<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 March 31, 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 March 31, 2000
- ----- -----------------------------
COMMON STOCK, $1.00 PAR VALUE 1,138,096 SHARES
- ----------------------------- ----------------
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Company's Interim Report to Shareholders for the Quarter
ended March 31, 2000 are incorporated by reference in Part I of this Report.
<PAGE> 2
CHICAGO RIVET & MACHINE CO.
INDEX
PART I. FINANCIAL INFORMATION Page
----
Consolidated Balance Sheets at March 31, 2000
and December 31, 1999 2-3
Consolidated Statements of Operations for the Three
Months Ended March 31, 2000 and 1999 4
Consolidated Statements of Retained Earnings for the
Three Months Ended March 31, 2000 and 1999 5
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2000 and 1999 6
Notes to the Consolidated Financial Statements 7-8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-10
PART II. OTHER INFORMATION 11-16
1
<PAGE> 3
CHICAGO RIVET & MACHINE CO.
Consolidated Balance Sheets
March 31, 2000 and December 31, 1999
March 31, December 31,
2000 1999
------------ ------------
(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 2,026,776 $ 3,414,460
Certificates of deposit 1,353,733 552,594
Accounts receivable - net of allowances 6,979,140 6,681,659
Inventories:
Raw materials 1,659,110 2,002,490
Work in process 2,425,070 1,782,944
Finished goods 2,787,332 3,138,287
----------- -----------
Total inventories 6,871,512 6,923,721
----------- -----------
Deferred income taxes 695,191 695,191
Other current assets 186,418 245,997
----------- -----------
Total current assets 18,112,770 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 26,281,557 25,239,969
----------- -----------
32,951,885 31,897,520
Less accumulated depreciation 18,248,122 17,789,557
----------- -----------
Net property, plant and equipment 14,703,763 14,107,963
----------- -----------
Total assets $32,816,533 $32,621,585
=========== ===========
See Notes to the Consolidated Financial Statements
2
<PAGE> 4
CHICAGO RIVET & MACHINE CO.
Consolidated Balance Sheets
March 31, 2000 and December 31, 1999
March 31, December 31,
2000 1999
----------- ------------
(Unaudited)
Liabilities and Shareholders' Equity
Current Liabilities:
Current portion of note payable $ 1,800,000 $ 1,800,000
Accounts payable 2,176,672 1,498,002
Wages and salaries 989,558 792,606
Contributions due profit sharing plan 157,116 669,053
Other accrued expenses 456,034 540,718
Federal and state income taxes 813,356 765,653
----------- -----------
Total current liabilities 6,392,736 6,066,032
Note payable 900,000 1,350,000
Deferred income taxes 1,318,275 1,318,275
----------- -----------
Total liabilities 8,611,011 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 issued and outstanding 1,138,096 1,138,096
Additional paid-in capital 447,134 447,134
Retained earnings 22,620,292 22,302,048
----------- -----------
Total shareholders' equity 24,205,522 23,887,278
----------- -----------
Total liabilities and shareholders' equity $32,816,533 $32,621,585
=========== ===========
See Notes to the Consolidated Financial Statements
3
<PAGE> 5
CHICAGO RIVET & MACHINE CO.
Consolidated Statements of Operations
For the Three Months Ended March 31, 2000 and 1999
(Unaudited)
2000 1999
------------ ------------
Net sales $ 12,372,113 $ 12,435,788
Lease revenue 63,623 81,692
------------ ------------
12,435,736 12,517,480
Cost of goods sold and costs
related to lease revenue 8,892,224 8,874,439
------------ ------------
Gross profit 3,543,512 3,643,041
Selling and administrative expenses 1,990,084 1,698,154
Profit sharing expense 156,000 190,000
------------ ------------
1,397,428 1,754,887
Other income and expenses:
Interest income 51,977 47,794
Interest expense (50,940) (77,439)
Gain from the disposal of equipment 10,144 11,428
Other income, net of other expense 3,826 3,790
------------ ------------
Income before income taxes 1,412,435 1,740,460
Provision for income taxes 491,000 588,000
------------ ------------
Net income $ 921,435 $ 1,152,460
============ ============
Average common shares outstanding 1,138,096 1,153,496
============ ============
Per share data:
Net income per share $ 0.81 $ 1.00
============ ============
Cash dividends declared per share $ 0.53 $ 0.53
============ ============
See Notes to the Consolidated Financial Statements
4
<PAGE> 6
CHICAGO RIVET & MACHINE CO.
