<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, 2000 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 June 30, 2000
----- -----------------------------
COMMON STOCK, $1.00 PAR VALUE 978,532 SHARES
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
(1) Portions of the Company's Interim Report to Shareholders for the Quarter
ended June 30, 2000 are incorporated by reference in Part I of this Report.
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CHICAGO RIVET & MACHINE CO.
INDEX
PART I. FINANCIAL INFORMATION Page
Consolidated Balance Sheets at June 30, 2000
and December 31, 1999 2-3
Consolidated Statements of Operations for the Three
and Six Months Ended June 30, 2000 and 1999 4
Consolidated Statements of Retained Earnings for the
Six Months Ended June 30, 2000 and 1999 5
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2000 and 1999 6
Notes to the Consolidated Financial Statements 7-9
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-11
PART II. OTHER INFORMATION 12-17
1
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CHICAGO RIVET & MACHINE CO.
Consolidated Balance Sheets
June 30, 2000 and December 31, 1999
June 30, December 31,
2000 1999
----------- -----------
(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 1,900,782 $ 3,414,460
Certificates of deposit 1,153,733 552,594
Accounts receivable - net of allowances 6,878,421 6,681,659
Inventories:
Raw materials 1,546,872 2,002,490
Work in process 2,459,703 1,782,944
Finished goods 2,921,147 3,138,287
----------- -----------
Total inventories 6,927,722 6,923,721
----------- -----------
Deferred income taxes 695,191 695,191
Other current assets 106,364 245,997
----------- -----------
Total current assets 17,662,213 18,513,622
----------- -----------
Property, Plant and Equipment:
Land and improvements 1,010,595 1,010,595
Buildings and improvements 5,659,733 5,646,956
Production equipment, leased
machines and other 26,569,567 25,239,969
----------- -----------
33,239,895 31,897,520
Less accumulated depreciation 18,709,201 17,789,557
----------- -----------
Net property, plant and equipment 14,530,694 14,107,963
----------- -----------
Total assets $32,192,907 $32,621,585
=========== ===========
See Notes to the Consolidated Financial Statements
2
<PAGE> 4
CHICAGO RIVET & MACHINE CO.
Consolidated Balance Sheets
June 30, 2000 and December 31, 1999
June 30, December 31,
2000 1999
----------- -----------
(Unaudited)
Liabilities and Shareholders' Equity
Current Liabilities:
Current portion of note payable $ 1,800,000 $ 1,800,000
Accounts payable 1,142,255 1,498,002
Wages and salaries 915,893 792,606
Contributions due profit sharing plan 306,388 669,053
Other accrued expenses 718,251 540,718
Federal and state income taxes 404,958 765,653
----------- -----------
Total current liabilities 5,287,745 6,066,032
Note payable 4,332,760 1,350,000
Deferred income taxes 1,318,275 1,318,275
----------- -----------
Total liabilities 10,938,780 8,734,307
----------- -----------
Commitments and contingencies (Note 4)
Shareholders' Equity:
Preferred stock, no par value, 500,000 shares
authorized: none outstanding - -
Common stock, $1.00 par value, 4,000,000 shares
authorized: 1,138,096 shares issued 1,138,096 1,138,096
Additional paid-in capital 447,134 447,134
Retained earnings 23,338,869 22,302,048
Treasury stock, 159,564 shares at cost (3,669,972) -
----------- -----------
Total shareholders' equity 21,254,127 23,887,278
----------- -----------
Total liabilities and shareholders' equity $32,192,907 $32,621,585
=========== ===========
See Notes to the Consolidated Financial Statements
3
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CHICAGO RIVET & MACHINE CO.
Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 12,301,502 $ 12,863,103 $ 24,673,615 $ 25,298,891
Lease revenue 64,586 70,587 128,209 152,279
------------ ------------ ------------ ------------
12,366,088 12,933,690 24,801,824 25,451,170
Cost of goods sold and costs
related to lease revenue 8,719,362 10,175,525 17,611,586 19,049,964
------------ ------------ ------------ ------------
Gross profit 3,646,726 2,758,165 7,190,238 6,401,206
Selling and administrative expenses 2,234,902 2,030,885 4,380,986 3,919,039
------------ ------------ ------------ ------------
1,411,824 727,280 2,809,252 2,482,167
Other income and expenses:
Interest income 40,332 47,173 92,309 94,967
Interest expense (110,641) (61,827) (161,581) (139,266)
Gain (loss) from disposal of equipment (10,115) 3,114 29 14,542
Other income, net of other expense 4,313 4,372 8,139 8,162
------------ ------------ ------------ ------------
Income before income taxes 1,335,713 720,112 2,748,148 2,460,572
Provision for income taxes 441,000 239,000 932,000 827,000
------------ ------------ ------------ ------------
Net Income $ 894,713 $ 481,112 $ 1,816,148 $ 1,633,572
============ ============ ============ ============
Average common shares outstanding 1,003,080 1,152,832 1,070,588 1,153,162
============ ============ ============ ============
Per share data:
Net income per share $ 0.89 $ 0.42 $ 1.70 $ 1.42
============ ============ ============ ============
Cash dividends declared per share $ 0.18 $ 0.18 $ 0.71 $ 0.71
============ ============ ============ ============
</TABLE>
See Notes to the Consolidated Financial Statements
4
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CHICAGO RIVET & MACHINE CO.
