<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------
FORM 8-K
CURRENT REPORT
(AMENDMENT NO. 1)
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
December 3, 1996
---------------------------------
(Date of earliest event reported)
CHICAGO RIVET & MACHINE CO.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Illinois 0-1227 36-0904920
- --------------------------------------------------------------------------------
(State or Other (Commission File (IRS Employer
Jurisdiction of File Number) Identification
Incorporation) Number)
901 Frontenac Road, Naperville, IL 60566-7061
------------------------------------------------------------------
(Address of Principal Offices, including zip code)
(630) 357-8500
----------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
<TABLE>
<CAPTION>
Page No.
<S> <C>
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF ACQUIRED COMPANY
Report of Independent Certified Public Accountants 3
Balance Sheets at September 30, 1996 and October 31, 1995 4-5
Statements of Income and Retained Earnings for the eleven months ended
September 30, 1996 and the year ended October 31, 1995 6
Statements of Cash Flows for the eleven months ended September 30, 1996
and the year ended October 31, 1995 7
Summary of Accounting Policies 8-9
Notes to Financial Statements 10-11
(b) PRO FORMA FINANCIAL INFORMATION
Pro Forma Condensed Consolidated Financial Statements (unaudited) 12
Pro Forma Condensed Consolidated Balance Sheet at September 30, 1996
(unaudited) 13
Notes to Pro Forma Condensed Consolidated Balance Sheet at September 30, 1996
(unaudited) 14
Pro Forma Condensed Consolidated Statement of Income for the nine
months ended September 30, 1996 (unaudited) 15
Notes to Pro Forma Condensed Consolidated Statement of Income for the nine
months ended September 30, 1996 (unaudited) 16
Pro Forma Condensed Consolidated Statement of Income for the year
ended December 31, 1995 (unaudited) 17
Notes to Pro Forma Condensed Consolidated Statement of Income for the year
ended December 31, 1995 (unaudited) 18-19
</TABLE>
<PAGE> 3
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
H & L Tool Company, Inc.
Madison Heights, Michigan
We have audited the accompanying balance sheets of H & L Tool Company, Inc. as
of September 30, 1996 and October 31, 1995, and the related statements of
income and retained earnings, and cash flows for the eleven months ended
September 30, 1996 and the year ended October 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of H & L Tool Company, Inc. at
September 30, 1996 and October 31, 1995, and the results of its operations and
its cash flows for the eleven months ended September 30, 1996 and the year
ended October 31, 1995 in conformity with generally accepted accounting
principles.
/s/ BDO SEIDMAN, LLP
Troy, Michigan
November 18, 1996
<PAGE> 4
H & L TOOL COMPANY, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, October 31,
1996 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 4,894,334 $ 2,181,284
Marketable securities 1,942,556 1,702,654
Accounts receivable, less allowance for
possible losses of $21,000 (Note 1) 3,179,957 3,086,456
Inventories (Notes 1 and 2) 1,179,537 1,525,046
Prepaid expenses and other current assets (Note 1) 383,192 158,804
------------ -----------
TOTAL CURRENT ASSETS 11,579,576 8,654,244
------------ -----------
PROPERTY AND EQUIPMENT (Note 1)
Land 175,500 175,500
Building and improvements 2,008,046 2,008,046
Machinery and equipment 14,487,284 14,487,284
Motor equipment 161,077 211,278
Furniture and equipment 422,747 410,443
------------ -----------
17,254,654 17,292,551
Less accumulated depreciation 15,237,960 14,661,863
------------ -----------
NET PROPERTY AND EQUIPMENT 2,016,694 2,630,688
------------ -----------
OTHER
Cash surrender value of life insurance, net
of policy loans of $80,000 285,759 264,364
Miscellaneous 226,334 229,795
------------ -----------
TOTAL OTHER ASSETS 512,093 494,159
------------ -----------
TOTAL ASSETS $ 14,108,363 $11,779,091
============ ===========
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO
FINANCIAL STATEMENTS.