Consolidated Statements of Retained Earnings
For the Three Months Ended March 31, 2000 and 1999
(Unaudited)
2000 1999
------------ ------------
Retained earnings at beginning of period $ 22,302,048 $ 20,405,979
Net income for the three months ended 921,435 1,152,460
Cash dividends declared in the period,
$.53 per share in 2000 and 1999 (603,191) (610,940)
------------ ------------
Retained earnings at end of period $ 22,620,292 $ 20,947,499
============ ============
See Notes to the Consolidated Financial Statements
5
<PAGE> 7
CHICAGO RIVET & MACHINE CO.
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2000 and 1999
(Unaudited)
2000 1999
----------- -----------
Cash flows from operating activities:
Net income $ 921,435 $ 1,152,460
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 465,126 424,305
Net gain on the sale of properties (10,144) (11,428)
Deferred income taxes -- (25,000)
Changes in working capital components:
Accounts receivable (297,481) (880,224)
Inventories 52,209 (137,016)
Other current assets 59,579 78,354
Accounts payable 280,336 389,376
Accrued wages and salaries 196,952 155,801
Accrued profit sharing (511,937) (355,896)
Other accrued expenses (84,684) 34,191
Income taxes payable 47,703 557,460
----------- -----------
Net cash provided by operating activities 1,119,094 1,382,383
----------- -----------
Cash flows from investing activities:
Capital expenditures (1,061,857) (163,843)
Proceeds from the sale of properties 11,075 25,752
Proceeds from held-to-maturity securities 452,594 550,254
Purchases of held-to-maturity securities (1,253,733) (1,151,521)
----------- -----------
Net cash used in investing activities (1,851,921) (739,358)
----------- -----------
Cash flows from financing activities:
Payments under term loan agreement (450,000) (450,000)
Cash dividends paid (204,857) (207,216)
----------- -----------
Net cash used in financing activities (654,857) (657,216)
----------- -----------
Net decrease in cash and cash equivalents (1,387,684) (14,191)
Cash and cash equivalents at beginning of period 3,414,460 3,181,471
----------- -----------
Cash and cash equivalents at end of period $ 2,026,776 $ 3,167,280
=========== ===========
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 March 31, 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 month period ended March 31, 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
<PAGE> 9
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 March 31, 2000:
Net sales and lease revenue $ 9,914,464 $ 2,521,272 $ -- $ 12,435,736
Depreciation 340,698 65,385 59,043 465,126
Segment profit 1,583,872 913,460 -- 2,497,332
Selling and administrative expenses 1,085,934 1,085,934
Interest expense 50,940 50,940
Interest income (51,977) (51,977)
------------
Income before income taxes 1,412,435
------------
Capital expenditures 1,053,282 7,063 1,512 1,061,857
Segment assets:
Inventory 4,022,771 2,848,741 -- 6,871,512
Property, plant and equipment, net 11,242,634 1,861,270 1,599,859 14,703,763
Other assets -- -- 11,241,258 11,241,258
------------
32,816,533
------------
Three Months Ended March 31, 1999:
Net sales and lease revenue $ 9,737,327 $ 2,780,153 $ -- $ 12,517,480
Depreciation 299,508 65,517 59,280 424,305
Segment profit 1,601,892 1,039,636 -- 2,641,528
Selling and administrative expenses 871,423 871,423
Interest expense 77,439 77,439
Interest income (47,794) (47,794)
------------
Income before income taxes 1,740,460
------------
Capital expenditures 106,599 1,024 56,220 163,843
Segment assets:
Inventory 3,777,597 2,889,166 -- 6,666,763
Property, plant and equipment, net 10,385,719 1,721,228 1,763,022 13,869,969
Other assets -- -- 12,539,225 12,539,225
------------
33,075,957
------------
</TABLE>
8
<PAGE> 10
CHICAGO RIVET & MACHINE CO.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Revenues for the first quarter, while still very strong, fell short of the
record levels posted during the first quarter of 1999. Net sales and lease
revenues amounted to $12,435,736 in the first quarter of 2000, compared to
$12,517,480 during the first quarter of 1999. Revenues within the fastener
segment increased 1.8% compared with the first quarter of 1999 and amounted to
$9,914,464. However, demand for products within the assembly equipment segment
continued to be soft, and first quarter revenues within that segment of our
operations amounted to $2,521,272, a decline of approximately 9.3% compared to
the first quarter of 1999.
