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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended September 30, 2000 Commission File Number 0-1227
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CHICAGO RIVET & MACHINE CO.
---------------------------
(Exact name of registrant as specified in its charter)
ILLINOIS 36-0904920
-------------------- -------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
P.O. Box 3061
90l Frontenac Road
Naperville, Illinois 60566
-------------------- ------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (630) 357-8500
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at September 30, 2000
----- ---------------------------------
COMMON STOCK, $1.00 PAR VALUE 978,532 SHARES
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CHICAGO RIVET & MACHINE CO.
INDEX
PART I. FINANCIAL INFORMATION Page
Consolidated Balance Sheets at September 30, 2000
and December 31, 1999 2-3
Consolidated Statements of Operations for the Three
and Nine Months Ended September 30, 2000 and 1999 4
Consolidated Statements of Retained Earnings for the
Nine Months Ended September 30, 2000 and 1999 5
Consolidated Statements of Cash Flows for the Nine Months
Ended September 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
Quantitative and Qualitative Information About Market Risk 11
PART II. OTHER INFORMATION 12-15
1
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CHICAGO RIVET & MACHINE CO.
Consolidated Balance Sheets
September 30, 2000 and December 31, 1999
September 30, December 31,
2000 1999
------------ ------------
(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 2,625,005 $ 3,414,460
Certificates of deposit 829,886 552,594
Accounts receivable - net of allowances 6,351,416 6,681,659
Inventories:
Raw materials 1,564,382 2,002,490
Work in process 2,348,139 1,782,944
Finished goods 3,030,157 3,138,287
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Total inventories 6,942,678 6,923,721
------------ ------------
Deferred income taxes 695,191 695,191
Other current assets 261,534 245,997
------------ ------------
Total current assets 17,705,710 18,513,622
------------ ------------
Property, Plant and Equipment:
Land and improvements 1,010,595 1,010,595
Buildings and improvements 5,671,733 5,646,956
Production equipment, leased
machines and other 26,714,677 25,239,969
------------ ------------
33,397,005 31,897,520
Less accumulated depreciation 19,140,300 17,789,557
------------ ------------
Net property, plant and equipment 14,256,705 14,107,963
------------ ------------
Total assets $ 31,962,415 $ 32,621,585
============ ============
See Notes to the Consolidated Financial Statements
2
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CHICAGO RIVET & MACHINE CO.
Consolidated Balance Sheets
September 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
(Unaudited)
<S> <C> <C>
Liabilities and Shareholders' Equity
Current Liabilities:
Current portion of note payable $ 1,800,000 $ 1,800,000
Accounts payable 1,102,300 1,438,147
Wages and salaries 1,149,915 792,606
Contributions due profit sharing plan 350,769 669,053
Other accrued expenses 572,782 514,603
Unearned revenue 311,075 85,970
Federal and state income taxes 71,958 765,653
------------- ------------
Total current liabilities 5,358,799 6,066,032
Note payable 3,882,760 1,350,000
Deferred income taxes 1,368,275 1,318,275
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Total liabilities 10,609,834 8,734,307
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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 23,437,323 22,302,048
Treasury stock, 159,564 shares at cost (3,669,972) -
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Total shareholders' equity 21,352,581 23,887,278
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Total liabilities and shareholders' equity $31,962,415 $32,621,585
============= ============
</TABLE>
3
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CHICAGO RIVET & MACHINE CO.
Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 10,284,719 $ 11,654,430 $ 34,958,334 $ 36,953,321
Lease revenue 60,851 67,028 189,060 219,307
------------ ------------ ------------ ------------
10,345,570 11,721,458 35,147,394 37,172,628
Cost of goods sold and costs
related to lease revenue 8,082,881 8,423,877 25,694,467 27,473,841
------------ ------------ ------------ ------------
Gross profit 2,262,689 3,297,581 9,452,927 9,698,787
Selling and administrative expenses 1,794,694 2,011,344 6,175,680 5,930,383
------------ ------------ ------------ ------------
467,995 1,286,237 3,277,247 3,768,404
Other income and expenses:
Interest income 55,348 49,600 147,657 144,567
Interest expense (113,080) (60,091) (274,661) (199,357)
Gain (loss) from disposal of equipment 224 (5,302) 253 9,240
Other income, net of other expense 5,096 4,330 13,235 12,492
------------ ------------ ------------ ------------
Income before income taxes 415,583 1,274,774 3,163,731 3,735,346
Provision for income taxes 141,000 458,000 1,073,000 1,285,000
------------ ------------ ------------ ------------
Net Income $ 274,583 $ 816,774 $ 2,090,731 $ 2,450,346
============ ============ ============ ============
Average common shares outstanding 978,532 1,152,139 1,039,679 1,152,792
============ ============ ============ ============
Per share data:
Net income per share $ 0.28 $ 0.71 $ 2.01 $ 2.13
============ ============ ============ ============
Cash dividends declared per share $ 0.18 $ 0.18 $ 0.89 $ 0.89
============ ============ ============ ============
</TABLE>
See Notes to the Consolidated Financial Statements
4
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CHICAGO RIVET & MACHINE CO.