<PAGE> 5
H & L TOOL COMPANY, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, October 31,
1996 1995
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 684,451 $ 627,513
Accruals
Compensation and witholdings (Note 7) 2,404,316 506,254
Profit-sharing (Note 4) 200,000 200,000
Taxes, other than income 98,028 73,100
Other 28,570 7,629
Current maturities of long-term debt (Note 3) -- 166,668
----------- -----------
TOTAL CURRENT LIABILITIES 3,415,365 1,581,164
LONG-TERM DEBT, less current maturities (Note 3) -- 152,775
----------- -----------
TOTAL LIABILITIES 3,415,365 1,733,939
----------- -----------
COMMITMENTS (Note 5)
STOCKHOLDERS' EQUITY
Common stock - $1 par value, 50,000 shares authorized,
30,000 issued and outstanding 30,000 30,000
Additional paid-in capital 35,000 35,000
Retained earnings 10,627,998 9,980,152
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 10,692,998 10,045,152
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $14,108,363 $11,779,091
=========== ===========
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO
FINANCIAL STATEMENTS.
<PAGE> 6
H & L TOOL COMPANY, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Eleven months Year Ended
ended September 30, October 31,
1996 1995
<S> <C> <C>
NET SALES (Note 6) $19,661,602 $22,285,744
COST OF SALES 14,801,048 16,298,541
----------- -----------
GROSS PROFIT 4,860,554 5,987,203
SELLING AND ADMINISTRATIVE EXPENSES 4,515,892 4,232,330
----------- -----------
OPERATING INCOME 344,662 1,754,873
----------- -----------
OTHER INCOME (EXPENSE)
Interest income 283,089 228,369
Gain on sale of equipment 20,984 21,615
Interest expense (8,331) (39,431)
Miscellaneous 7,442 (255)
----------- -----------
TOTAL 303,184 210,298
----------- -----------
NET INCOME (Note 7) 647,846 1,965,171
RETAINED EARNINGS, at beginning of year 9,980,152 8,314,981
DIVIDENDS PAID -- (300,000)
----------- -----------
RETAINED EARNINGS, at end of year $10,627,998 $9,980,152
=========== ==========
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO
FINANCIAL STATEMENTS.
<PAGE> 7
H & L TOOL COMPANY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Eleven months Year Ended
ended September 30, October 31,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $647,846 $1,965,171
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 703,302 787,767
Gain on sale of equipment (20,984) (21,615)
Changes in non-investing and non-financing
assets and liabilities
Increase in accounts receivable (93,501) (39,890)
Decrease (increase) in inventories 345,509 (10,599)
Increase in prepaid expenses and other current assets (224,388) (64,746)
Increase (decrease) in accounts payable 56,938 (580,519)
Increase (decrease) in accrued expenses 1,943,931 (152,533)
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,358,653 1,883,036
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of marketable securities 2,000,000 2,500,000
Purchase of marketable securities (2,239,902) (3,228,449)
Proceeds from sale of equipment 23,000 30,174
Purchase of property and equipment (87,863) (1,238,387)
Increase in cash surrender value of life insurance (21,395) (22,383)
---------- -----------
NET CASH USED IN INVESTING ACTIVITIES (326,160) (1,959,045)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of debt (319,443) (166,668)
Dividends paid --- (300,000)
---------- -----------
NET CASH USED IN FINANCING ACTIVITIES (319,443) (466,668)
---------- -----------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 2,713,050 (542,677)
CASH AND EQUIVALENTS, beginning of year 2,181,284 2,723,961
---------- -----------
CASH AND EQUIVALENTS, end of year $4,894,334 $2,181,284
========== ==========
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO
FINANCIAL STATEMENTS.
<PAGE> 8
H & L TOOL COMPANY, INC.
SUMMARY OF ACCOUNTING POLICIES
NATURE OF H & L Tool Company, Inc. (the Company) manufactures screw
OPERATIONS machine and coldheader parts for the automotive industry.
