<PAGE> 1
CONFORMED
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d)
--- of the Securities Exchange Act of 1934
For the fiscal year ended October 31, 1996
Commission file number 0-6056
Transition report pursuant to Section 13 or 15(d)
--- of the Securities Exchange Act of 1934
For the transition period from to
-------- --------
MICHIGAN RIVET CORPORATION
-----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Michigan 38-1887153
- ------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) Identification No.)
13201 Stephens Road, Warren, Michigan 48089
- --------------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (810) 754-5100
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ----------------------
Common Stock, $1.00 Par Value None
------------------------------ ----------------------
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 periods 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. /X/
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The aggregate market value of the voting stock held by nonaffiliates (132,875)
of the registrant as of January 3, 1997 was $797,250.
The number of shares outstanding of the registrant's common stock as of January
3, 1997 was 638,525.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the 1996 Annual Meeting of Shareholders are
incorporated by reference into Items 10, 11, 12 and 13.
PART I
Item 1. BUSINESS
Michigan Rivet Corporation ("MRC") manufactures steel fasteners, principally
rivets and hinge pins, which are, in general, sold as original equipment to the
automotive industry. The fasteners range in size from a diameter of 1/8 of an
inch to 5/8 of an inch and are manufactured to customers' designs and
specifications through wire drawing, cold extrusion, cold heading and certain
secondary machining operations.
A wholly owned subsidiary of MRC, The McLaughlin Company ("McL"), manufactures
a wide variety of specialized steel nuts, nut and washer assemblies and special
fasteners which are sold as original equipment to the automotive industry and
as standard products to a wide variety of manufacturers. The nuts range in
size up to 1 inch across the flats and are manufactured through cold extrusion,
cold heading, stamping, tapping and certain other secondary operations.
Both MRC's and McL's (collectively referred to as "Company") business is
entirely within a single industry segment.
Manufacturing and Machining Operations
MRC purchases pickled and lubricated cold rolled steel rod ranging in diameter
from 7/32 of an inch to 45/64 of an inch. Charter Steel and American Steel and
Wire are the primary sources for raw material with a normal six week
availability. The steel rod is forced through a wire drawer consisting of one
or more dies, each of a smaller diameter than the preceding die. The rod is
thereby converted into cold rolled wire.
The cold rolled wire is then fed into a cold header, either directly or after
being forced through another wire drawer attached to the header. In the header
the wire is first cut into slugs, which may vary in length from 1/4 of an inch
to approximately five inches. These slugs are then forced or "hit" into one or
more dies to produce formed steel parts. The cold headers owned by MRC
generally cut and force or "hit" the slugs to size at rates of 60 to 300 "hits"
per minute. The drawing and heading operations are conducted with the steel
rod and wire at room temperature. Hence, the process is called "cold" heading.
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Some of MRC's fasteners require secondary machining operations, which include
drilling, broaching, annealing (to soften the part), tumbling (to remove burrs
and other irregularities), trimming, pointing, grooving, thread-rolling and
knurling. Other secondary operations, such as plating and heat-treating, are
performed on some of MRC's products by outside suppliers of such services.
McL's operations are very similar to those of MRC. Instead of purchasing cold
rolled steel rod and converting it into wire through the drawing process, McL
purchases the wire in a form ready to be fed into a cold header, principally
from Super Steel Treating Company. McL also purchases coiled flat stock which
is used in presses to manufacture floating cage nuts, clinch nuts, and washers
for the nut and washer assemblies.
While MRC's manufacturing process produces little waste, McL's process produces
slugs from the nut forming operation, offal from stampings and turnings from
tapping. Besides tapping, other secondary operations performed by McL are
washing, tumbling, locking and staking. All products manufactured by the
Company are subjected to quality control review through the various stages of
production.
Management believes that the Company is in substantial compliance with all
existing laws and regulations pertaining to protection of the environment and
does not anticipate that continued compliance will have any material effect on
the Company or its operations.
Customers and Marketing
The Industry Information, which includes the names of the Company's major
customers, set forth in Note 1 to the consolidated financial statements
included in Item 8 of this report is incorporated herein by reference. The
loss of any major domestic automobile producer as a customer would have a
materially adverse effect upon the Company's business.
The production of motor vehicles is generally reduced during July and August of
each year while retooling occurs to accommodate design changes for the
forthcoming model year. To this extent, the automotive industry, upon which
the Company is primarily dependent for its business, can be characterized as
seasonal in nature. However, the Company's production of automotive parts
reflects, in large part, periodic releases against customers' purchase orders
that are usually spaced throughout the automotive industry's model year (July
to July). A majority of the Company's orders are in the form of blanket
purchase orders (some covered under long-term contracts), which allows the
Company to manufacture in advance of releases knowing the product is salable
for the current model year. The nature of releases against open orders make it
impossible to determine the value of backlog orders.
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<PAGE> 4
The Company sells its fasteners primarily through its own salaried personnel
sales staff and, to a lesser extent, through independent manufacturers'
representatives compensated on a commission basis. The Company also markets
through national distribution centers acting as distributors for standard
products and agents for specialized products.
Competition
The Company operates in a highly competitive industry. The Company has no
knowledge of its relative position in the general automotive parts industry.
There are a number of cold heading and cold extrusion companies in Michigan
which supply the automotive industry with parts similar to those produced by
the Company and which are larger and have greater resources than the Company.
The Company must also compete with domestic and foreign companies which
manufacture similar parts for the automobile industry by methods other than
cold heading and cold extrusion. There is no dominant supplier in the
Company's segment of the industry. Additionally, the three major domestic
automobile manufacturers have equipment in some of their plants with which they
manufacture similar parts for themselves by cold heading and other methods.
