1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended March 31, 2001 Commission File Number 0-1227
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CHICAGO RIVET & MACHINE CO.
(Exact name of registrant as specified in its charter)
ILLINOIS 36-0904920
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
P.O. Box 3061
90l Frontenac Road
Naperville, Illinois 60566
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (630) 357-8500
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 31, 2001
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COMMON STOCK, $1.00 PAR VALUE 967,132 SHARES
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CHICAGO RIVET & MACHINE CO.
INDEX
PART I. FINANCIAL INFORMATION Page
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Consolidated Balance Sheets at March 31, 2001
and December 31, 2000 2-3
Consolidated Statements of Operations for the Three
Months Ended March 31, 2001 and 2000 4
Consolidated Statements of Retained Earnings for the
Three Months Ended March 31, 2001 and 2000 5
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2001 and 2000 6
Notes to the Consolidated Financial Statements 7-8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Quantitative and Qualitative Information About Market Risk 10
PART II. OTHER INFORMATION 11-15
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CHICAGO RIVET & MACHINE CO.
Consolidated Balance Sheets
March 31, 2001 and December 31, 2000
March 31, December 31,
2001 2000
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(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 2,864,064 $ 2,265,442
Certificates of deposit 631,104 1,429,886
Accounts receivable - net of allowances 5,694,990 5,037,231
Inventories:
Raw materials 1,998,037 2,010,984
Work in process 2,168,549 2,156,092
Finished goods 2,891,625 3,037,108
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Total inventories 7,058,211 7,204,184
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Deferred income taxes 705,191 705,191
Other current assets 234,868 191,668
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Total current assets 17,188,428 16,833,602
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Property, Plant and Equipment:
Land and improvements 1,010,595 1,010,595
Buildings and improvements 5,677,680 5,677,680
Production equipment, leased
machines and other 26,966,472 26,686,705
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33,654,747 33,374,980
Less accumulated depreciation 19,514,368 19,051,463
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Net property, plant and equipment 14,140,379 14,323,517
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Total assets $31,328,807 $31,157,119
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See Notes to the Consolidated Financial Statements
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CHICAGO RIVET & MACHINE CO.
Consolidated Balance Sheets
March 31, 2001 and December 31, 2000
March 31, December 31,
2001 2000
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(Unaudited)
Liabilities and Shareholders' Equity
Current Liabilities:
Current portion of note payable $ 1,800,000 $ 1,800,000
Accounts payable 1,651,137 1,065,561
Accrued wages and salaries 1,151,629 753,577
Contributions due profit sharing plan 54,911 437,076
Other accrued expenses 698,934 774,974
Federal and state income taxes payable 174,010 1,123
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Total current liabilities 5,530,621 4,832,311
Note payable 2,982,760 3,432,760
Deferred income taxes 1,373,275 1,373,275
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Total liabilities 9,886,656 9,638,346
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Commitments and contingencies (Note 4)
Shareholders' Equity:
Preferred stock, no par value, 500,000 shares
authorized: none outstanding -- --
Common stock, $1.00 par value, 4,000,000 shares
authorized: 1,138,096 shares issued 1,138,096 1,138,096
Additional paid-in capital 447,134 447,134
Retained earnings 23,752,043 23,828,665
Treasury stock, 170,964 shares at cost (3,895,122) (3,895,122)
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Total shareholders' equity 21,442,151 21,518,773
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Total liabilities and shareholders' equity $ 31,328,807 $ 31,157,119
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See Notes to the Consolidated Financial Statements
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CHICAGO RIVET & MACHINE CO.
Consolidated Statements of Operations
For the Three Months Ended March 31, 2001 and 2000
(Unaudited)
2001 2000
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Net sales $ 10,568,698 $ 12,372,113
Lease revenue 59,133 63,623
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10,627,831 12,435,736
Cost of goods sold and costs
related to lease revenue 8,377,914 8,892,224
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Gross profit 2,249,917 3,543,512
Selling and administrative expenses 1,699,245 2,146,084
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550,672 1,397,428
Other income and expenses:
Interest income 46,762 51,977
Interest expense (94,768) (50,940)
Gain from the disposal of equipment 7,983 10,144
Other income, net of other expense 2,592 3,826
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Income before income taxes 513,241 1,412,435
Provision for income taxes 174,000 491,000
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Net Income $ 339,241 $ 921,435
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Average common shares outstanding 967,132 1,138,096
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Per share data:
Net income per share $ 0.35 $ 0.81
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Cash dividends declared per share $ 0.43 $ 0.53
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See Notes to the Consolidated Financial Statements
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CHICAGO RIVET & MACHINE CO.
Consolidated Statements of Retained Earnings
For the Three Months Ended March 31, 2001 and 2000
(Unaudited)
2001 2000
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Retained earnings at beginning of period $ 23,828,665 $ 22,302,048
Net income for the three months ended 339,241 921,435
Cash dividends declared in the period;
$.43 per share in 2001 and $.53 in 2000 (415,863) (603,191)
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Retained earnings at end of period $ 23,752,043 $ 22,620,292
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See Notes to the Consolidated Financial Statements
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CHICAGO RIVET & MACHINE CO.
