<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, 1997
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 (131,967)
of the registrant as of January 7, 1998 was $1,055,736.
The number of shares outstanding of the registrant's common stock as of January
7, 1998 was 638,525.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the 1998 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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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 21, 1997, the Company had approximately 305 employees, of
whom 82 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 10.5% of net sales in Fiscal Year
1997.
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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. 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 $2,580,972 at
October 31, 1997.
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
There are no 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, 1997 and 1996 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.
Year Ended Year Ended
Oct. 31, 1997 Oct. 31, 1996
------------- -------------
Bid Ask Bid Ask
------------- -------------
First quarter 8 9 5 -
Second quarter 7 9 5-1/2 -
Third quarter 8 10 6 10
Fourth quarter 8 10 6 9
As of January 7, 1998, there were approximately 302 holders of record of the
common stock of MRC.
The Company paid dividends in Fiscal Year 1997 as follows:
Declared: December 18, 1996 Paid: January 27, 1997 12(cent)per share
February 19, 1997 March 31, 1997 12(cent)per share
May 13, 1997 June 23, 1997 12(cent)per share
August 20, 1997 September 30, 1997 12(cent)per share
Item 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended October 31
----------------------------------------------
1997 1996 1995 1994 1993
----------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Net sales $43,013 $41,597 $39,211 $38,375 $33,057
Net earnings (loss) 1,527 1,333 1,630 44 (768)
Total assets 22,540 21,300 20,655 21,736 20,042
Long-term debt 2,531 3,747 4,437 4,380 571 A
Per share of common stock:
Net earnings (loss) 2.39 2.09 2.55 .07 (1.20)
Cash dividends .48 .37 .24 - -
</TABLE>
A - Due to Bank covenant violations, $4,331,659 of debt was classified as
current.
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
1997 vs. 1996
Results of Operations
Net sales increased to $43,013,000 in Fiscal Year 1997, a three percent (3%)
increase from net sales of $41,597,000 in Fiscal Year 1996. The net profit for
Fiscal Year 1997 was $1,527,000 vs. a $1,333,000 profit for Fiscal Year 1996.
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 91% in Fiscal Year 1997 and 92%
for Fiscal Year 1996.
Cost of sales as a percentage of net sales remained the same for Fiscal Year
1997 and 1996.
Some major cost changes were as follows:
o A ten percent (10%) increase in hourly labor due to contractual
rate increases and lower efficiencies.
o Higher tooling costs due to increased costs and new job set ups.
o Outside secondary costs were lower due to bringing operations
inside at an overall savings.
o Cost to acquire QS-9000 certification was $75,000.
Selling, general and administrative expenditures as a percentage of net sales
decreased to 8.3% of sales in Fiscal Year 1997 from 8.6% in Fiscal Year 1996.
The dollar amount was an increase of $28,000 from the prior year. This was
primarily a result of increased commissions, salary wages and bonus provision.
Proceeds received from the sale of obsolete and excess equipment were $179,000
in Fiscal Year 1997 and $78,000 in Fiscal Year 1996.
Interest expense decreased $145,000 from the prior year due to lower short-term
notes and interest rates from the bank.
Liquidity and Capital Resources
The interest rate on $2,900,000 of the Company's Mortgage and Long Term
Equipment Loan Agreements was lowered by 50 basis points to equal the bank's
prime rate. The Revolving Credit available remains at $5,000,000 with the
interest rate reduced 25 basis points to a rate equal to 25 basis points below
the bank's prime rate. The Company is in compliance with all the covenants of
the lending agreement.
The Company's cash increased $119,000 from the beginning of the Fiscal Year
1997. Cash flow from operating activities increased to $3,633,000 in Fiscal Year
1997, due primarily to earnings, non-cash expenses for
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depreciation and accrued postretirement benefits and other current liabilities.