Quality and price are the major factors in supplying parts to the automotive
industry. Quality indexes must be maintained to be a viable source, and the
Company, to date, has been able to compete successfully with other sources of
the automotive parts which it makes. While the Company does not believe that
it is in danger of losing any significant portion of its business to these
automotive customers, no representation can be made that certain parts now made
by the Company may not in the future be made by an automobile manufacturer or
by a competitor of the Company, some by the methods employed by the Company.
Employees
As of December 20, 1996, the Company had approximately 300 employees, of whom
80 were salaried. Hourly employees are represented by the International Union,
United Automobile, Aerospace and Agricultural Implement Workers of America.
Other
The success of the Company's business is not dependent upon any material
patents, trademarks, licenses, franchises or concessions held by it. The
dollar amount spent during each of the last two fiscal years on research
activities relating to the development of new products or services or the
improvement of existing products or services is deemed by management to be
insignificant. The Company's export sales were approximately 10% of net sales
in Fiscal Year 1996.
4
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Item 2. PROPERTIES
MRC's manufacturing plant and executive offices are located at 13201 Stephens
Road, Warren, Michigan, a suburb of Detroit. An 80,000 square foot,
$4,000,000, addition was erected on the available land at the Stephens Road
plant and was completed in September 1989. There are approximately 140,000
square feet of floor space at the plant, of which 110,000 are devoted to
manufacturing. The warehouse and shipping operations encompass approximately
20,000 square feet with the remainder devoted to office and administration
purposes. The building, and the 7.5 acre parcel on which it is situated, are
owned by MRC subject to an outstanding mortgage in the amount of $2,821,489 at
October 31, 1996.
McL's manufacturing plant and executive offices are located at 1701 Standish
Avenue, Petoskey, Michigan, a city 260 miles north of Detroit. There are
approximately 79,000 square feet of floor space at the plant, of which 76,000
are devoted to manufacturing with the remainder being used for office and
administration purposes. The building and the 5.5 acre parcel on which it is
situated are owned by McL.
The Company owns all of its manufacturing plant and equipment and believes that
all such plant and equipment is well maintained and suited for the purposes
intended. The Company has adequate manufacturing capacity for current
operations and excess capacity for future growth.
Item 3. LEGAL PROCEEDINGS
Claims of age discrimination filed with the Michigan Department of Civil Rights
by two former salaried employees and one current salaried employee, based on
the Company's 1994 management reorganization, were settled or dismissed with no
material effect on the Company's financial condition or results of operation.
There are no other material pending legal proceedings to which the Company is a
party or of which any of its property is the subject.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year to a vote
of security holders.
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PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The registrant's common stock is traded over-the-counter. The prices shown for
the fiscal years ended October 31, 1996 and 1995 were obtained from a
Detroit-area stock brokerage firm that effects transactions of Company stock
from time to time. Quotations reflect inter-dealer prices, without retail
mark-up, mark-down, or commission and may not necessarily represent actual
transactions. Trading in the registrant's stock is limited and sporadic and
should not be deemed to constitute an established public trading market.
<TABLE>
<CAPTION>
Year Ended Year Ended
Oct. 31, 1996 Oct. 31, 1995
--------------- ---------------
Bid Ask Bid Ask
--------------- ---------------
<S> <C> <C> <C> <C>
First quarter 5 - 3 -
Second quarter 5-1/2 - 3 -
Third quarter 6 10 3 -
Fourth quarter 6 9 3-1/4 -
</TABLE>
As of January 3, 1997, there were approximately 310 holders of record of the
common stock of MRC.
The Company paid dividends in Fiscal Year 1996 as follows:
Declared: December 20, 1995 Paid: January 26, 1996 8c. per share
February 21, 1996 March 29, 1996 8c. per share
May 14, 1996 June 21, 1996 9c. per share
August 21, 1996 September 30, 1996 12c. per share
Item 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended October 31
------------------------------------------------
1996 1995 1994 1993 1992
-----------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net sales $41,597 $39,211 $38,375 $33,057 $31,364
Earnings (loss) before
cumulative effect of
accounting change 1,333 1,630 44 (768) (543)
Cumulative effect of
accounting change 190
Net earnings (loss) 1,333 1,630 44 (768) (353)
Total assets 21,300 20,655 21,736 20,042 20,102
Long-term debt 3,747 4,437 4,380 571 4,780
Per share of common stock:
Earnings (loss) before
cumulative effect of
accounting change 2.09 2.55 .07 (1.20) (.85)
Cumulative effect of
accounting change .30
Net earnings (loss) 2.09 2.55 .07 (1.20) (.55)
Cash dividends .37 .24 - - -
</TABLE>
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
1996 vs. 1995
Results of Operations
Net sales increased to $41,597,000 in Fiscal Year 1996, a six percent (6%)
increase from net sales of $39,211,000 in Fiscal Year 1995. The net profit for
Fiscal Year 1996 was $1,333,000 vs. a $1,630,000 profit for Fiscal Year 1995.
Fiscal Year 1995 profits included life insurance proceeds. The growth in sales
resulted from a combination of new products, increased volume, and change in
product mix. Sales to Ford, General Motors, Chrysler and their suppliers as a
percent to total sales was 92% in Fiscal Year 1996 and 1995.
Cost of sales as a percentage of net sales decreased to 85.6% in Fiscal Year
1996 from 88.0% in Fiscal Year 1995.
Some major cost changes were as follows:
A small reduction in hourly direct and indirect labor due to automation
and better utilization of resources.
Lower manufacturing costs due to improved tooling and maintenance
procedures.