Consolidated Statements of Retained Earnings
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
2000 1999
------------ ------------
Retained earnings at beginning of period $ 22,302,048 $ 20,405,979
Net income for the nine months ended 2,090,731 2,450,346
Treasury stock retired at cost - (60,510)
Cash dividends declared in the period,
$.89 per share in 2000 and 1999 (955,456) (1,025,776)
------------ ------------
Retained earnings at end of period $ 23,437,323 $ 21,770,039
============ ============
See Notes to the Consolidated Financial Statements
5
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CHICAGO RIVET & MACHINE CO.
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
2000 1999
---- ----
Cash flows from operating activities:
Net income $ 2,090,731 $ 2,450,346
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,400,418 1,320,268
Net gain on the sale of properties (253) (9,240)
Deferred income taxes 50,000 25,000
Changes in operating assets and liabilities:
Accounts receivable 330,243 (954,086)
Inventories (18,957) 9,087
Other current assets (15,537) 23,567
Accounts payable (335,847) 280,730
Accrued expenses 97,204 416,402
Unearned revenue 225,105 (8,811)
Income taxes payable (693,695) 48,892
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Net cash provided by operating activities 3,129,412 3,602,155
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Cash flows from investing activities:
Capital expenditures (1,564,332) (822,394)
Proceeds from the sale of properties 15,425 41,275
Proceeds from held-to-maturity securities 1,906,327 4,051,774
Purchases of held-to-maturity securities (2,183,619) (5,954,114)
----------- -----------
Net cash used in investing activities (1,826,199) (2,683,459)
----------- -----------
Cash flows from financing activities:
Borrowings under term loan agreement 3,882,760 -
Payments under term loan agreement (1,350,000) (1,350,000)
Purchase of treasury stock (3,669,972) (64,131)
Cash dividends paid (955,456) (1,025,776)
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Net cash used in financing activities (2,092,668) (2,439,907)
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Net decrease in cash and cash equivalents (789,455) (1,521,211)
Cash and cash equivalents at beginning of period 3,414,460 3,181,471
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Cash and cash equivalents at end of period $ 2,625,005 $ 1,660,260
=========== ===========
See Notes to the Consolidated Financial Statements
6
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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 September 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 nine-month period ending
September 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 September 30, 2000:
Net sales and lease revenue $ 8,022,136 $ 2,323,434 $ - $ 10,345,570
Depreciation 343,956 63,861 58,983 466,800
Segment profit 599,860 721,841 - 1,321,701
Selling and administrative expenses 848,386 848,386
Interest expense 113,080 113,080
Interest income (55,348) (55,348)
------------
Income before income taxes 415,583
------------
Capital expenditures 63,635 118,244 12,408 194,287
Segment assets:
Inventory 3,957,677 2,985,001 - 6,942,678
Property, plant and equipment, net 10,869,966 1,887,612 1,499,128 14,256,706
Other assets - - 10,763,031 10,763,031
------------
31,962,415
------------
Three Months Ended September 30, 1999:
Net sales and lease revenue $ 9,023,786 $ 2,697,672 $ - $ 11,721,458
Depreciation 317,817 66,588 51,068 435,473
Segment profit 1,199,076 1,061,371 - 2,260,447
Selling and administrative expenses 975,182 975,182
Interest expense 60,091 60,091
Interest income (49,600) (49,600)
------------
Income before income taxes 1,274,774
------------
Capital expenditures 106,053 15,653 16,391 138,097
Segment assets:
Inventory 3,508,194 3,012,466 - 6,520,660
Property, plant and equipment, net 10,214,229 1,712,975 1,687,642 13,614,846
Other assets - - 12,412,927 12,412,927
------------
32,548,433
------------
</TABLE>
8
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CHICAGO RIVET & MACHINE CO.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Assembly
Fastener Equipment Other Consolidated
-------- --------- ----- ------------
<S> <C> <C> <C> <C>
Nine Months Ended September 30, 2000:
Net sales and lease revenue $ 27,759,283 $ 7,388,111 $ - $ 35,147,394
Depreciation 1,028,718 194,631 177,069 1,400,418
Segment profit 3,885,525 2,440,349 - 6,325,874
Selling and administrative expenses 3,035,139 3,035,139
Interest expense 274,661 274,661
Interest income (147,657) (147,657)
------------
Income before income taxes 3,163,731
------------
Capital expenditures 1,382,526 161,456 20,350 1,564,332
Nine Months Ended September 30, 1999:
Net sales and lease revenue $ 28,661,346 $ 8,511,282 $ - $ 37,172,628
Depreciation 953,019 197,621 169,628 1,320,268
Segment profit 3,307,431 3,257,664 - 6,565,095
Selling and administrative expenses 2,774,959 2,774,959
Interest expense 199,357 199,357
Interest income (144,567) (144,567)
------------
Income before income taxes 3,735,346