USE OF ESTIMATES In preparing financial statements in conformity with
generally accepted accounting principles, management is
required to make estimates and assumptions that affect (1)
the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities as of the
date of the financial statements, and (2) revenues and
expenses during the reporting period. Actual results could
differ from these estimates.
CONCENTRATIONS OF Financial instruments which potentially subject the Company
CREDIT RISK to concentrations of credit risk consist principally of
cash, cash equivalents and accounts receivable. At times,
such cash and equivalents in banks are in excess of the
respective financial institution's FDIC insurance limit.
With respect to accounts receivable, the Company attempts
to minimize credit risk by monitoring customers' credit
exposure on a continuing basis. The Company establishes an
allowance for possible losses on accounts receivable based
upon factors surrounding the credit risk of specific
customers, historical trends and other information. Also
see Note 6.
FAIR VALUE OF The carrying amounts of cash and equivalents, accounts
FINANCIAL receivable, accounts payable and accrued expenses
INSTRUMENTS approximate fair value because of the short maturity of
these items.
CASH EQUIVALENTS Cash equivalents consist of certificates of deposit with
original maturities of three months or less.
MARKETABLE Marketable securities, consisting of U.S. treasury bills,
SECURITIES are classified as "available-for-sale" and therefore are
stated at market value (which equals cost) in accordance
with Statement of Financial Accounting Standards (SFAS) No.
115 "Accounting for Certain Investments in Debt and Equity
Securities." Marketable securities all mature within one
year of the respective balance sheet dates.
INVENTORIES Inventories are valued at the lower-of-cost or market. Cost
is determined by the dollar value last-in, first-out (LIFO)
method.
<PAGE> 9
H & L TOOL COMPANY, INC.
SUMMARY OF ACCOUNTING POLICIES
PROPERTY, Property and equipment are stated at cost.
EQUIPMENT AND Depreciation is computed over the estimated useful
DEPRECIATION lives of the assets ranging from 3 to 30 years using
both straight-line and accelerated methods.
REVENUE RECOGNITION The Company recognizes product sales at the time of
shipment.
RECENT ACCOUNTING The Financial Accounting Standards Board has issued
PRONOUNCEMENTS SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets Being Disposed
Of," which provides guidance on how and when impairment
losses are recognized on long-lived assets. This
statement will be adopted November 1, 1996 and
will not have a material impact on the Company.
<PAGE> 10
H & L TOOL COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
1. SALE OF ASSETS The Company has entered into a purchase and sale
agreement to sell substantially all of its operating
assets for approximately $19,000,000 in cash and the
assumption of certain liabilities. The purchase price is
subject to a credit of $4,800,000 in consideration of cash
and equivalents which are being retained by H & L Tool
Company, Inc. The sale is expected to be finalized in
December 1996.
2. INVENTORIES Inventories consisted of the following:
<TABLE>
<CAPTION>
September 30, October 31,
1996 1995
<S> <C> <C>
Raw material $1,053,777 $1,342,954
Work-in-process 757,261 900,476
Finished goods 368,750 385,918
LIFO reserve (1,000,251) (1,104,302)
----------- -----------
$ 1,179,537 $ 1,525,046
=========== ===========
</TABLE>
If the first-in, first-out method of inventory valuation
had been used by the Company, inventories would have been
approximately $1,000,000 and $1,104,000 higher than
reported at September 30, 1996 and October 31, 1995,
respectively.
During the eleven months ended September 30, 1996 and the
year ended October 31, 1995, inventory quantities were
reduced. This resulted in liquidations of LIFO inventory
carried at costs lower than replacement value. The effect
of this reduction was to increase net income by
approximately $151,000 in 1996 and $51,000 in 1995.
3. LONG-TERM DEBT Long-term debt at October 31, 1995, consisted of a note
payable to a bank, payable monthly in installments of
$13,889, plus interest at 8.5% per annum. This note was
collateralized by specific equipment. The Company repaid
this obligation during the eleven months ended
September 30, 1996.