Cash of $2,959,000 was used to acquire equipment and pay short and long term
debt. Cash of $311,000 was used to pay dividends to shareholders. As of October
31, 1997, the Company had $4,800,000 available under its revolving line of
credit. Expenditures for additional equipment during Fiscal year 1998 are
presently expected to approximate $2,300,000 which are projected to be financed
from cash generated from operations and cash from the revolving credit line.
The Company is continuing to review the costs of all parts and when necessary
request price adjustments from our customers. The Company has had some success,
about ten percent, in attaining a few price adjustments. The Company will
continue its long range capital improvements plan to upgrade major production
equipment on an orderly, as needed basis and, to evaluate all current outside
operations. There can be no assurance that the Company's projections will be
realized.
Impact of the Year 2000 Issue
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any computer programs
that have date sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
Based on a complete assessment conducted by Company personnel, the Company
determined that its computer systems will properly utilize dates beyond December
31, 1999. The Company has initiated formal communications with all of its
significant suppliers and large customers to determine the extent to which the
Company is vulnerable to those third parties' failure to remediate their own
Year 2000 Issue. Based on the responses to these inquiries, the Company believes
that it has no exposure to contingencies related to the Year 2000 Issue for the
products it has sold.
Dividends
Dividends totaling forty-eight cents ($.48) per share were paid in Fiscal Year
1997 for an increase of 30% over amounts paid in Fiscal Year 1996.
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,
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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 85.4% in Fiscal Year
1996 from 88.0% in Fiscal Year 1995.
Some major cost changes were as follows:
o A small reduction in hourly direct and indirect labor due to
automation and better utilization of resources.
o Lower manufacturing costs due to improved tooling and maintenance
procedures.
o 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.
The Company's cash increased $9,000 from the beginning of the Fiscal Year 1996.
Cash flow from operating activities increased to $2,320,000 in Fiscal Year 1996,
due primarily to earnings and to non-cash expenses for depreciation and the
accrued postretirement benefits. Cash of $2,154,000 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 $2,300,000, which are projected to be
financed from cash generated from operations and cash from the revolving credit
line.
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<PAGE> 10
The Company is continuing to review the costs of all parts and when necessary
request price adjustments from our customers. The Company has had some success
in attaining a few price adjustments in the past year. The Company will continue
its long range capital improvements plan to upgrade major production equipment
on an orderly, as needed basis. There can be no assurance that the Company's
projections will be realized.
Dividends
Dividends totaling thirty-seven cents ($.37) per share were paid in Fiscal Year
1996 for an increase of 54% over amounts paid in Fiscal Year 1995.
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 1998 Proxy Statement, and is incorporated herein by reference, as
follows
Caption(s) in 1998 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
27--Financial Data Schedule
(b) No reports on Form 8-K were filed during the last quarter of the
Company's fiscal year ended October 31, 1997.
(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.
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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
/s/ WILLIAM B. STADE
-------------------------------
William B. Stade
President
Date 01-22-98
-------------------------------
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 1998.
/s/ WILLIAM B. STADE /s/ KERMIT L. KNUPPENBURG
- ------------------------------- --------------------------
William B. Stade Kermit L. Knuppenburg
Chairman of the Board, Director
President and Director
/s/ ANTHONY W. LIVORINE /s/ CLARK V. STEVENS
- ------------------------------- --------------------------
Anthony W. Livorine Clark V. Stevens
Director Director
/s/ WILLIAM P. LIANOS /s/ CHARLES E. BLANK
- ------------------------------- --------------------------
William P. Lianos Charles E. Blank
Exec. V. P. & Treasurer and Director Director
(Principal Financial & Accounting
Officer)
/s/ ANTHONY J. CAPUTO
- -------------------------------
Anthony J. Caputo
Director
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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, 1997
MICHIGAN RIVET CORPORATION
WARREN, MICHIGAN
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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, 1997, 1996 and
1995
Consolidated statements of operations and retained earnings--Years
ended October 31, 1997, 1996 and 1995
Consolidated statements of cash flows--Years ended October 31, 1997,
1996 and 1995
Notes to consolidated financial statements--Years ended October 31,
1997, 1996, and 1995
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.