------------
Capital expenditures 581,639 149,566 91,189 822,394
</TABLE>
9
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CHICAGO RIVET & MACHINE CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
The Company's third quarter has historically reflected reduced revenues as
production schedules are reduced to accommodate normal vacation schedules both
at our facilities and at those of our major customers. This year, the
traditional third quarter decline in revenues was accompanied by a sharp drop in
production schedules that extended across our major customer base. This decline
was most evident in the motor vehicle and automotive parts sector of the economy
where output declined at an annual rate in excess of 19% during the third
quarter. Our results for the quarter reflect this downturn in activity as
consolidated revenues declined 11.7% compared to the third quarter of 1999.
Revenues from the fastener segment, which had been nearly equal to the record
levels recorded in 1999 during the first six months of the year, weakened
considerably in the third quarter and totaled $8,022,136, a decline of 11.1%
compared to the third quarter of 1999. On a year to date basis, fastener sales
trail 1999 by approximately 3.1% and total $27,759,283. Assembly equipment
sales, which have been relatively soft throughout the year amounted to
$2,323,434 during the quarter, a decline of 13.9% compared to the year earlier
period. On a year to date basis, sales in this segment have declined 13.2% and
total $7,388,111.
Although the overall decline in volume is the major factor contributing to
lower earnings in the third quarter of 2000, the situation is compounded by a
somewhat disproportionate decline in revenues from the assembly equipment
segment, which has traditionally enjoyed higher margins than the fastener
segment. In addition, costs related to health insurance and worker's
compensation insurance were approximately $120,000 higher during the third
quarter of the current year compared to the third quarter of 1999, while
interest expense increased approximately $53,000. Also during the quarter,
adjustments to certain estimates related to inventories were recorded. This had
the effect of reducing third quarter net income by approximately $82,000.
Selling and administrative expenses declined in the third quarter compared to
the third quarter of 1999, primarily due to lower profit sharing expense. Net
income for the third quarter of 2000 amounted to $274,583 or $.28 per share on
978,532 average shares outstanding.
Working capital at the end of the quarter amounted to approximately $12.3
million, approximately even with the end of the prior quarter. Capital
expenditures during the quarter amounted to $194,000, primarily related to
equipment used in the production of perishable tooling supplied to assembly
equipment customers. We continue to make scheduled quarterly payments of
$450,000 plus interest, at a variable rate, on our term note. At September 30,
2000 the principal balance of this note was approximately $5.68 million, and the
interest rate was approximately 7.4%. The Company also has a $1.0 million line
of credit from Bank of America. There is no charge for this facility until it is
utilized. We believe that our current cash, cash equivalents and available line
of credit will be sufficient to provide adequate working capital to meet our
needs for the foreseeable future.
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, our ability to maintain our
relationships with our significant customers; increases in the prices of, or
limitations on the availability of, our primary raw materials; or a downturn in
the automotive industry, upon which we rely for sales revenue, and which is
cyclical and dependent on, among other things, consumer spending, international
economic conditions and regulations and policies regarding international trade.
Many of these factors are beyond our ability to control or predict. Readers are
cautioned not to place undue reliance on these forward-looking statements. We
undertake no obligation to publish revised forward-looking statements to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
10
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CHICAGO RIVET & MACHINE CO.
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 September 30, 2000, $5.68 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.
11
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PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the current period.
12
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHICAGO RIVET & MACHINE CO.
---------------------------
(Registrant)
Date: November 3, 2000
/s/ John A. Morrissey
---------------------------
John A. Morrissey
Chairman of the Board of Directors
and Chief Executive Officer
Date: November 3, 2000
/s/ John C. Osterman
---------------------------
John C. Osterman
President, Chief Operating
Officer and Treasurer (Principal
Financial Officer)
Date: November 3, 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
27.1 Financial Data Schedule 15
14