<PAGE> 11
H & L TOOL COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
4. EMPLOYEE The Company has a profit-sharing plan for the benefit of
BENEFIT PLANS all eligible employees. The Company's contribution to the
plan, as determined by its board of directors, is
discretionary but may not exceed 15% of the annual aggregate
compensation, as defined, paid to all participating
employees. Provision for profit-sharing expense for the
eleven months ended September 30, 1996 and fiscal year ended
October 31, 1995 was $407,241 and $476,399, respectively.
5. OPERATING LEASE The Company leases a warehouse facility from its
stockholders. The lease, which will be terminated when the
sale of assets is finalized (Note 1), requires monthly
rental payments of $8,400. The lease also requires that the
Company be responsible for insurance, property taxes, and
repairs and maintenance on the warehouse. Rent expense
amounted to $92,400 for the eleven months ended September
30, 1996 and $100,800 for the fiscal year ended October 31,
1995.
6. MAJOR Sales to three major customers amounted to approximately
CUSTOMERS 75% of total sales for the eleven months ended
September 30, 1996 and fiscal year ended October 31, 1995.
7. ABSENCE OF A The absence of a provision for taxes on income is due to
PROVISION FOR an election made by the Company, with consent of its
TAXES ON stockholders, to include the stockholders' respective shares
INCOME of the Company's taxable income in their individual
tax returns. As a result, no federal tax is imposed on
the Company. The Company pays bonuses in October to its
affected stockholders to cover their estimated tax
liabilities on their respective shares of
taxable income. Bonus expense was $1,805,000 and $1,441,000
for the eleven months ended September 30, 1996 and year
ended October 31, 1995, respectively.
8. SUPPLEMENTAL Cash paid for interest for the eleven months ended
CASH FLOW September 30, 1996 and fiscal year ended October 31, 1995
INFORMATION was $10,790 and $45,638, respectively.
<PAGE> 12
PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
The following unaudited pro forma financial statements give effect to the
acquisition of certain assets and liabilities of H & L Tool Company, Inc.
(H & L) by Chicago Rivet & Machine Co. (the Company) in a transaction
accounted for as a purchase. The pro forma financial data are based upon the
historical financial statements of H & L and the Company and the assumptions
and adjustments described in the notes to the financial data. The pro forma
financial data reflect the preliminary allocation of purchase price. The final
allocation of purchase price and the resulting depreciation expense will differ
from the preliminary allocation since it will reflect the actual closing date
asset and liability amounts, as well as any other purchase price adjustments
pursuant to the asset purchase agreement.
The following unaudited pro forma balance sheet as of September 30, 1996 was
prepared as if the acquisition had occurred on that date. The unaudited pro
forma statements of income were prepared as if the acquisition had occurred at
the beginning of the Company's year ended December 31, 1995, using fiscal year
ended October 31, 1995 data for H & L and as if the acquisition had occurred at
the beginning of the Company's nine month period ended September 30, 1996,
using H & L data for the nine month period ended July 31, 1996.
These unaudited pro forma financial statements should be read in conjunction
with the historical financial statements and notes thereto of Chicago Rivet &
Machine Co. filed with the Company's Form 10-Q for the quarter ended September
30, 1996 and with the Company's Annual Report on From 10-K for the year ended
December 31, 1995, as well as with the audited historical financial statements
and notes thereto of H & L Tool Company, Inc. appearing elsewhere in this
Form 8-K.
The unaudited pro forma financial statements do not necessarily reflect the
operations of Chicago Rivet & Machine Co. and H & L Tool Company, Inc. as they
would have been had the two entities existed as one for the periods shown and
the operating results should not be deemed to be indicative of the future
operations of the combined entity. The pro forma adjustments are based upon
available information and certain assumptions that management believes are
reasonable.