The largest cost reduction came in the fringe benefit area. Workers
Compensation and retiree medical accrual (FAS 106) were the areas that had
significant lower costs. The lower FAS 106 accrual will continue in
future years as a result of the May 1995 agreement with the Union.
Selling, general and administrative expenditures as a percentage of net sales
decreased to 8.6% of sales in Fiscal Year 1996 from 8.7% in Fiscal Year 1995.
The dollar amount was an increase of $145,000 from the prior year. This was
primarily a result of increased sales commissions, salary wage and bonus, and
Michigan Single Business Tax.
Proceeds received from the sale of excess production equipment were $78,000 in
Fiscal Year 1996.
Interest expense decreased $177,000 from the prior year due to lower short-term
notes and interest rate from the bank.
Liquidity and Capital Resources
The interest rate on $3,000,000 of the Company's Mortgage and Long Term
Equipment Loan Agreements was lowered by .25% to prime +.5%. The Revolving
Credit remains at $5,000,000 with the interest rate reduced .75% to prime. The
Company is in compliance with all the Covenants of the lending agreement.
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The Company's cash increased $9,000 from the beginning of the Fiscal Year 1996.
Cash flow from operating activities increased to $2,390,000 in Fiscal Year
1996, due primarily to earnings and to non-cash expenses for depreciation and
the accrued postretirement benefits. Cash of $2,076,000 was used to acquire
equipment and pay short and long term debt. The Company paid down $309,000 on
its revolving line of credit and at October 31, 1996 had $4,800,000 available
under the agreement. Expenditures for additional equipment during Fiscal Year
1997 are presently expected to approximate $2,300,000, which are projected to
be financed from cash generated from operations and cash from the revolving
credit line.
The Company is continuing to review the costs of all parts and when necessary
request price adjustments from our customers. The Company has had some success
in attaining a few price adjustments in the past year. The Company will
continue its long range capital improvements plan to upgrade major production
equipment on an orderly, as needed basis. There can be no assurance that the
Company's projections will be realized.
Dividends
Dividends totaling thirty-seven cents ($.37) per share were paid in Fiscal Year
1996 for an increase of 54%.
1995 vs. 1994
Results of Operations
Net sales increased to $39,211,000 in Fiscal 1995, a two percent (2%) increase
from net sales of $38,375,000 in Fiscal 1994. The net profit for Fiscal 1995
was $1,630,000 vs. a $44,000 profit for Fiscal 1994. The growth in sales
resulted from product mix as the volume of products shipped was 4% lower than
the prior year. Sales to Ford, General Motors, Chrysler and their suppliers as
a percent to total sales was 92% in Fiscal 1995 vs. 93% in Fiscal 1994. Fiscal
1995 had an increase in the highly specialized fasteners that receive higher
prices per thousand pieces.
Cost of sales as a percentage of net sales decreased to 88% in Fiscal 1995 from
90.4% in Fiscal 1994. Effective November 1, 1993, the Company adopted FAS 106,
which requires that postretirement benefits for health care and life insurance
for certain of the Company's retirees be recognized as an expense when the
benefits are incurred rather than when paid as the Company historically had
done. This expense increased cost of sales before FAS 106 adoption by
$1,115,000 or 2.8% in Fiscal 1995 and 3.8% in Fiscal 1994.
Some major cost changes were as follows:
A small material price increase was experienced at one plant but was
almost entirely offset by a greater decrease at the other plant.
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Indirect hourly and salary labor decreased at one plant due to better
utilization of resources.
Fringe benefits other than FAS 106 were down at one plant and slightly up
at the other plant, with an overall reduction.
Selling, general and administrative expenditures as a percentage of net sales
increased to 8.7% of sales in Fiscal 1995 from 8.0% in Fiscal 1994. The dollar
amount was an increase of $330,000 from the prior year. This was primarily a
result of increased sales commissions, salary bonus, and the settlement of
former employees age discrimination claims (See Item 3).
Interest expense decreased $55,000 from the prior year due to lower short-term
notes at the bank.
Total tax expense deferred from that amount expected by applying the statutory
rate of 34% due primarily to nontaxable life insurance proceeds.
Liquidity and Capital Resources
The Company's Mortgage and Long Term Equipment Loan Agreements were renewed in
January 1995 for five years at the same amortization schedule. The Revolving
Credit remains at $5,000,000. In most instances, the interest rate was reduced
by .75% on all Comerica Bank loans. The Company is in compliance with all the
Covenants of the lending agreement.
The Company used the life insurance proceeds as a result of the death of the
former President of the Company to pay down the short-term bank debt.
The Company's cash decreased $528,000 from the beginning of the Fiscal Year
1995. Cash flow from operating activities increased to $3,861,000 in Fiscal
1995, due primarily to earnings and to non-cash expenses for depreciation and
the accrued postretirement benefits. Cash of $1,619,000 was used to acquire
equipment and pay long term debt. The Company paid down $3,434,000 on its
revolving line of credit and at October 31, 1995 had an additional $3,362,000
available under the agreement. Expenditures for additional equipment during
Fiscal 1996 are presently expected to approximate $1,850,000, which are
projected to be financed from cash generated from operations.
In May 1995, the Company and the Union agreed to a revision to the retiree
health and life insurance along with a new wage schedule for newly hired
employees. This change equates to approximately $900,000 lower annual accrual
for retiree health benefits.
As described in note 4 to the consolidated financial statements, this change
reduced the accumulative postretirement benefit obligation by approximately
$5,200,000 thus reducing the future annual cost by approximately $900,000.
9
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In April 1995, the Company sold its interest in the assets of Renair. This
transaction eliminated all of the assets of Rivmac and resulted in a pretax
loss of $53,000.
