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CONFORMED
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OF THE
SECURITIES EXCHANGE ACT of 1934
For Quarter ended July 31, 1999
Commission file number: 0-6056
Michigan Rivet Corporation
- --------------------------------------------------------------------------------
(exact name of registrant as specified in its charter)
Michigan 38-1887153
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
13201 Stephens Road; Warren, MI 48089
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(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (810) 754-5100
----------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes XX No
---- ----
There were 638,525 outstanding shares of the registrant's common stock, $1.00
par value, as of July 31, 1999, close of the period covered by this report.
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MICHIGAN RIVET CORPORATION
NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the interim periods are not necessarily
indicative of the results that may be expected for the year. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year ended
October 31, 1998.
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PART I. FINANCIAL INFORMATION FORM 10-Q
ITEM 1. FINANCIAL STATEMENTS
MICHIGAN RIVET CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
July 31, October 31,
1999 1998
----------- -----------
<S> <C> <C>
Current Assets:
Cash............................................ $ 153,605 $ 92,125
Accounts receivable, less allowance of $50,000.. 4,643,896 6,575,512
Inventories..................................... 6,534,804 6,087,804
Deferred federal income taxes................... 647,639 647,639
Prepaid expenses and other current assets....... 273,319 253,734
----------- -----------
TOTAL CURRENT ASSETS...... 12,253,263 13,656,814
Other Assets...................................... 1,048,662 1,048,662
Property, Plant and Equipment..................... 27,231,461 26,296,996
Less accumulated depreciation................... 15,972,201 15,242,603
----------- -----------
11,259,260 11,054,393
----------- -----------
$24,561,185 $25,759,869
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable to bank........................... $ 0 $ 848,000
Accounts payable................................ 4,366,480 5,224,035
Payroll and employee benefits................... 881,905 1,394,722
Other accrued expenses.......................... 440,036 576,914
Current maturities of long-term debt............ 299,060 299,061
----------- -----------
TOTAL CURRENT LIABILITIES 5,987,482 8,342,732
Long-Term Debt.................................... 1,824,248 2,058,572
Accrued Retiree Health Liability.................. 4,097,008 3,967,643
Shareholders' Equity
Common stock - $1 par value
Authorized - 1,000,000 shares
Outstanding - 638,525 shares................ 638,525 638,525
Other capital................................... 117,403 117,403
Retained earnings............................... 11,896,519 10,634,994
----------- -----------
12,652,447 11,390,922
----------- -----------
$24,561,185 $25,759,869
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
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FORM 10-Q
MICHIGAN RIVET CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 31 July 31
---------------------------- ----------------------------
1999 1998 1999 1998
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net sales........................ $11,195,010 $ 9,634,274 $34,343,856 $32,515,181
Cost and expenses:
Cost of products sold.......... 9,450,287 8,612,556 29,035,991 28,014,178
Selling, administrative
and general expenses.... 1,014,389 828,463 2,786,659 2,598,605
Interest expense............... 50,877 83,889 183,730 221,860
----------- ----------- ----------- -----------
10,515,553 9,524,908 32,006,380 30,834,643
----------- ----------- ----------- -----------
Income before
income taxes.......... 679,457 109,366 2,337,476 1,680,538
Income taxes..................... 232,000 36,000 795,000 571,000
----------- ----------- ----------- -----------
Net Income.............. $ 447,457 $ 73,366 $ 1,542,476 $ 1,109,538
=========== =========== =========== ===========
Net Income per share............. $ .71 $ .12 $ 2.42 $ 1.74
=========== =========== =========== ===========
Dividends per share.............. $ .12 $ .12 $ .44 $ .36
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
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FORM 10-Q
MICHIGAN RIVET CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
July 31
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income ........................................................ $ 1,542,476 $ 1,109,538
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation ............................................... 958,000 851,300
Accrued retiree health liability ........................... 129,365 282,803
Cash provided from (used in) changes in operating assets and
liabilities:
Accounts receivable .................................... 1,931,616 1,690,998
Inventories ............................................ (447,000) (1,118,000)
Prepaid expenses and other current assets .............. (19,585) (20,841)
Accounts payable & other accrued expenses .............. (1,507,250) (695,813)
----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES ............................. 2,587,622 2,099,985
INVESTING ACTIVITIES
Acquisition of property, plant and equipment ...................... 1,162,867 2,265,519
FINANCING ACTIVITIES
Net increase (decrease) in short-term debt ........................ (848,000) 748,000
Payments on long-term debt ........................................ (234,324) (466,802)
Dividends paid .................................................... (280,951) (228,717)
----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES ....................................... (1,363,275) 52,481
----------- -----------
INCREASE (DECREASE) IN CASH ....................... 61,480 (113,053)
Cash at beginning of period ......................................... 92,125 660,398
----------- -----------
CASH AT END OF PERIOD ............................. $ 153,605 $ 547,345
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
MICHIGAN RIVET CORPORATION
Results of Operations
Net sales in the quarter ended July 31, 1999 of $11,195,000 increased
$1,561,000, or 16.2% from the sales reported in the comparable period a year
ago. The increase in sales is a result of changes in production schedules and no
work stoppage at General Motors in 1999. The net profit for the quarter ended
July 31, 1999 was $447,000 vs. a net profit of $73,000 in the comparable period
a year ago.
The cost of sales percentage was 84.4% for the current fiscal year quarter vs.
89.4% in the comparable period a year ago. This decrease was due to lower
manufacturing costs and some improved production efficiencies.