<PAGE> 13
CHICAGO RIVET & MACHINE CO.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Historical
---------------------------------------- Company
Chicago Rivet H & L Tool Combined Adjustments Pro Forma
------------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash $ 6,950,761 $ 4,894,334 $11,845,095 $(10,150,084) (1) $ 1,695,011
Marketable securities 1,662,319 1,942,556 3,604,875 (1,942,556) (1) 1,662,319
Accounts receivable (net of
allowances) 2,681,328 3,179,957 5,861,285 --- 5,861,285
Inventories 3,497,701 1,179,537 4,677,238 1,240,038 (2) 5,917,276
Prepaid expenses and other assets 605,413 383,192 988,605 (297,684) (3) 690,921
----------- ----------- ----------- ------------ -----------
Total Current Assets 15,397,522 11,579,576 26,977,098 (11,150,286) 15,826,812
----------- ----------- ----------- ------------ -----------
Property, plant and equipment, net 4,971,807 2,016,694 6,988,501 7,423,967 (4) 14,412,468
Goodwill, net of amortization 14,597 --- 14,597 --- 14,597
Other assets 722,951 512,093 1,235,044 (512,093) (5) 722,951
----------- ----------- ----------- ------------ -----------
Total assets $21,106,877 $14,108,363 $35,215,240 $ (4,238,412) $30,976,828
=========== =========== =========== ============ ===========
Current Liabilities:
Accounts payable $ 792,170 $ 684,451 $ 1,476,621 $ --- $ 1,476,621
Accrued expense 2,113,401 2,730,914 4,844,315 (2,545,414) (6) 2,298,901
----------- ----------- ----------- ------------ -----------
Total Current Liabilities 2,905,571 3,415,365 6,320,936 (2,545,414) 3,775,522
----------- ----------- ----------- ------------ -----------
Deferred Income Taxes 1,031,190 --- 1,031,190 -- 1,031,190
Note Payable --- --- --- 9,000,000 (7) 9,000,000
Shareholders' Equity
Common stock 1,171,496 30,000 1,201,496 (30,000) (8) 1,171,496
Additional paid-in-capital 460,252 35,000 495,252 (35,000) (8) 460,252
Retained earnings 15,538,368 10,627,998 26,166,366 (10,627,998) 15,538,368
----------- ----------- ----------- ------------ -----------
Total Shareholders' Equity 17,170,116 10,692,998 27,863,114 (10,692,998) 17,170,116
----------- ----------- ----------- ------------ -----------
Total Liabilities and
Shareholders' Equity $21,106,877 $14,108,363 $35,215,240 $ (4,238,412) $30,976,828
=========== =========== =========== ============ ===========
</TABLE>
See accompanying notes
<PAGE> 14
CHICAGO RIVET & MACHINE CO.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996 (UNAUDITED)
The unaudited Pro Forma Balance Sheet gives effect to the following pro forma
adjustments:
(1) Represents the estimated drawdown of cash required as a source
of funds to finance a portion of the acquisition ($5,255,750) and an
adjustment for H & L cash retained by seller ($4,894,334) and an
adjustment for marketable securities retained by seller ($1,942,556).
(2) Represents the estimated write up to fair market value of
acquired inventories due to the reversal of H & L's LIFO reserve
($1,000,251) less an adjustment for obsolescence reserve ($140,000)
and an additional write up arising from the application of APB
Statement No. 16, which management expects will be realized prior
to the end of the first quarter of 1997 ($379,787).
(3) Reflects an adjustment for assets not acquired.
(4) Reflects the estimated adjustment to record the acquired
property, plant and equipment at its fair value in accordance with
APB No. 16.
(5) Represents an adjustment for assets not acquired.
(6) Represents an adjustment for liabilities not assumed.
(7) Represents the incremental borrowings necessary as a source of
funds to finance a portion of the acquisition. The borrowings are
pursuant to an unsecured term loan with principal and interest to be
paid quarterly over five years at a variable rate of interest that is
adjusted subject to changes in the reference rate specified in the
loan agreement. The current interest rate associated with this
borrowing is 6.30%.
(8) Represents the elimination of the historical equity and net
assets of H & L in connection with purchase accounting.