The Company is currently projecting a 5% increase in sales with continued
profitability. The Company will review its sales forecast at the end of the
first quarter in view of the lower production estimates from the automotive
industry. The Company is continuing to review the costs of all parts and when
necessary request price adjustments from our customers. The Company has had
some success in attaining price adjustments in the past year. The Company will
continue its long range capital improvements plan to upgrade major production
equipment on an orderly, as needed basis. There can be no assurance that the
Company's projections will be realized.
Impact of Inflation
The Company maintains data on its costs which allows it to monitor the impact
of changes due in part to inflation and also to other factors such as
technological change. Periodically, usually on a part-by-part basis, increases
in costs are reviewed and are, to the extent allowed by the Company's customers
and permitted by competition, passed along as price increases.
The Company is party to an agreement with one of its major customers which
requires automatic price decreases in future contract years. Although this
provision will prevent the Company from passing along increases in costs
related to the project, the Company believes that it will be able to absorb any
such increases due to increased production efficiencies currently planned.
The Company continues to monitor controllable costs in the areas of labor, raw
material, work-in-process and finished goods inventory, as well as other
suppliers of goods or services so that assets are used more productively and
margins are improved.
Other
The volatility of the domestic automotive industry and the Company's reliance
on this important customer base for sales causes the reported information not
to be necessarily indicative of future operating results or future financial
conditions for the Company.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted as a separate section of this
report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
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PART III
The information called for by the items within this part is included in the
Company's 1997 Proxy Statement, and is incorporated herein by reference, as
follows
Caption(s) in 1997 Proxy Statement
Item 10. DIRECTORS AND EXECUTIVE
OFFICERS OF THE REGISTRANT........"Election of Directors"
Item 11. EXECUTIVE COMPENSATION................"Executive Compensation"
Item 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT..."Security Ownership of
Management"
Item 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS..........."Certain Relationships and
Related Transactions"
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8K
(a) Financial Statements, Schedules and Exhibits
(1) and (2)--The response to this portion of Item 14 is submitted as a
separate section of this report.
(3) Listing of exhibits
3.1--Articles of Incorporation - Previously filed as Exhibit 3 to the
registrant's Annual Report on Form 10K for the year ended
October 31, 1982 and incorporated herein by reference.
3.2--Bylaws - Previously filed as
Exhibit 3 to the registrant's Annual Report on Form 10K for the
year ended October 31, 1976 and incorporated herein by
reference.
21--Subsidiaries of Registrant
(b) No reports on Form 8-K were filed during the last quarter of the
Company's fiscal year ended October 31, 1996.
(c) Exhibits:
See Item 14(a)(3) above.
(d) Financial Statement Schedules:
The response to this portion of Item 14 is submitted as a separate
section of this report.
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MICHIGAN RIVET CORPORATION
William B. Strade
--------------------------------
William B. Stade
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of this
registrant and in the capacities indicated on the 22nd day of January 1997.
William B. Stade Kermit L. Knuppenburg
- -------------------------------- -------------------------------
William B. Stade Kermit L. Knuppenburg
Chairman of the Board, Director
President and Director
Anthony W. Livorine Clark V. Stevens
- -------------------------------- -------------------------------
Anthony W. Livorine Clark V. Stevens
Director Director
William P. Lianos Charles E. Blank
- -------------------------------- -------------------------------
William P. Lianos Charles E. Blank
Exec. V. P. & Treasurer and Director Director
(Principal Financial & Accounting
Officer)
Anthony J. Caputo
- --------------------------------
Anthony J. Caputo
Director
12
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ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1), (2), and (d)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED OCTOBER 31, 1996
MICHIGAN RIVET CORPORATION
WARREN, MICHIGAN
13
<PAGE> 14
FORM 10-K--ITEM 14(a)(1) and (2)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
MICHIGAN RIVET CORPORATION AND SUBSIDIARIES
The following consolidated financial statements of Michigan Rivet Corporation
and subsidiaries are included in Item 8:
Consolidated balance sheets--Years ended October 31, 1996, 1995 and 1994
Consolidated statements of operations and retained earnings--Years ended
October 31, 1996, 1995 and 1994
Consolidated statements of cash flows--Years ended October 31, 1996, 1995
and 1994
Notes to consolidated financial statements--Years ended October 31, 1996,
1995, and 1994
The following consolidated financial statement schedule of Michigan Rivet
Corporation and subsidiaries are included in Item 14(d):
Schedule VIII--Valuation and qualifying accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
14
<PAGE> 15
[PLANTE & MORAN, LLP]
Independent Auditor's Report
To the Board of Directors and Stockholders
Michigan Rivet Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheet of Michigan Rivet
Corporation and subsidiaries as of October 31, 1996, 1995 and 1994, and the
related consolidated statements of operations and retained earnings and cash
flows for the years then ended. 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 audits 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Michigan Rivet Corporation and subsidiaries at October 31, 1996, 1995 and 1994,
and the consolidated results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting principles.
As disclosed in Notes 1 and 4 to the financial statements, the Company adopted
the provisions of Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" in
1993.