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[PLANTE & MORAN, LLP LETTERHEAD]
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, 1997, 1996 and 1995, and the
related consolidated statements of income and retained earnings and cash flows
for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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, 1997, 1996 and 1995,
and the consolidated results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting principles.
/s/ Plante & Moran, LLP
Bloomfield Hills, Michigan
December 16, 1997
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MICHIGAN RIVET CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
OCTOBER 31
----------------------------------------------------------
1997 1996 1995
------------------ ----------------- -----------------
ASSETS
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 660,398 $ 119,372 $ 110,682
Accounts receivable, less allowance of $50,000 in
1997, 1996 and 1995 5,687,051 6,151,075 5,368,533
Inventories:
Finished products 1,722,457 1,311,279 1,328,108
In process 2,708,403 2,664,998 2,967,555
Raw materials 722,270 728,025 673,281
--------------- -------------- --------------
Total inventories 5,153,130 4,704,302 4,968,944
Deferred federal income taxes (Note 3) 597,639 520,211 697,639
Prepaid expenses and other current assets 252,792 189,990 182,590
--------------- -------------- --------------
Total current assets 12,351,010 11,684,950 11,328,388
OTHER ASSETS (Note 3) 1,004,594 704,191 505,324
PROPERTY, PLANT AND EQUIPMENT
Land 125,000 125,000 125,000
Buildings and improvements 5,435,779 5,347,560 5,295,320
Machinery and equipment 19,455,410 18,505,226 17,578,978
--------------- -------------- --------------
Total property and equipment 25,016,189 23,977,786 22,999,298
Less accumulated depreciation 15,831,463 15,067,088 14,178,218
--------------- -------------- --------------
Net carrying amount 9,184,726 8,910,698 8,821,080
--------------- -------------- --------------
Total assets $ 22,540,330 $ 21,299,839 $ 20,654,792
=============== ============== ==============
</TABLE>
See Notes to Consolidated
Financial Statements.
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MICHIGAN RIVET CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Continued)
<TABLE>
<CAPTION>
OCTOBER 31
----------------------------------------------------------
1997 1996 1995
------------------ ----------------- -----------------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to bank (Note 2) $ - $ - $ 309,000
Accounts payable 4,441,194 3,813,348 3,569,626
Payroll and employees' benefits 1,121,649 997,522 945,252
Other accrued expenses 602,709 333,535 599,601
Current maturities of long-term debt (Note 2) 369,163 684,815 691,039
------------------ ----------------- -----------------
Total current liabilities 6,534,715 5,829,220 6,114,518
LONG-TERM DEBT (Note 2) 2,531,337 3,746,600 4,436,829
ACCRUED POSTRETIREMENT BENEFITS
(Note 4) 3,813,570 3,279,140 2,732,084
DEFERRED FEDERAL INCOME TAXES (Note 3) - - 25,000
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 8,904,780 7,688,951 6,590,433
------------------ ----------------- -----------------
Total stockholders' equity 9,660,708 8,444,879 7,346,361
------------------ ----------------- -----------------
Total liabilities and stockholders' equity $ 22,540,330 $ 21,299,839 $ 20,654,792
================== ================= =================
</TABLE>
See Notes to Consolidated
Financial Statements.