<PAGE> 15
CHICAGO RIVET & MACHINE CO.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Historical Adjustments Company
------------------------ ------------ Pro Forma
Chicago H & L ---------
Rivet Tool
--------- ----
<S> <C> <C> <C> <C>
Net sales and lease revenue $16,293,372 $15,826,245 $ --- $32,119,617
Cost of goods sold 11,071,626 12,002,384 48,536 (1) 23,122,546
----------- ----------- -------- -----------
Gross profit 5,221,746 3,823,861 (48,536) 8,997,071
Shipping, selling and administrative 3,673,185 3,400,443 (901,503)(2) 6,172,125
----------- ----------- -------- -----------
Income from operations 1,548,561 423,418 852,967 2,824,946
----------- ----------- -------- -----------
Other income 337,068 161,416 (407,214)(3) 91,270
Interest expense ---- (6,531) (425,250)(4) (431,781)
----------- ----------- -------- -----------
Total other income and expense 337,068 154,885 (832,464) (340,511)
----------- ----------- -------- -----------
Income before income taxes 1,885,629 578,303 20,503 2,484,435
Provision for income taxes 720,000 --- 234,000 954,000
----------- ----------- -------- -----------
Net income $1,165,629 $578,303 $(213,497) $ 1,530,435
=========== =========== ========= ===========
Average shares outstanding 585,748 585,748
=========== ===========
Net income per share $ 1.99 $ 2.61
=========== ===========
</TABLE>
See accompanying notes
<PAGE> 16
CHICAGO RIVET & MACHINE CO.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED)
The unaudited Pro Forma Consolidated Statement of Income gives effect to the
following unaudited pro forma adjustments:
(1) Includes an adjustment of $123,545 to cost of sales to reflect
the removal of H & L's favorable LIFO impact since the Company
records inventory on a FIFO basis; elimination of $92,400 in rental
expense associated with warehouse facilities that were rented by H &
L Tool, but have been purchased by Chicago Rivet; additional
depreciation expense of $17,391, assumed to be allocated entirely to
cost of sales, resulting from write-up of property, plant and
equipment to fair value in accordance with APB No. 16.
(2) H & L Tool, with the consent of its stockholders, made an election to
include the stockholders' respective shares of H & L's taxable income
in their individual tax returns. Accordingly, no federal tax is
recorded on the books of H & L. However, H & L paid bonuses to its
affected stockholders to cover the estimated tax liabilities on
their respective shares of taxable income. In addition, the
stockholders who were also employees of H & L were paid additional
amounts for services rendered in connection with general management,
sales development and sales management. This adjustment gives effect
to the estimated saving from the elimination of all amounts previously
paid to the stockholders ($2,067,200), the additional expenses
associated with the addition of staff to perform certain services
previously rendered by the former stockholders and estimated
incremental sales and marketing expenses ($1,241,700) and a reduction
in expenses associated with assets not purchased by Chicago Rivet
($76,003).
(3) Reflects the elimination of interest income of $213,277
reported by H & L on investments in marketable securities and an
estimated reduction of $193,937 in interest income earned by Chicago
Rivet, due to the use of cash to finance the acquisition. The
reduction in interest income assumes that the Company would have
earned approximately 4.9%, (which was the average rate of return
earned by the Company on investments in marketable securities during
1996) on $5,255,750 of cash that was used as a portion of the funding
for the acquisition.
(4) Reflects additional interest expense pursuant to a term loan
agreement between the Company and Bank of America, NA. The agreement
provides for 20 quarterly payments of principal plus interest at a
variable rate equal to a reference rate plus 80 basis points. The
adjustment of $425,250 is based upon the current rate of 6.30% on the
full amount of borrowing.
(5) Reflects tax provision, for H & L's pro forma income, before tax,
at a rate of 39%, which is approximately equal to the combined
statutory federal rate plus an estimate of state income taxes net of
federal benefit.