PLANTE & MORAN, LLP
December 16, 1996
Bloomfield Hills, Michigan
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MICHIGAN RIVET CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
OCTOBER 31
--------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 119,372 $ 110,682 $ 638,266
Accounts receivable, less allowance of $50,000 in
1996, 1995 and 1994 6,151,075 5,368,533 5,763,245
Inventories:
Finished products 1,311,279 1,328,108 1,331,453
In process 2,664,998 2,967,555 3,058,305
Raw materials 728,025 673,281 629,588
----------- ----------- -----------
Total inventories 4,704,302 4,968,944 5,019,346
DEFERRED FEDERAL INCOME TAXES (Note 3) 520,211 697,639 788,000
PREPAID EXPENSES AND OTHER CURRENT
ASSETS 189,990 182,590 645,464
----------- ----------- -----------
Total current assets 11,684,950 11,328,388 12,854,321
DEFERRED FEDERAL INCOME TAXES AND
OTHER ASSETS (Note 3) 704,191 505,324 66,906
PROPERTY, PLANT AND EQUIPMENT
Land 125,000 125,000 125,000
Buildings and improvements 5,347,560 5,295,320 5,208,957
Machinery and equipment 18,505,226 17,578,978 16,966,933
----------- ----------- -----------
Total property and equipment 23,977,786 22,999,298 22,300,890
Less accumulated depreciation 15,067,088 14,178,218 13,485,783
----------- ----------- -----------
Net carrying amount 8,910,698 8,821,080 8,815,107
----------- ----------- -----------
Total assets $21,299,839 $20,654,792 $21,736,334
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial
Statements. 16
<PAGE> 17
MICHIGAN RIVET CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Continued)
<TABLE>
<CAPTION>
OCTOBER 31
---------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to bank (Note 2) $ - $ 309,000 $ 3,743,000
Accounts payable 3,813,348 3,569,626 3,997,626
Payroll and employees' benefits 997,522 945,252 558,717
Other accrued expenses 333,535 599,601 750,316
Current maturities of long-term debt (Note 2) 684,815 691,039 498,831
----------- ----------- -----------
Total current liabilities 5,829,220 6,114,518 9,548,490
LONG-TERM DEBT (Note 2) 3,746,600 4,436,829 4,379,620
ACCRUED POSTRETIREMENT BENEFITS 3,279,140 2,732,084 1,457,602
(Note 4)
DEFERRED FEDERAL INCOME TAXES (Note 3) - 25,000 484,548
STOCKHOLDERS' EQUITY
Common stock - $1 par value:
Authorized - 1,000,000 shares
Issued and outstanding - 638,525 shares 638,525 638,525 638,525
Paid-in capital 117,403 117,403 117,403
Retained earnings 7,688,951 6,590,433 5,110,146
----------- ----------- -----------
Total stockholders' equity 8,444,879 7,346,361 5,866,074
----------- ----------- -----------
Total liabilities and stockholders' equity $21,299,839 $20,654,792 $21,736,334
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial
Statements. 17
<PAGE> 18
MICHIGAN RIVET CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
----------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES $41,596,542 $39,210,844 $38,375,208
COSTS AND EXPENSES
Cost of products sold 35,526,431 34,487,789 34,702,554
Selling, administrative and general 3,557,246 3,412,508 3,082,643
----------- ----------- -----------
Interest 469,451 646,227 700,765
Total costs and expenses 39,553,128 38,546,524 38,485,962
----------- ----------- -----------
INCOME (LOSS) - Before other income
and federal income taxes 2,043,414 664,320 (110,754)
OTHER INCOME - Net gain from life
insurance proceeds (Note 5) - 1,141,394 -
FEDERAL INCOME TAXES (BENEFIT)
(Note 3) 710,000 175,793 (155,000)
----------- ----------- -----------
NET INCOME 1,333,414 1,629,921 44,246
RETAINED EARNINGS - Beginning of
year 6,590,433 5,110,146 5,065,900
DIVIDENDS ($.37 and $.24 per share) (234,896) (149,634) -
----------- ----------- -----------
RETAINED EARNINGS - End of year $ 7,688,951 $ 6,590,433 $ 5,110,146
=========== =========== ===========
NET INCOME PER SHARE $ 2.09 $ 2.55 $ .07
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial
Statements. 18
<PAGE> 19
MICHIGAN RIVET CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
--------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,333,414 $ 1,629,921 $ 44,246
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation 1,059,216 1,048,743 1,087,267
Gain on sale of equipment (78,326) - -
Provision for deferred income taxes - (369,187) (435,056)
Provision for postretirement benefits 547,056 1,274,482 1,657,602
Changes in operating assets and liabilities:
(Increase) decrease in accounts
receivable (782,542) 394,712 (851,285)
(Increase) decrease in inventories 264,642 50,402 (678,254)
(Increase) decrease in prepaid expenses
and other assets (53,839) 24,456 51,683
Increase (decrease) in accounts payable
and other accrued expenses 29,926 (192,180) 453,662
----------- ----------- -----------
Net cash provided by operating
activities 2,319,547 3,861,349 1,329,865
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment (1,148,834) (1,054,716) (522,211)
Proceeds from sale of equipment 78,326 - -
----------- ----------- -----------
Net cash used in investing
activities (1,070,508) (1,054,716) (522,211)
CASH FLOWS FROM FINANCING ACTIVITIES
Net (payments) borrowings under short-term
credit line (309,000) (3,434,000) 216,000
Proceeds from long-term debt - 813,298 -
Payments on long-term debt (696,453) (563,881) (587,002)
Payment of dividends (234,896) (149,634) -
----------- ----------- -----------
Net cash used in financing
activities (1,240,349) (3,334,217) (371,002)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH 8,690 (527,584) 436,652
CASH - Beginning of year 110,682 638,266 201,614
----------- ----------- -----------
CASH - End of year $ 119,372 $ 110,682 $ 638,266
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial
Statements. 19
<PAGE> 20
MICHIGAN RIVET CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial
statements include the accounts of Michigan Rivet Corporation and its
subsidiaries. Upon consolidation, significant intercompany accounts
and transactions are eliminated.