17
<PAGE> 18
MICHIGAN RIVET CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
----------------------------------------------------------------
1997 1996 1995
------------------- -------------------- -------------------
<S> <C> <C> <C>
NET SALES $ 43,013,303 $ 41,596,542 $ 39,210,844
COSTS AND EXPENSES
Cost of products sold 36,790,532 35,526,431 34,487,789
Selling, administrative and general 3,585,020 3,557,246 3,412,508
Interest 323,853 469,451 646,227
------------------- -------------------- -------------------
Total costs and expenses 40,699,405 39,553,128 38,546,524
------------------- -------------------- -------------------
INCOME - Before other income
and federal income taxes 2,313,898 2,043,414 664,320
OTHER INCOME - Net gain from life
insurance proceeds (Note 5) - - 1,141,394
FEDERAL INCOME TAXES (Note 3) 787,000 710,000 175,793
------------------- -------------------- -------------------
NET INCOME 1,526,898 1,333,414 1,629,921
RETAINED EARNINGS - Beginning of
year 7,688,951 6,590,433 5,110,146
DIVIDENDS ($.48, $.37 and $.24 per share,
respectively) (311,069) (234,896) (149,634)
------------------- -------------------- -------------------
RETAINED EARNINGS - End of year $ 8,904,780 $ 7,688,951 $ 6,590,433
=================== ==================== ===================
NET INCOME PER SHARE $ 2.39 $ 2.09 $ 2.55
=================== ==================== ===================
</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
------------------------------------------------------------
1997 1996 1995
------------------ ----------------- -------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,526,898 $ 1,333,414 $ 1,629,921
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation 1,044,186 1,059,216 1,048,743
Gain on sale of equipment (68,354) (78,326) -
Provision for deferred income taxes (355,000) - (369,187)
Provision for postretirement benefits 534,430 547,056 1,274,482
Changes in operating assets and liabilities:
(Increase) decrease in accounts
receivable 464,024 (782,542) 394,712
(Increase) decrease in inventories (448,828) 264,642 50,402
(Increase) decrease in prepaid expenses
and other assets (85,633) (53,839) 24,456
Increase (decrease) in accounts payable
and other accrued expenses 1,021,147 29,926 (192,180)
------------------ ----------------- -------------------
Net cash provided by operating
activities 3,632,870 2,319,547 3,861,349
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment (1,428,360) (1,148,834) (1,054,716)
Proceeds from sale of equipment 178,500 78,326 -
------------------ ----------------- -------------------
Net cash used in investing
activities (1,249,860) (1,070,508) (1,054,716)
CASH FLOWS FROM FINANCING ACTIVITIES
Net payments under short-term credit line - (309,000) (3,434,000)
Proceeds from long-term debt - - 813,298
Payments on long-term debt (1,530,915) (696,453) (563,881)
Payment of dividends (311,069) (234,896) (149,634)
------------------ ----------------- -------------------
Net cash used in financing
activities (1,841,984) (1,240,349) (3,334,217)
------------------ ----------------- -------------------
NET INCREASE (DECREASE) IN CASH 541,026 8,690 (527,584)
CASH - Beginning of year 119,372 110,682 638,266
------------------ ----------------- -------------------
CASH - End of year $ 660,398 $ 119,372 $ 110,682
================== ================= ===================
</TABLE>
See Notes to Consolidated Financial Statements.
19
<PAGE> 20
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial
statements include the accounts of Michigan Rivet Corporation and
its subsidiaries (the "Company"). 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:
1997 1996 1995
------- -------- --------
General Motors Corporation 33% 33% 33%
Ford Motor Company 39 40 38
Chrysler Corporation 19 19 21
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, 26
percent and 25 percent of consolidated inventories at October 31,
1997, 1996 and 1995, 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 $403,000, $407,000 and $456,000 in 1997, 1996 and
1995, 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 that 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, 1997, 1996 AND 1995
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.
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. These benefits are recognized as an
expense as employees render service.
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 less .25 percent (prime was 8.5 percent
at October 31, 1997). The weighted average interest rate for
1997, 1996 and 1995 was 8.59 percent, 8.99 percent and 9.64
percent, respectively. Available borrowings under this agreement
are based on a percentage of eligible accounts receivable.