<PAGE> 17
CHICAGO RIVET & MACHINE CO.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
Historical Adjustments
------------------------ ----------- Company
Chicago H & L Pro Forma
Rivet Tool ---------
----- ----
<S> <C> <C> <C> <C>
Net sales and lease revenue $23,717,410 $22,285,744 $ --- $ 46,003,154
Cost of goods sold 15,036,303 16,298,541 (44,575)(1) 31,290,269
----------- ----------- --------- ------------
Gross profit 8,681,107 5,987,203 44,575 14,712,885
Shipping, selling and administrative 5,347,049 4,232,330 (784,900)(2) 8,794,479
----------- ----------- --------- ------------
Income from operations 3,334,058 1,754,873 829,475 5,918,406
Other income 311,157 249,729 (475,915)(3) 84,971
Interest expense ---- (39,431) (567,000)(4) (606,431)
----------- ----------- --------- ------------
Total other income and expense 311,157 210,298 (1,042,915) (521,460)
----------- ----------- --------- ------------
Income before income taxes 3,645,215 1,965,171 (213,440) 5,396,946
Provision for income taxes 1,410,000 --- 683,000 (5) 2,093,000
----------- ----------- ---------- ------------
Net income $ 2,235,215 $ 1,965,171 $ (896,440) $ 3,303,946
=========== =========== ========== ===========
Average shares outstanding 585,748 585,748
======= =======
Net income per share $ 3.81 $ 5.64
=========== ===========
</TABLE>
See accompanying notes
<PAGE> 18
CHICAGO RIVET & MACHINE CO.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995 (UNAUDITED)
The unaudited Pro Forma Consolidated Statement of Income gives effect to the
following unaudited pro forma adjustments:
(1) Includes elimination of $100,800 in rental expense associated with
warehouse facilities that were rented by H & L Tool, but have been
purchased by Chicago Rivet; a $51,000 adjustment to cost of sales to
reflect the removal of H & L's favorable LIFO impact, since the
Company records inventory on a FIFO basis; additional depreciation
expense of $5,225, assumed to be allocated entirely to cost of sales,
resulting from the write-up of property, plant and equipment to fair
value in accordance with APB No. 16.
(2) H & L Tool, with the consent of its stockholders, made an election to
include the stockholders' respective shares of H & L's taxable income
in their individual tax returns. Accordingly, no federal tax is
recorded on the books of H & L. However, H & L paid bonuses to its
affected stockholders to cover the estimated tax liabilities on their
respective shares of taxable income. In addition, the stockholders
who were also employees of H & L were paid additional amounts for
services rendered in connection with general management, sales
development and sales management. This adjustment gives effect to the
estimated saving from the elimination of all amounts previously paid
to the stockholders ($2,354,900), the additional expenses associated
with the addition of staff to perform certain services previously
rendered by the former stockholders and estimated incremental sales
and marketing expenses ($1,669,000) and a reduction in expenses
associated with assets not purchased by Chicago Rivet ($99,000).
(3) Reflects the elimination of interest income of $228,369 reported
by H & L on investments in marketable securities and an estimated
reduction of $247,546 in interest income earned by Chicago Rivet, due
to the use of cash to finance the acquisition. The reduction in
interest income assumes that the Company would have earned
approximately 4.7%, (which was the average rate of return earned by
the Company on investments in marketable securities during 1995) on
$5,255,750 of cash that was used as a portion of the funding for the
acquisition.
(4) Reflects additional interest expense pursuant to a term loan
agreement between the Company and Bank of America, NA. The agreement
provides for 20 quarterly payments of principal plus interest at a
variable rate equal to a reference rate plus 80 basis points. The
adjustment of $567,000 is based upon the current rate of 6.30% on the
full amount of borrowing.
<PAGE> 19
(5) Reflects tax provision, for H & L's pro forma income, before tax,
at a rate of 39%, which is approximately equal to the combined
statutory federal rate plus an estimate of state income taxes net of
federal benefit.
<PAGE> 20
SIGNATURE
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 hereunto duly authorized.
CHICAGO RIVET & MACHINE CO.
By: /s/ John C. Osterman
----------------------------
Name:John C. Osterman
Title: President, Chief
Operating Officer and
Treasurer
Dated: February 14, 1997