Consolidated Statements of Retained Earnings
For the Six Months Ended June 30, 2000 and 1999
(Unaudited)
2000 1999
------------ ------------
Retained earnings at beginning of period $ 22,302,048 $ 20,405,979
Net income for the six months ended 1,816,148 1,633,572
Treasury stock retired at cost - (22,782)
Cash dividends declared in the period,
$.71 per share in 2000 and 1999 (779,327) (818,564)
------------ ------------
Retained earnings at end of period $ 23,338,869 $ 21,198,205
============ ============
See Notes to the Consolidated Financial Statements
5
<PAGE> 7
CHICAGO RIVET & MACHINE CO.
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,816,148 $ 1,633,572
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 933,618 884,795
Net gain on the sale of properties (29) (14,542)
Deferred income taxes - (15,000)
Changes in operating assets and liabilities:
Accounts receivable (196,762) (868,989)
Inventories (4,001) 371,520
Other current assets 139,633 85,758
Accounts payable (355,747) 58,878
Accrued wages and salaries 123,287 433,602
Accrued profit sharing (362,665) (170,897)
Other accrued expenses 30,183 928,675
Unearned revenue 147,350 (14,207)
Income taxes payable (360,695) (46,540)
----------- -----------
Net cash provided by operating activities 1,910,320 3,266,625
----------- -----------
Cash flows from investing activities:
Capital expenditures (1,370,045) (684,297)
Proceeds from the sale of properties 13,725 39,405
Proceeds from held-to-maturity securities 1,052,594 950,254
Purchases of held-to-maturity securities (1,653,733) (2,801,521)
----------- -----------
Net cash used in investing activities (1,957,459) (2,496,159)
----------- -----------
Cash flows from financing activities:
Borrowings under term loan agreement 3,882,760 -
Payments under term loan agreement (900,000) (900,000)
Purchase of treasury stock (3,669,972) (24,175)
Cash dividends paid (779,327) (818,564)
----------- -----------
Net cash used in financing activities (1,466,539) (1,742,739)
----------- -----------
Net decrease in cash and cash equivalents (1,513,678) (972,273)
Cash and cash equivalents at beginning of period 3,414,460 3,181,471
----------- -----------
Cash and cash equivalents at end of period $ 1,900,782 $ 2,209,198
=========== ===========
</TABLE>
See Notes to the Consolidated Financial Statements
6
<PAGE> 8
CHICAGO RIVET & MACHINE CO.
NOTES TO THE CONSOLIDATED 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, 2000 and December 31, 1999 and the
results of operations and changes in cash flows for the indicated periods.
The Company uses estimated gross profit rates to determine the cost of goods
sold during interim periods on a portion of its operations. Actual results could
differ from those estimates and will be adjusted, as necessary, following the
Company's annual physical inventory in the fourth quarter.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Certain items in 1999 have been reclassified to conform to the presentation in
2000. These changes have no effect on the financial position of the Company.
2. The results of operations for the three and six-month period ending June 30,
2000 are not necessarily indicative of the results to be expected for the year.
3. The Company extends credit primarily on the basis of 30-day terms to various
companies doing business primarily in the automotive and appliance industries.
The Company has a concentration of credit risk primarily within the automotive
industry and in the Midwestern United States.
4. The Company is, from time to time, involved in litigation, including
environmental claims, in the normal course of business. While it is not possible
at this time to establish the ultimate amount of liability with respect to
contingent liabilities, including those related to legal proceedings, management
is of the opinion that the aggregate amount of any such liabilities, for which
provision has not been made, will not have a material adverse effect on the
Company's financial position.