Description of Business - The Company is a domestic manufacturer
of cold headed steel fasteners, nuts and components, principally for
the automotive industry. Sales to General Motors Corporation, Ford
Motor Company and Chrysler Corporation, including their suppliers, are
summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
General Motors Corporation 33% 33% 27%
Ford Motor Company 40 38 40
Chrysler Corporation 19 21 26
</TABLE>
The Company generally does not require collateral from its
customers. Credit losses from automobile and related manufacturers
have been minimal and within management's expectations.
Inventories - Inventories are stated at the lower of cost or market.
Cost is determined by the last-in, first out (LIFO) method for certain
inventories (approximately 26 percent, 25 percent and 26 percent of
consolidated inventories at October 31, 1996, 1995 and 1994,
respectively) and the first-in, first-out (FIFO) method for all other
inventories.
Current cost exceeded the balance sheet carrying amount of LIFO
inventories by $407,000, $456,000 and $512,000 in 1996, 1995 and 1994,
respectively.
Use of Estimates - 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 revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Property, Plant and Equipment - Properties are stated at cost and
include expenditures which materially increase the useful lives of
existing buildings and equipment. Expenditures for normal repairs,
maintenance and production tooling are charged to operations as
incurred. Depreciation is computed principally by the straight-line
method over the estimated useful lives of the related assets.
20
<PAGE> 21
MICHIGAN RIVET CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes - Under Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes," the liability method is used
in accounting for income taxes. Under this method, deferred tax
assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws in effect. Current
taxes payable or refundable are based on amounts on tax returns for
the year.
Accounting for Employee Postretirement Benefits - The Company provides
health care and life insurance benefits for certain retired
employees. This plan is unfunded and benefits are paid when they are
incurred by the retiree. Effective November 1, 1993, the Company
adopted the provisions of Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" (SFAS No. 106). This Statement requires that these benefits
be recognized as an expense as employees render service rather than
when benefits are paid as the Company historically has done. As
permitted under the Statement, the Company elected to amortize the
cumulative effect of this accounting change on a prospective basis
over 20 years (see Note 4).
NOTE 2 - DEBT
Notes payable to bank represent borrowings for working capital
purposes under a $5,000,000 short-term revolving line of credit, which
is renewed quarterly and bears interest at the lending institution's
prime rate (prime was 8.25 percent at October 31, 1996). The weighted
average interest rate for 1996, 1995 and 1994 was 8.99 percent, 9.64
percent and 7.78 percent, respectively. Available borrowings under
this agreement are based on a percentage of eligible accounts
receivable. At October 31, 1996, $5,000,000 in additional borrowings
was available under the agreement.
Long-term debt consists of the following obligations:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Mortgage note $2,821,489 $3,040,359 $3,212,001
Term note 633,306 833,310 1,033,314
Mortgage note, due February 1996,
9.75%, $5,346 paid monthly - 20,941 79,901
Equipment notes payable 933,830 1,171,835 553,235
Other 42,790 61,423 -
---------- ---------- ----------
Total 4,431,415 5,127,868 4,878,451
Less current maturities 684,815 691,039 498,831
---------- ---------- ----------
Total long-term debt $3,746,600 $4,436,829 $4,379,620
========== ========== ==========
</TABLE>
21
<PAGE> 22
MICHIGAN RIVET CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996, 1995 AND 1994
NOTE 2 - DEBT (Continued)
The mortgage note is payable in monthly installments of $39,757
including interest, and matures February 1, 2000. The term note is
payable in monthly installments of $16,667 plus interest and matures
November 1, 2000. The term note bears interest at 9 percent. The
mortgage note bears interest at the lending institution's prime rate
plus .50 percent (prime was 8.25 percent at October 31, 1996). The
Company's financing agreements include covenants that require minimum
levels of working capital, tangible net worth and debt to equity
ratios. The agreements also require the lender's approval before cash
dividends may be declared or paid.
During 1995, the Company financed certain production equipment
totaling $750,000 under terms of a note payable to a bank. The
new note requires monthly payments of $12,500 plus interest at 9
percent and matures July 1, 2000. An additional note payable required
monthly payments of $16,452 through May 1995. Another equipment note
payable has an interest rate of approximately 8 percent and requires
60 monthly payments of $9,058 through May 1998 plus a balloon payment
of $201,603 in June 1998.
Maturities of long-term debt during the five fiscal years
following 1996 are:
<TABLE>
<S> <C>
1997 $ 684,815
1998 714,373
1999 746,542
2000 519,205
2001 339,673
Thereafter 1,426,807
</TABLE>
As of October 31, 1996, substantially all of the Company's assets
were mortgaged or otherwise collateralized by the various debt
agreements.
Cash payments for interest were $473,295, $687,589 and $763,288
in 1996, 1995 and 1994, respectively.
22
<PAGE> 23
MICHIGAN RIVET CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996, 1995 AND 1994
NOTE 3 - FEDERAL INCOME TAXES
The provision for income tax expense (benefit) is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Current expense $ 710,000 $ 544,980 $ 280,056
Deferred (reduction) - (369,187) (435,056)
Total tax expense (benefit) $ 710,000 $ 175,793 $ (155,000)
========== ========== ==========
Income tax payments $ 785,000 $ 605,000 $ -
========== ========== ==========
</TABLE>
The total tax expense for 1995 differs from the amount computed
utilizing the statutory rate of 34 percent primarily due to nontaxable
income from insurance proceeds as described in Note 5.