Net income amounted to $921,435 or $.81 per share on 1,138,096 average
shares outstanding during the first quarter of 2000. These results fell short of
the outstanding results reported for the first quarter of 1999. Earnings were
impacted by a number of factors. The softness in our assembly equipment segment
was a significant factor, as margins in that segment have historically been
greater than those in the fastener segment. In addition, the cost of health
insurance benefits increased approximately $90,000 during the quarter,
depreciation expense increased approximately $41,000, and wage levels are
approximately 3% higher than one year ago. A more significant factor was an
increase of approximately $258,000 in selling and administrative expenses, due
primarily to expenses in connection with final stages of implementation of the
new information management systems and, to a lesser extent, professional fees
and expenses associated with the recently completed Dutch auction tender offer.
We do not anticipate that selling and administrative expenses will return to
normal levels until the third quarter.
As previously reported, the Dutch auction tender offer was successfully
completed in April. A total of 159,564 shares were tendered at a price of $23.00
per share. Funding for the repurchase was provided through additional borrowing.
The Company's financial condition continues to be sound. Working capital
amounted to $11.7 million at the end of the first quarter, a decrease of
approximately $0.7 million compared to the balance at the beginning of the year.
Investments in new equipment amounted to approximately $1.06 million during the
quarter.
Late in 1996, in connection with the purchase of H & L Tool Company, Inc.,
the Company borrowed $9.0 million, on an unsecured basis, subject to certain
customary covenants. At the end of the first quarter of 2000, the outstanding
balance of the loan was $2.7 million and the interest rate was approximately 7%.
In connection with the previously reported Dutch auction 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 the 1996 loan described
above ($2.7 million) and to fund repurchases of stock under the terms of the
Dutch auction. Currently, the total indebtedness under the term loan stands at
approximately $6.8 million, which comprises the refinanced amount of the
original note and the additional borrowing in connection with the Dutch auction
tender offer. 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. This note is subject to
covenants that are customary for this type of borrowing. The Company believes
that its existing cash, cash equivalents and available borrowings under its
9
<PAGE> 11
$1.0 million line of credit will be sufficient to provide adequate working
capital through at least the next twelve months.
Overall, market conditions continue to be somewhat softer than one year ago
and we do not foresee the situation changing in the short term. Efforts to
increase market share continue unabated as do efforts to improve profitability
through cost control measures. The Company's financial condition continues to be
sound and we expect that 2000 will be a successful year.
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.
10
<PAGE> 12
PART II -- OTHER INFORMATION
Item 3 Quantitative and Qualitative 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 March 31, 2000, $2.7 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 InterBank 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 6. Exhibits and Reports on Form 8-K
(a) Exhibits
19.1 Interim Report to Shareholders for the quarter
ended March 31, 2000.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the current period.
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: May 12, 2000
/s/ John A. Morrissey
-------------------------
John A. Morrissey
Chairman of the Board of Directors
and Chief Executive Officer
Date: May 12, 2000
/s/ John C. Osterman
-------------------------
John C. Osterman
President, Chief Operating
Officer and Treasurer
(Principal Financial Officer)
Date: May 12, 2000
/s/ Michael J. Bourg
-------------------------
Michael J. Bourg
Controller (Principal Accounting
Officer)
12
<PAGE> 14
CHICAGO RIVET & MACHINE CO.