The selling, general and administrative expense increase was primarily due to
greater sales commissions and bonus accruals. The percent to sales also
increased to 8.12% from 8.05%.
Interest expense decreased $38,000 due primarily to lower short-term borrowing
during the period. The interest rate paid by the Company to Comerica Bank is
tied to the prevailing prime rate.
For the first nine months of 1999, net sales of $34,344,000 were 5.6% greater
than the same period in 1998, due primarily to increased sales to the automotive
market and new non-automotive customers. The increase in gross profit resulted
from primarily lower material and outside processing costs. The net profit for
the first nine months of 1999 was $1,542,000 vs. a net profit of $1,110,000 in
the comparable period a year ago.
Liquidity and Capital Resources
The Company has short-term credit lines aggregating $5,000,000. At July 31,
1999, $0 were borrowed on this facility. Additionally, cash generated from
operations was used to purchase
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machinery and equipment and reduce long-term debt. The Company anticipates that
funds provided by operations together with funds available under its credit
lines will be sufficient to meet the Company's liquidity needs for the remainder
of fiscal year 1999.
Year 2000
The Year 2000 issue ("Y2K") exists because some computer programs use two digits
rather that four to define the applicable year. For instance, these programs
record the year 1998 as "98." Any date-sensitive software may interpret 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 a
temporary inability to engage in normal business activities.
Readiness
The Company has conducted an inventory and assessment of its information
technology ("IT") systems and non-IT systems (such as building facilities, voice
mail, telephone and other systems containing embedded microprocessors). The
inventory was completed during 1997. The remediation phase and testing phases
were completed during 1998.
The Company's material internal IT systems principally consist of accounting and
manufacturing software applications. The Company has tested these systems and
are assured that all applications are Y2K compliant.
The Company purchases products and services from third parties. The Company has
sought written assurances from its material vendors and suppliers that there
will be no interruption of service or acceptable product as a result of the Y2K
issue. Based in part on the assurances received or not received, throughout
calendar 1999 the Company will resource work to mitigate the negative effects on
the Company in the event the Y2K issue results in the unavailability of products
or services. The Company cannot assure that any contingency plans will prevent
product or service interruption by one or more of the Company's third party
vendors or suppliers from having a material adverse effect on the Company.
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Cost
The Company expects the costs directly associated with its Y2K efforts to be
minor and under $50,000 total.
Risks
The Company may be at risk from external infrastructure failures, including
electrical power, telephone, and transportation, among others. Investigation and
assessment of infrastructures is beyond the scope and resources of the Company.
Among the risks arising from these sources are the Company's inability to
conduct business in its offices that lose electrical power or experience failure
of elevator, security, HVAC or other building systems, and disruption to Company
business if telephone or cellular communication is unavailable.
Contingencies
The Company has developed contingency plans in regard to its internal systems,
vendor/supplier issues or any of the more global infrastructure issues. The plan
is to create a complete back-up file of all data and if necessary to manually
transact all functions until problem is corrected.
Forward-Looking Statements
The estimates regarding the costs of the Company's Y2K efforts, as well as
statements regarding the potential effect of Y2K issues on the Company and the
Company's plans to deal with issues or contingencies raised by Y2K issues, are
forward-looking statements. These statements are subject to a number of risks
and uncertainties which could cause actual costs, effects or plans to differ
from the discussion above. Among these risks or uncertainties are the following:
- - difficulty in successfully identifying all hardware, software and
systems which may be affected by Y2K problems or which may contain
microprocessors affected by those problems;
- - difficulty in identifying all third parties whose inability to process
Y2K date information may affect the Company;
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- - the fact that the Company will have no control over the efforts of
material vendors, suppliers and other providers to address their Y2K
issues; and
- - the effect of general economic conditions on the willingness of third
parties to make the expenditures necessary to address Y2K problems
which may affect the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK SENSITIVE
INSTRUMENTS
At the end of the quarter covered by this report, the Company had no material
exposure to market risks from instruments related to currency, interest rates or
otherwise.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended July 31, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto, duly authorized.
Michigan Rivet Corporation
By William P. Lianos
--------------------------
William P. Lianos
Executive Vice President and Treasurer
(Principal Financial & Accounting Officer)
Date 8-26-99
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Exhibit Index
EXHIBIT NO. DESCRIPTION
- ----------- -----------
EXHIBIT 27 Financial data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENT OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10Q
</LEGEND>
<CIK> 0000065666
<NAME> MICHIGAN RIVET CORP.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> JUL-31-1999
<CASH> 153,605
<SECURITIES> 0
<RECEIVABLES> 4,693,896
<ALLOWANCES> 50,000
<INVENTORY> 6,534,804
<CURRENT-ASSETS> 12,253,263
<PP&E> 27,231,461
<DEPRECIATION> 15,972,201
<TOTAL-ASSETS> 24,561,185
<CURRENT-LIABILITIES> 5,987,482
<BONDS> 1,824,248
0
0
<COMMON> 638,525
<OTHER-SE> 12,013,922
<TOTAL-LIABILITY-AND-EQUITY> 24,561,185
<SALES> 34,343,856
<TOTAL-REVENUES> 34,343,856
<CGS> 29,035,991
<TOTAL-COSTS> 29,035,991
<OTHER-EXPENSES> 2,786,659
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 183,730
<INCOME-PRETAX> 2,337,476
<INCOME-TAX> 795,000
<INCOME-CONTINUING> 1,542,476
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,542,476
<EPS-BASIC> 2.42
<EPS-DILUTED> 2.42
</TABLE>