The details of the net deferred tax asset are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Deferred tax liabilities:
Depreciation $ 962,480 $ 952,612 $ 944,735
Other - 2,896 35,813
---------- ---------- ----------
Total deferred tax liabilities 962,480 955,508 980,548
Deferred tax assets:
Employee benefits 1,256,396 1,145,594 708,149
Tax credit carryover - 100,000 172,000
Inventory valuation 328,849 335,387 386,984
Other 49,874 47,166 16,867
---------- ---------- ----------
Total deferred tax assets 1,635,119 1,628,147 1,284,000
Valuation allowance - - -
---------- ---------- ----------
Net deferred tax asset $ 672,639 $ 672,639 $ 303,452
========== ========== ==========
</TABLE>
23
<PAGE> 24
MICHIGAN RIVET CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996, 1995 AND 1994
NOTE 3 - FEDERAL INCOME TAXES (Continued)
The principal components of deferred federal income tax expense
(credits) are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Net operating loss carryforward $ - $ - $ 341,500
Employee benefits (110,802) (437,443) (565,500)
Accelerated tax depreciation 9,868 54,696 (75,500)
Inventory valuation 6,538 51,597 (92,000)
Tax credit carryover and other 94,396 (38,037) (43,556)
---------- ---------- ----------
Total $ - $ (369,187) $ (435,056)
========== ========== ==========
</TABLE>
NOTE 4 - RETIREMENT BENEFITS
Pension Plans - Certain employees of the Company who are members
of collective bargaining units are covered by a noncontributory
defined benefit pension plan. The plan provides benefits that are
based on a stated amount for each year of service plus a frozen vested
accrued severance benefit calculated as of August 26, 1977 for
eligible employees on that date. The Company's funding policy is to
make at least the minimum annual contribution required by applicable
regulations.
A summary of the components of pension income for the union plan
follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Service cost for benefits earned during
the period $ 73,369 $ 60,377 $ 76,729
Interest cost of projected benefit
obligation 266,634 255,487 240,899
Actual return on plan assets (718,773) (662,138) (17,575)
Net amortization and deferral 332,331 295,544 (336,461)
---------- ---------- ----------
Net pension income $ (46,439) $ (50,730) $ (36,408)
========== ========== ==========
</TABLE>
24
<PAGE> 25
MICHIGAN RIVET CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996, 1995 AND 1994
NOTE 4 - RETIREMENT BENEFITS (Continued)
Assumptions used in accounting for the plan were:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Weighted average discount rate 7.5% 7.0% 8.0%
Expected long-term rate of return on
assets 7.0% 7.0% 7.0%
</TABLE>
The following table sets forth the funded status and amounts
recognized in the consolidated balance sheets for the union plan:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Actuarial present value of benefit
obligation:
Vested benefit $3,699,434 $3,636,038 $3,135,696
========== ========== ==========
Accumulated benefit obligation $3,818,023 $3,781,650 $3,243,054
========== ========== ==========
Projected benefit obligation $3,818,023 $3,781,650 $3,243,054
Plan assets at fair value 5,617,523 5,116,114 4,680,338
---------- ---------- ----------
Excess of plan assets over projected 1,799,500 1,334,464 1,437,284
benefit obligation
Unrecognized net gain (682,137) (207,948) (305,906)
Unrecognized prior service cost 5,827 6,399 6,971
Unrecognized net asset at transition (580,452) (636,616) (692,780)
---------- ---------- ----------
Net pension asset recognized in the
balance sheet $ 542,738 $ 496,299 $ 445,569
========== ========== ==========
</TABLE>
Plan assets are invested primarily in pooled equity investment
funds, obligations of the U.S. government and its agencies and certain
other investments.
Certain employees participate in a Company sponsored savings plan.
Under the plan, the Company contributes a defined amount to
individual employee accounts based on the respective employee's
contribution. The Company contributed approximately $50,000, $56,000
and $49,000 to this plan in 1996, 1995 and 1994, respectively.
25
<PAGE> 26
MICHIGAN RIVET CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996, 1995 AND 1994
NOTE 4 - RETIREMENT BENEFITS (Continued)
Postretirement Benefits - As discussed in Note 1, the Company
provides health care and life insurance benefits for certain
retired employees. The Company adopted the provisions of SFAS 106
effective November 1, 1993. The accumulated postretirement benefit
obligation (APBO) at the date of adoption was $11,263,445. The
Company elected to recognize the transition obligation over 20 years.
During 1995, the Company and its collective bargaining unit agreed
to modifications to the postretirement benefit plan. These
modifications primarily related to a cap on future retiree medical
insurance benefits, and resulted in a reduction of the accumulated
postretirement benefit obligation of approximately $5,200,000. This
reduction has been used to reduce the transition obligation, which
will be recognized prospectively over the remaining amortization
period allowed by SFAS 106.
The Company recognized an expense related to postretirement benefits
consisting of service cost, interest cost and transition amortization
in 1996, 1995 and 1994, as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ------------
<S> <C> <C> <C>
Service cost of benefits earned $ 196,412 $ 359,215 $ 437,451
Interest cost on liability 351,592 677,106 835,440
Net amortization and deferral 189,473 426,530 561,822
----------- ----------- ------------
Total net periodic post-
retirement benefit cost $ 737,477 $ 1,462,851 $ 1,834,713
=========== =========== ============
</TABLE>
The amount reported on the balance sheet at October 31, 1996, 1995 and
1994 was:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ------------
<S> <C> <C> <C>
Accumulated postretirement benefit
obligation:
Fully eligible active participants $ 1,051,138 $ 1,379,359 $ 2,117,080
Other active participants 957,331 1,529,610 6,168,314
Retired participants 3,207,589 3,875,644 3,731,548
----------- ----------- ------------
Total APBO 5,216,058 6,784,613 12,016,942
Unrecognized net obligation at
transition (3,556,706) (3,779,000) (10,674,623)
Unrecognized net gain (loss) 1,819,788 (73,529) 315,283
----------- ----------- ------------
Accrued postretirement
benefit cost $ 3,479,140 $ 2,932,084 $ 1,657,602
=========== =========== ============
</TABLE>
26
<PAGE> 27
MICHIGAN RIVET CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996, 1995 AND 1994
NOTE 4 - RETIREMENT BENEFITS (Continued)
The Company has not funded any portion of its APBO except for benefits
being paid as incurred by participants. Cash paid for these benefits
totaled $190,000, $188,000 and $177,000 in 1996, 1995 and 1994,
respectively. The Company estimated the current portion of this
accrued benefit cost to be $200,000 for 1996, 1995 and 1994, and
those amounts have been shown as current liabilities.
