783,856
or $ 1.34 per share on 585,748 average shares outstanding during the first half
of 1996 compared to $1,258,151 or $2.14 per share on 586,646 average shares
outstanding during the first half of 1995. Reduced volume, and to a lesser
extent, the change in product mix account for the decline in gross margin
during the quarter. The impact was offset, to some extent, by a reduction in
selling and administrative expenses, reflecting lower commission expense
related to lower sales volumes and also to a reduction in profit sharing
expense.
Demand continues to be soft throughout our markets suggesting that for
the remainder of the year, both sales and earnings will continue to fall short
of the results attained during 1995. Our markets continue to be characterized
by excessive supply, a fact that not only limits our ability to recover
increased costs of manufacture, but also makes it very difficult to expand our
market share while maintaining an acceptable level of profitability. In spite
of these obstacles, we plan to continue pursuing opportunities that offer the
potential to increase profitability.
Working capital is essentially unchanged from the end of the first
quarter, at approximately $13 million. Inventories were reduced by
approximately $787,000 during the quarter consistent with reduced manufacturing
activities.
Previously, the Company announced it had entered into a conditional
agreement to purchase substantially all of the assets and assume certain
liabilities of H & L Tool Company, Inc. of Madison Heights, Michigan. While
the exact purchase price will be determined by the definitive contract, it is
expected to be approximately $19,000,000 in a combination of cash and the
assumption of certain liabilities. The transaction is expected to be financed
by a combination of available cash and borrowings of approximately $8,000,000.
The transaction is subject to various conditions, including completion of a due
diligence investigation and the negotiation of a satisfactory purchase and sale
agreement. The due diligence investigation is proceeding, and the Company is
negotiating the terms of the definitive purchase and sale agreement.
See the Company's Interim Report to Shareholders for the Quarter ended
June 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.
-9-
<PAGE> 11
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K -- No reports on Form 8-K were
filed during the three months ended June 30, 1996.
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: August 13, 1996
John A. Morrissey
----------------------------------
Chairman of the Board of Directors
and Chief Executive Officer
Date: August 13, 1996
John C. Osterman
----------------------------------
President, Chief Operating
Officer and Treasurer (Principal
Financial Officer)
Date: August 13, 1996
Stephen D. Voss
----------------------------------
Assistant Treasurer and Controller
-10-
<PAGE> 12
CHICAGO RIVET & MACHINE CO.
EXHIBITS
INDEX TO EXHIBITS
Exhibit
Number Page
- ------ ----
19.1 Interim Report to Shareholders for the
quarter ended June 30, 1996. 12 - 13
27.1 Financial Data Schedule 14
-11-
<PAGE> 1
E X H I B I T 1 9 . 1
To Our Shareholders:
The comparative results of operations of Chicago Rivet & Machine
Co. for the second quarter and first six months of 1996 and 1995 are
summarized below.
As has been the case for several months, demand for all of our
products continued to be relatively weak throughout the second quarter. During
the recently completed quarter, sales and lease revenues amounted to $6,162,712
compared to $6,982,747 recorded for the second quarter of 1995. This is an
11.7% decline from the year earlier period, and while, revenues from the sale
of all products declined, the decrease was slightly more pronounced with regard
to automatic rivet setting machines and related tools and parts. On a year to
date basis, sales and lease revenues declined approximately 14.6% to
$11,486,344 and the decline was again more pronounced with regard to machines
and related tools and parts.
As would be expected, given lower sales volumes recorded in 1996, net
income is also lower, amounting to $433,227 or $.74 per share on 585,748
average shares outstanding during the second quarter of 1996 compared to
$668,908 or $1.14 per share on 586,645 average shares outstanding during the
second quater of 1995. On a year to basis, net income amounted to $783,856 or
$1.34 per share on 585,748 average shares outstanding during the first half of
1996 compared to $1,258,151 or $2.14 per share on 586,646 average shares
outstanding during the first half of 1995. Reduced volume, and to a lesser
extent, the change in product mix account for the decline in income recorded in
the first half of 1996.
Demand continues to be soft throughout our markets suggesting that for
the remainder of the year, both sales and earnings will continue to fall short
of the exceptional results attained during 1995. Our markets continue to be
characterized by excessive supply, a fact that not only limits our ability to
recover increased costs of manufacture, but also makes it very difficult to
expand our market share while maintaining an acceptable level of profitability.
In spite of these obstacles, we plan to continue aggressively pursing
opportunities that offer the potential to increase profitability.
Previously, the Company announced it had entered into an agreement to
purchase substantially all of the assets and assume certain liabilities of H &
L Tool Company, Inc. of Madison Heights, Michigan. The agreement was subject
to various conditions, including completion of a due diligence investigation
and the negotiation of a satisfactory purchase and sale agreement. The due
diligence investigation is proceeding, and we are negotiating the terms of the
definitive purchase and sale agreement.
Respectfully yours,
John A. Morrissey John C. Osterman
Chairman President
July 29, 1996
-12-
<PAGE> 2
- --------------------------------------------------------------------------------
CHICAGO RIVET & MACHINE CO.
Summary of Results of Operations
For the Three and Six Months Ended June 30
<TABLE>
<CAPTION>
Second Quarter First Six Months
------------------------- ----------------------------
1996 1995 1996 1995
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales and lease revenue $6,162,712 $6,982,747 $11,486,344 $13,441,404
Income before taxes 702,245 1,115,908 1,273,856 2,132,151
Income after taxes 433,227 668,908 783,856 1,258,151
Net income per share .74 1.14 1.34 2.14
Average shares outstanding 585,748 586,645 585,748 586,646
</TABLE>
- --------------------------------------------------------------------------------
(All figures subject to year end audit)
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 4,993,852
<SECURITIES> 2,772,923
<RECEIVABLES> 3,495,613
<ALLOWANCES> 167,128
<INVENTORY> 3,532,174
<CURRENT-ASSETS> 15,879,614
<PP&E> 18,298,449
<DEPRECIATION> 13,360,028
<TOTAL-ASSETS> 20,838,881
<CURRENT-LIABILITIES> 2,838,402
<BONDS> 0
<COMMON> 1,171,496
0
0
<OTHER-SE> 15,792,571
<TOTAL-LIABILITY-AND-EQUITY> 20,838,881
<SALES> 6,055,187
<TOTAL-REVENUES> 6,162,712
<CGS> 4,254,019
<TOTAL-COSTS> 5,556,096
<OTHER-EXPENSES> (95,629)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 702,245
<INCOME-TAX> 269,018
<INCOME-CONTINUING> 433,227
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 433,227
<EPS-PRIMARY> 0.74
<EPS-DILUTED> 0.74
</TABLE>