Long-term debt consists of the following obligations:
<TABLE>
<CAPTION>
1997 1996 1995
---------------- ----------------- -----------------
<S> <C> <C> <C>
Mortgage note $ 2,580,972 $ 2,821,489 $ 3,040,359
Term note - 633,306 833,310
Mortgage note, due February 1996,
9.75%, $5,346 paid monthly - - 20,941
Equipment notes payable 288,682 933,830 1,171,835
Other 30,846 42,790 61,423
---------------- ----------------- -----------------
Total 2,900,500 4,431,415 5,127,868
Less current maturities 369,163 684,815 691,039
---------------- ----------------- -----------------
Total long-term debt $ 2,531,337 $ 3,746,600 $ 4,436,829
================ ================= =================
</TABLE>
21
<PAGE> 22
MICHIGAN RIVET CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1997, 1996 AND 1995
NOTE 2 - DEBT (Continued)
The mortgage note is payable in monthly installments of $39,757
including interest, and matures February 1, 2000. The mortgage
note bears interest at the lending institution's prime rate
(prime was 8.5 percent at October 31, 1997). 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
note requires monthly payments of $10,174 plus interest at 9
percent and matures July 1, 2000.
Maturities of long-term debt during the five fiscal years
following 1997 are:
1998 $ 369,163
1999 431,894
2000 390,048
2001 343,334
2002 373,682
Thereafter 992,379
As of October 31, 1997, substantially all of the Company's assets
were mortgaged or otherwise collateralized by the various debt
agreements.
Cash payments for interest were $326,493, $473,295 and $687,589
in 1997, 1996 and 1995, respectively.
NOTE 3 - FEDERAL INCOME TAXES
The provision for income tax expense is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------- --------------- ---------------
<S> <C> <C> <C>
Current expense $ 1,142,000 $ 710,000 $ 544,980
Deferred reduction (355,000) - (369,187)
----------------- --------------- ---------------
Total income tax expense $ 787,000 $ 710,000 $ 175,793
================= =============== ===============
Income tax payments $ 905,000 $ 785,000 $ 605,000
================= =============== ===============
</TABLE>
22
<PAGE> 23
MICHIGAN RIVET CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1997, 1996 AND 1995
NOTE 3 - FEDERAL INCOME TAXES (Continued)
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>
1997 1996 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
Deferred tax liabilities:
Depreciation $ 935,465 $ 962,480 $ 952,612
Other - - 2,896
----------------- ----------------- -----------------
Total deferred tax liabilities 935,465 962,480 955,508
Deferred tax assets:
Employee benefits 1,549,855 1,256,396 1,145,594
Tax credit carryover - - 100,000
Inventory valuation 398,524 328,849 335,387
Other 14,725 49,874 47,166
----------------- ----------------- -----------------
Total deferred tax assets 1,963,104 1,635,119 1,628,147
Valuation allowance - - -
----------------- ----------------- -----------------
Net deferred tax asset $ 1,027,639 $ 672,639 $ 672,639
================= ================= =================
</TABLE>
The principal components of deferred federal income tax credits are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------ ----------------- -----------------
<S> <C> <C> <C>
Employee benefits $ (293,459) $ (110,802) $ (437,443)
Accelerated tax depreciation (27,015) 9,868 54,696
Inventory valuation (69,675) 6,538 51,597
Tax credit carryover and other 35,149 94,396 (38,037)
------------------ ----------------- -----------------
Total $ (355,000) $ - $ (369,187)
================== ================= =================
</TABLE>
23
<PAGE> 24
MICHIGAN RIVET CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1997, 1996 AND 1995
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>
1997 1996 1995
---------------- ---------------- ----------------
<S> <C> <C> <C>
Service cost for benefits earned during
the period $ 82,164 $ 73,369 $ 60,377
Interest cost of projected benefit
obligation 291,878 266,634 255,487
Actual return on plan assets (906,341) (718,773) (662,138)
Net amortization and deferral 508,743 332,331 295,544
---------------- ---------------- ----------------
Net pension income $ (23,556) $ (46,439) $ (50,730)