EXHIBITS
INDEX TO EXHIBITS
Exhibit
Number Page
----
19.1 Interim Report to Shareholders for the
quarter ended March 31, 2000 14-15
27.1 Financial Data Schedule 16
13
<PAGE> 1
EXHIBIT 19.1
To Our Shareholders:
The comparative results of operations of Chicago Rivet & Machine Co. for
the first quarter of 2000 and 1999 are summarized below. Revenues for the first
quarter, while still very strong, fell short of the record levels posted during
the first quarter of 1999. Net sales and lease revenues amounted to $12,435,736
in the first quarter of 2000, compared to $12,517,480 during the first quarter
of 1999. Revenues within the fastener segment increased 1.8% compared with the
first quarter of 1999 and amounted to $9,914,464. However, demand for products
within the assembly equipment segment continued to be soft, and first quarter
revenues within that segment of our operations amounted to $2,521,272, a decline
of approximately 9.3% compared to the first quarter of 1999.
Net income amounted to $921,435 or $.81 per share on 1,138,096 average
shares outstanding during the first quarter of 2000. These results, while
certainly very respectable, fell short of the outstanding results reported for
the first quarter of 1999. Earnings were impacted by a number of factors. The
softness in our assembly equipment segment was a significant factor, as margins
in that segment have historically been greater than those in the fastener
segment. In addition, the cost of health insurance benefits increased
approximately $90,000 during the quarter, depreciation expense increased
approximately $41,000, and wage levels are approximately 3% higher than one year
ago. A more significant factor was an increase of approximately $258,000 in
selling and administrative expenses, due primarily to expenses in connection
with final stages of implementation of the new information management systems
and, to a lesser extent, professional fees and expenses associated with the
recently completed "Dutch auction" tender offer. We do not anticipate that
selling and administrative expenses will return to normal levels until the third
quarter.
As previously reported, the tender offer was successfully completed in
April. A total of 159,564 shares were tendered at a price of $23.00 per share.
Funding for the repurchase was provided through additional borrowing. The tender
offer provided significant liquidity, at a premium over the market price that
prevailed prior to the offer, for those shareholders choosing to tender shares.
Shareholders electing not to tender, have a proportionately larger stake in the
Company and, in the long term, the results of the offer should be accretive to
earnings per share.
Overall, market conditions continue to be somewhat softer than one year ago
and we do not foresee the situation changing in the short term. Efforts to
increase market share continue unabated as do efforts to improve profitability
through cost control measures. The Company's financial condition continues to be
sound and we expect that 2000 will be a successful year.
Respectfully yours,
John A. Morrissey John C. Osterman
Chairman President
May 5, 2000
The foregoing discussion is only intended to provide highlights of
operations for the periods covered. Additional information is contained in our
Form 10-Q, which will be filed with the SEC and is available to shareholders
upon request from the
14
<PAGE> 2
Company, or via the internet through the SEC's EDGAR database. 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.
CHICAGO RIVET & MACHINE CO.
Summary of Consolidated Results of Operations
For the Three Months Ended March 31,
2000 1999
---- ----
Net sales and lease revenue........... $12,435,736 $12,517,480
Income before taxes .................. 1,412,435 1,740,460
Income after taxes ................... 921,435 1,152,460
Net income per share ................. .81 1.00
Average shares outstanding ........... 1,138,096 1,153,496
(All figures subject to year end audit)
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,026,776
<SECURITIES> 1,353,733
<RECEIVABLES> 7,087,982
<ALLOWANCES> 108,842
<INVENTORY> 6,871,512
<CURRENT-ASSETS> 18,112,770
<PP&E> 32,951,885
<DEPRECIATION> 18,248,122
<TOTAL-ASSETS> 32,816,533
<CURRENT-LIABILITIES> 6,392,736
<BONDS> 900,000
0
0
<COMMON> 1,138,096
<OTHER-SE> 23,067,426
<TOTAL-LIABILITY-AND-EQUITY> 32,816,533
<SALES> 12,372,113
<TOTAL-REVENUES> 12,435,736
<CGS> 8,892,224
<TOTAL-COSTS> 8,892,224
<OTHER-EXPENSES> 2,146,084
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50,940
<INCOME-PRETAX> 1,412,435
<INCOME-TAX> 491,000
<INCOME-CONTINUING> 921,435
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 921,435
<EPS-BASIC> .81
<EPS-DILUTED> .81
</TABLE>