The significant actuarial assumptions used to determine the cost
to the Company at October 31, 1996 are as follows:
Discount rate 7.50%
Health care trend rates - Medical Approximately 10.50% per
annum grading down to
5.50% in 2005/2006 and all
years thereafter
Health care trend rates - Prescription Approximately 13.50% per
annum grading down to
5.50% in 2005/2006 and all
years thereafter
A one percent increase in the health care trend rate assumptions
would increase the October 31, 1996 APBO by 2.33 percent and would
increase the aggregate of the 1996 service and interest cost
components of the net periodic postretirement benefit cost by 1.87
percent.
NOTE 5 - OTHER INCOME
In November 1994, the Company's former president passed away. The
Company received life insurance proceeds totaling $1,200,000 from
policies on his life. The cash surrender value of these policies at
the time of death totaled $58,606, resulting in a net gain of
$1,141,394.
NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS
A summary of the fair value of financial instruments, as well as
the methods and significant assumptions used to estimate fair value,
is as follows:
Short-term Financial Instruments - The fair value of short-term
financial instruments, including cash, accounts receivable, accounts
payable and accrued liabilities, approximates the carrying amount in
the accompanying financial statements due to the short maturity of
such instruments.
27
<PAGE> 28
MICHIGAN RIVET CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996, 1995 AND 1994
NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
Long-term Debt - The fair value of long-term debt approximates
the carrying amount based on the current borrowing rates offered for
such instruments and since the current rates reflect market rates.
28
<PAGE> 29
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- ---------------------------------------------------------------------------------------------------------------------------------
(2) Charged Deductions- Balance at
DESCRIPTION Balance at (1) Charged to Other Describe End of Period
Beginning of to Costs and Accounts-
Period Expenses Describe
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year Ended October 31, 1996:
Valuation allowance for $ 50,000 $ 31,231 A $ 31,231 $ 50,000
Reserve for inventory 604,000 59,000 663,000
-------- --------- -------- --------
obsolescence
TOTALS $654,000 $ 90,231 $ 31,231 $713,000
======== ========= ======== ========
Year Ended October 31, 1995:
Valuation allowance for $ 50,000 $ 9,505 A $ 9,505 $ 50,000
accounts receivable
Reserve for inventory 612,800 (8,800) 604,000
-------- -------- -------- --------
obsolescence
TOTALS $662,800 $ 705 $ 9,505 $654,000
======== ========= ======== ========
Year Ended October 31, 1994:
Valuation allowance for $ 50,000 $ (5,146) A $ (5,146) $ 50,000
accounts receivable
Reserve for inventory 538,600 74,200 612,800
-------- -------- -------- --------
obsolescence
TOTALS $588,600 $ 69,054 $ (5,146) $662,800
======== ========= ======== ========
</TABLE>
A - Represents uncollectible accounts charged off, net of recoveries.
29
<PAGE> 30
EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
21 -- Subsidiaries of Resistrant
27 -- Financial Data Schedule
30
<PAGE> 1
EXHIBIT 21 -- SUBSIDIARIES OF REGISTRANT
MICHIGAN RIVET CORPORATION AND SUBSIDIARIES
Information with respect to registrant's subsidiaries is set forth
below:
Name: The McLaughlin Company
State of incorporation: Michigan
Percentage owned by registrant: 100%
Name: Rivmac Distribution, Inc.
State of incorporation: Michigan
Percentage owned by registrant: 100%
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from (A)
condensed consolidated balance sheets and statements of operations and is
qualified in its entirety by reference to such (B) 10-K.
</LEGEND>
<CIK> 0000065666
<NAME> MICHIGAN RIVET CORPORATION
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<EXCHANGE-RATE> 1
<CASH> 119,372
<SECURITIES> 0
<RECEIVABLES> 6,201,075
<ALLOWANCES> 50,000
<INVENTORY> 4,704,302
<CURRENT-ASSETS> 11,684,950
<PP&E> 23,977,786
<DEPRECIATION> 15,067,088
<TOTAL-ASSETS> 21,299,839
<CURRENT-LIABILITIES> 5,829,220
<BONDS> 3,746,600
0
0
<COMMON> 638,525
<OTHER-SE> 7,806,354
<TOTAL-LIABILITY-AND-EQUITY> 21,299,839
<SALES> 41,596,542
<TOTAL-REVENUES> 41,596,542
<CGS> 35,526,431
<TOTAL-COSTS> 35,526,431
<OTHER-EXPENSES> 3,557,246
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 469,451
<INCOME-PRETAX> 2,043,414
<INCOME-TAX> 710,000
<INCOME-CONTINUING> 1,333,414
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,333,414
<EPS-PRIMARY> 2.09
<EPS-DILUTED> 2.09
</TABLE>