================ ================ ================
Assumptions used in accounting for the plan were:
1997 1996 1995
---------------- ---------------- ----------------
Weighted average discount rate 7.5% 7.5% 7.0%
Expected long-term rate of return on 7.0% 7.0% 7.0%
assets
</TABLE>
24
<PAGE> 25
MICHIGAN RIVET CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1997, 1996 AND 1995
NOTE 4 - RETIREMENT BENEFITS (Continued)
The following table sets forth the funded status and amounts
recognized in the consolidated balance sheets for the union plan:
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ------------------ -----------------
<S> <C> <C> <C>
Actuarial present value of benefit
obligation:
Vested benefit $ 4,139,816 $ 3,699,434 $ 3,636,038
================= ================== =================
Accumulated benefit
obligation $ 4,272,033 $ 3,818,023 $ 3,781,650
================= ================== =================
Projected benefit obligation $ 4,272,033 $ 3,818,023 $ 3,781,650
Plan assets at fair value 6,306,504 5,617,523 5,116,114
----------------- ------------------ -----------------
Excess of plan assets over
projected benefit obligation 2,034,471 1,799,500 1,334,464
Unrecognized net gain (1,101,670) (682,137) (207,948)
Unrecognized prior service cost 157,781 5,827 6,399
Unrecognized net asset
at transition (524,288) (580,452) (636,616)
----------------- ------------------ -----------------
Net pension asset recognized
in the balance sheet $ 566,294 $ 542,738 $ 496,299
================= ================== =================
</TABLE>
Plan assets are invested primarily in pooled equity investment
funds, obligations of the U.S. government and its agencies and
certain other investments.
During 1997, the plan was amended to increase the benefit levels
resulting in an increase in the unrecognized prior service cost.
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 $60,000,
$50,000 and $56,000 to this plan in 1997, 1996 and 1995,
respectively.
25
<PAGE> 26
MICHIGAN RIVET CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1997, 1996 AND 1995
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.
During 1997, the plan provisions were revised to change the limit
on the Company's subsidy from 2.00 to 1.50 times the 1997
premium. This change reduced the unrecognized transition
obligation by $636,000.
The Company recognized an expense related to postretirement
benefits consisting of service cost, interest cost and transition
amortization in 1997, 1996 and 1995, as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ---------------- -----------------
<S> <C> <C> <C>
Service cost of benefits earned $ 176,150 $ 196,412 $ 359,215
Interest cost on liability 347,471 351,592 677,106
Net amortization and deferral 213,248 189,473 426,530
----------------- ---------------- -----------------
Total net periodic post-
retirement benefit cost $ 736,869 $ 737,477 $ 1,462,851
================= ================ =================
</TABLE>
26
<PAGE> 27
MICHIGAN RIVET CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1997, 1996 AND 1995
NOTE 4 - RETIREMENT BENEFITS (Continued)
The amounts reported on the balance sheet at October 31, 1997,
1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------------------- ----------------- ------------------
<S> <C> <C> <C>
Accumulated postretirement benefit
obligation:
Fully eligible active participants $ 900,253 $ 1,051,138 $ 1,379,359
Other active participants 896,131 957,331 1,529,610
Retired participants 2,920,002 3,207,589 3,875,644
-------------------- ----------------- ------------------
Total APBO 4,716,386 5,216,058 6,784,613
Unrecognized net obligation at
transition (2,696,908) (3,556,706) (3,779,000)
Unrecognized net gain (loss) 1,994,092 1,819,788 (73,529)
-------------------- ----------------- ------------------
Accrued postretirement
benefit cost $ 4,013,570 $ 3,479,140 $ 2,932,084
==================== ================= ==================
</TABLE>
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 $202,000 $190,000 and $188,000 in 1997,
1996 and 1995, respectively. The Company estimated the current
portion of this accrued benefit cost to be $200,000 for 1997,
1996 and 1995, and those amounts have been shown as current
liabilities.