7
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CHICAGO RIVET & MACHINE CO.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. Segment Information--The Company operates in two business segments as
determined by its products. The fastener segment includes rivets, cold-formed
fasteners and screw-machine products. The assembly equipment segment includes
automatic rivet setting machines, parts and tools for such machines and the
leasing of automatic rivet setting machines. Information by segment is as
follows:
<TABLE>
<CAPTION>
Assembly
Fastener Equipment Other Consolidated
-------- --------- ----- ------------
<S> <C> <C> <C> <C>
Three Months Ended June 30, 2000:
Net sales and lease revenue $ 9,822,683 $ 2,543,405 $ - $ 12,366,088
Depreciation 344,064 65,385 59,043 468,492
Segment profit 1,701,793 805,048 - 2,506,841
Selling and administrative expenses 1,100,819 1,100,819
Interest expense 110,641 110,641
Interest income (40,332) (40,332)
------------
Income before income taxes 1,335,713
------------
Capital expenditures 265,609 36,149 6,430 308,188
Segment assets:
Inventory 3,980,335 2,947,387 - 6,927,722
Property, plant and equipment, net 11,149,755 1,833,693 1,547,246 14,530,694
Other assets - - 10,734,491 10,734,491
------------
32,192,907
------------
Three Months Ended June 30, 1999:
Net sales and lease revenue $ 9,900,233 $ 3,033,457 $ - $ 12,933,690
Depreciation 335,694 65,516 59,280 460,490
Segment profit 506,463 1,156,657 - 1,663,120
Selling and administrative expenses 928,354 928,354
Interest expense 61,827 61,827
Interest income (47,173) (47,173)
------------
Income before income taxes 720,112
------------
Capital expenditures 368,987 132,889 18,578 520,454
Segment assets:
Inventory 3,305,761 2,852,466 - 6,158,227
Property, plant and equipment, net 10,425,610 1,771,463 1,722,321 13,919,394
Other assets - - 12,803,504 12,803,504
------------
32,881,125
------------
</TABLE>
8
<PAGE> 10
CHICAGO RIVET & MACHINE CO.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Assembly
Fastener Equipment Other Consolidated
-------- --------- ----- ------------
<S> <C> <C> <C> <C>
Six Months Ended June 30, 2000:
Net sales and lease revenue $ 19,737,147 $ 5,064,677 $ - $ 24,801,824
Depreciation 684,762 130,770 118,086 933,618
Segment profit 3,285,665 1,718,508 - 5,004,173
Selling and administrative expenses 2,186,753 2,186,753
Interest expense 161,581 161,581
Interest income (92,309) (92,309)
------------
Income before income taxes 2,748,148
------------
Capital expenditures 1,318,891 43,212 7,942 1,370,045
Six Months Ended June 30, 1999:
Net sales and lease revenue $ 19,637,560 $ 5,813,610 $ - $ 25,451,170
Depreciation 635,202 131,033 118,560 884,795
Segment profit 2,108,355 2,196,293 - 4,304,648
Selling and administrative expenses 1,799,777 1,799,777
Interest expense 139,266 139,266
Interest income (94,967) (94,967)
------------
Income before income taxes 2,460,572
------------
Capital expenditures 475,586 133,913 74,798 684,297
</TABLE>
9
<PAGE> 11
CHICAGO RIVET & MACHINE CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
Net sales and lease revenues for the second quarter of 2000 totaled
$12,366,088, a decrease of approximately 4.4% compared to the same period in
1999. Revenues in the assembly equipment segment were approximately 16% lower
than those recorded during the second quarter of 1999, and amounted to
$2,543,405, while revenues from the fastener segment declined less than 1%
compared with the year earlier period and totaled $9,822,683.
Net income for the second quarter of 2000 amounted to $894,713 or $.89
per share on 1,003,080 average shares outstanding during the quarter. On a year
to date basis, net income amounted to $1,816,148 or $1.70 per share on 1,070,588
average shares outstanding during the first six months of 2000. While earnings
for both the second quarter and the first half compare favorably with 1999, it
should be noted that 1999 results include an after tax charge of $623,000 in
connection with a product recall. Earnings were impacted by the continued
softness in the demand for our products, especially within the assembly
equipment segment where margins have historically been higher than those of the
fastener segment. Successful efforts to control costs of manufacture within the
fastener segment were able to offset much of the impact of reduced sales volumes
at the gross margin level. Selling and administrative expenses increased by
$204,000 compared to the second quarter of 1999. The primary factors that
contributed to this change were costs associated with the previously reported
"Dutch auction" tender offer and those incurred in connection with the ongoing
implementation of new data processing systems and software. The data processing
initiative is now entering its final stages, and, while it has taken longer than
originally anticipated, the Company is beginning to enjoy many of the
anticipated benefits associated with this project.
The Company's financial condition remains sound. Working capital at the
end of the second quarter was approximately $12.4 million, an increase of
approximately $0.7 million compared to the end of the first quarter and
approximately even with the beginning of the year.