The significant actuarial assumptions used to determine the cost
to the Company at October 31, 1997 are as follows:
Discount rate 7.25%
Health care trend rates - Medical Approximately 9.9%
per annum grading
down to 5.25% in
2005/2006 and all
years thereafter
Health care trend rates - Prescription Approximately 12.60%
per annum grading
down to 5.25% in
2005/2006 and all
years thereafter
A one percent increase in the health care trend rate assumptions
would increase the October 31, 1997 APBO by 1.87 percent and
would increase the aggregate of the 1997 service and interest
cost components of the net periodic postretirement benefit cost
by 2.01 percent.
27
<PAGE> 28
MICHIGAN RIVET CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1997, 1996 AND 1995
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 - CONTINGENCIES
The Company is self-insured for purposes of workers' compensation
insurance. Under the plan, the Company has specific stop-loss
insurance for occurrences exceeding $300,000 per individual
claim. The Company's authority for self insurance is renewed by
the State of Michigan on January 1 yearly. The Company currently
has a standby letter of credit of $200,000 pledged for potential
future claims. Workers' compensation claims totaled approximately
$301,000, $195,000 and $268,000 for the years ended October 31,
1997, 1996 and 1995, respectively.
NOTE 7 - 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.
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
- --------------------------------------------------------------------------------------------------------------------
DESCRIPTION Balance at (1) Charged (2) Charged Deductions- Balance at
Beginning of to Costs and to Other Describe End of Period
Period Expenses Accounts-
Describe
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year Ended October 31, 1997:
Valuation allowance for $ 50,000 $ 51,874 A $ 51,874 $ 50,000
accounts receivable
Reserve for inventory
obsolescence 663,000 127,000 790,000
-------- -------- -------- -----------
TOTALS $713,000 $178,874 $ 51,874 $ 840,000
======== ======== ======== ===========
Year Ended October 31, 1996:
Valuation allowance for $ 50,000 $ 31,231 A $ 31,231 $ 50,000
accounts receivable
Reserve for inventory
obsolescence 604,000 59,000 663,000
-------- -------- -------- -----------
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
obsolescence 612,800 (8,800) 604,000
-------- -------- -------- -----------
TOTALS $662,800 $ 705 $ 9,505 $ 654,000
======== ======== ======== ===========
</TABLE>
A - Represents uncollectible accounts charged off, net of recoveries.
29
<PAGE> 30
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
------- --- -----------
EXHIBIT 21 Subsidiaries of Registrant
EXHIBIT 27 Financial Data Schedule
<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%
30
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000065666
<NAME> MICHIGAN RIVET CORP.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1
<CASH> 660,398
<SECURITIES> 0
<RECEIVABLES> 5,737,051
<ALLOWANCES> 50,000
<INVENTORY> 5,153,130
<CURRENT-ASSETS> 12,351,010
<PP&E> 25,016,189
<DEPRECIATION> 15,831,463
<TOTAL-ASSETS> 22,540,330
<CURRENT-LIABILITIES> 6,534,715
<BONDS> 2,531,337
0
0
<COMMON> 638,525
<OTHER-SE> 9,022,183
<TOTAL-LIABILITY-AND-EQUITY> 22,540,330
<SALES> 43,013,303
<TOTAL-REVENUES> 43,013,303
<CGS> 36,790,532
<TOTAL-COSTS> 36,790,532
<OTHER-EXPENSES> 3,585,020
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 323,853
<INCOME-PRETAX> 2,313,898
<INCOME-TAX> 787,000
<INCOME-CONTINUING> 1,526,898
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,526,898
<EPS-PRIMARY> 2.39
<EPS-DILUTED> 2.39
</TABLE>