In connection with the tender offer, the Company obtained, on an
unsecured basis, a financing commitment that provided borrowing capacity of up
to $9.0 million plus a $1.0 million line of credit. The new borrowing was used
to finance the unpaid balance of a 1996 loan related to the purchase of H & L
Tool Company, Inc. ($2.7 million) and to fund purchases of stock under the terms
of the Dutch auction. At the end of the second quarter of 2000, total
indebtedness under the term loan stood at approximately $6.1 million. Under the
terms of the note evidencing such debt, the Company will repay the principal in
quarterly installments of $450,000, plus interest computed on the unpaid balance
at a variable rate that is based upon, at the election of the Company, the Bank
of America's reference rate less an applicable margin or the London Inter-Bank
Offering Rate (LIBOR) plus an applicable margin. The applicable margin is based
upon the funded debt ratio. The applicable margin for any portion of the loan
that bears interest at the reference rate is up to 50 basis points and the
applicable margin for any portion of the loan that bears interest at the LIBOR
rate is up to 130 basis points. At the end of June, 2000, the average interest
rate on the outstanding balance was approximately 7.4%. This note is subject to
the maintenance of certain financial ratios and other covenants that are
customary for this type of borrowing. The Company believes that its existing
cash, cash equivalents and available borrowings under its $1.0 million line of
credit will be sufficient to provide adequate working capital through at least
the next twelve months.
Throughout the first half of 2000, activity in our markets has trailed
the robust levels of 1999, and we expect that trend to continue throughout the
balance of the year. Despite that softness, we have been able to post solid
operating results due, in part, to ongoing efforts to reduce expenses and
improve efficiencies.
10
<PAGE> 12
THIS DISCUSSION CONTAINS CERTAIN "FORWARD-LOOKING STATEMENTS" WHICH ARE
INHERENTLY SUBJECT TO RISKS AND UNCERTAINTIES THAT MAY CAUSE ACTUAL EVENTS TO
DIFFER MATERIALLY FROM THOSE DISCUSSED HEREIN. FACTORS WHICH MAY CAUSE SUCH
DIFFERENCES IN EVENTS INCLUDE, AMONG OTHER THINGS, FLUCTUATIONS IN GENERAL
ECONOMIC CONDITIONS, CONSUMER DEMAND, THE GAIN OR LOSS OF A KEY CUSTOMER AND THE
PRICE AND AVAILABILITY OF THE COMPANY'S PRIMARY RAW MATERIALS. THEREFORE,
READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE UPON SUCH FORWARD-LOOKING
STATEMENTS.
11
<PAGE> 13
PART II -- OTHER INFORMATION
Item 3. Quantitative and Qualitative Information About Market Risk
Over time, the Company is exposed to market risks arising from
changes in interest rates. The Company has not historically used derivative
financial instruments. As of June 30, 2000, $6.1 million of floating-rate debt
was exposed to changes in interest rates compared to $3.15 million as of
December 31, 1999. This exposure was primarily linked to the London Inter-Bank
Offering Rate and the lender's reference rate under the Company's term loan. A
hypothetical 10% change in these rates would not have had a material effect on
the Company's quarterly earnings.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on May 9, 2000.
The only proposal voted upon was the election of six directors for a term ending
at the Annual Meeting in 2001. The six persons nominated by the Company's Board
of Directors received the following votes and were elected:
NAME VOTES FOR VOTES WITHHELD
---- --------- --------------
Edward L. Chott 1,017,347 18,939
William T. Divane, Jr. 1,027,307 11,039
John R. Madden 1,024,907 12,639
John A. Morrissey 1,027,509 10,938
Walter W. Morrissey 1,027,359 11,038
John C. Osterman 1,027,359 11,038
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
19.1 Interim Report to Shareholders for the quarter ended June
30, 2000
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the current period.
12
<PAGE> 14
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 11, 2000
/s/ John A. Morrissey
--------------------------------------
John A. Morrissey
Chairman of the Board of Directors
and Chief Executive Officer
Date: August 11, 2000
/s/ John C. Osterman
--------------------------------------
John C. Osterman
President, Chief Operating Officer
and Treasurer
(Principal Financial Officer)
Date: August 11, 2000
/s/ Michael J. Bourg
--------------------------------------
Michael J. Bourg
Controller
(Principal Accounting Officer)
13
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CHICAGO RIVET & MACHINE CO.
EXHIBITS
INDEX TO EXHIBITS
Exhibit
Number Page
19.1 Interim Report to Shareholders for the
quarter ended June 30, 2000 15 - 16
27.1 Financial Data Schedule 17
14