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2001 and 2000
(Unaudited)
2001 2000
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Cash flows from operating activities:
Net income $ 339,241 $ 921,435
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 467,307 465,126
Net gain on the sale of equipment (7,983) (10,144)
Changes in working capital components:
Accounts receivable (657,759) (297,481)
Inventories 145,973 52,209
Other current assets (43,200) 59,579
Accounts payable 343,793 280,336
Accrued wages and salaries 398,052 196,952
Accrued profit sharing (382,165) (511,937)
Other accrued expenses (76,040) (84,684)
Income taxes payable 172,887 47,703
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Net cash provided by operating activities 700,106 1,119,094
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Cash flows from investing activities:
Capital expenditures (292,786) (1,061,857)
Proceeds from the sale of properties 16,600 11,075
Proceeds from held-to-maturity securities 1,154,885 452,594
Purchases of held-to-maturity securities (356,103) (1,253,733)
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Net cash provided by (used in) investing activities 522,596 (1,851,921)
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Cash flows from financing activities:
Payments under term loan agreement (450,000) (450,000)
Cash dividends paid (174,080) (204,857)
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Net cash used in financing activities (624,080) (654,857)
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Net increase (decrease) in cash and cash equivalents 598,622 (1,387,684)
Cash and cash equivalents at beginning of period 2,265,442 3,414,460
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Cash and cash equivalents at end of period $ 2,864,064 $ 2,026,776
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See Notes to the Consolidated Financial Statements
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CHICAGO RIVET & MACHINE CO.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the financial
position of the Company as of March 31, 2001 and December 31, 2000 and the
results of operations and changes in cash flows for the indicated periods.
The Company uses estimated gross profit rates to determine the cost of goods
sold during interim periods on a portion of its operations. Actual results could
differ from those estimates and will be adjusted, as necessary, following the
Company's annual physical inventory in the fourth quarter.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. The results of operations for the three month period ended March 31, 2001 are
not necessarily indicative of the results to be expected for the year.
3. The Company extends credit primarily on the basis of 30-day terms to various
companies doing business primarily in the automotive and appliance industries.
The Company has a concentration of credit risk primarily within the automotive
industry and in the Midwestern United States.
4. The Company is, from time to time involved in litigation, including
environmental claims, in the normal course of business. While it is not possible
at this time to establish the ultimate amount of liability with respect to
contingent liabilities, including those related to legal proceedings, management
is of the opinion that the aggregate amount of any such liabilities, for which
provision has not been made, will not have a material adverse effect on the
Company's financial position.
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CHICAGO RIVET & MACHINE CO.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. Segment Information--The Company operates in two business segments as
determined by its products. The fastener segment includes rivets, cold-formed
fasteners and screw machine products. The assembly equipment segment includes
automatic rivet setting machines, parts and tools for such machines and the
leasing of automatic rivet setting machines. Information by segment is as
follows:
Assembly
Fastener Equipment Other Consolidated
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Three Months Ended March 31, 2001:
Net sales and lease revenue $ 8,306,645 $ 2,321,186 $ -- $ 10,627,831
Depreciation 346,890 60,699 59,718 467,307
Segment profit 617,274 735,854 -- 1,353,128
Selling and administrative expenses 791,881 791,881
Interest expense 94,768 94,768
Interest income (46,762) (46,762)
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Income before income taxes 513,241
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Capital expenditures 217,848 12,935 62,003 292,786
Segment assets:
Inventory 4,304,482 2,753,729 -- 7,058,211
Property, plant and equipment, net 10,730,445 1,948,265 1,461,669 14,140,379
Other assets -- -- 10,130,217 10,130,217
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31,328,807
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Three Months Ended March 31, 2000:
Net sales and lease revenue $ 9,914,464 $ 2,521,272 $ -- $ 12,435,736
Depreciation 340,698 65,385 59,043 465,126
Segment profit 1,583,872 913,460 -- 2,497,332
Selling and administrative expenses 1,085,934 1,085,934
Interest expense 50,940 50,940
Interest income (51,977) (51,977)
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Income before income taxes 1,412,435
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Capital expenditures 1,053,282 7,063 1,512 1,061,857
Segment assets:
Inventory 4,022,771 2,848,741 -- 6,871,512
Property, plant and equipment, net 11,242,634 1,861,270 1,599,859 14,703,763
Other assets -- -- 11,241,258 11,241,258
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32,816,533
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CHICAGO RIVET & MACHINE CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Revenues for the first quarter of 2001 amounted to $10,627,831, a
decline of 14.5% compared to the first quarter of 2000. Revenues within the
fastener segment amounted to $8,306,645, which is a decline of approximately 16%
compared to the first quarter of 2000. Revenues within the assembly equipment
segment amounted to $2,321,186 during the first quarter of 2001, a decline of
approximately 8% compared to the first quarter of 2000. The decline in revenues
is a reflection of continuing weakness in the manufacturing sector of the
economy and is consistent with conditions that have characterized our major
markets for several months.
In response to the lower order activity, the company has taken action
to reduce operating costs. While these efforts have been successful, their
combined impact was not sufficient to fully offset the effects of lower volumes,
and gross margins declined in both segments of our operation. While overall
sales declined within the fastener segment, we have obtained a variety of new
business which contributed to higher than normal tooling costs, further reducing
gross margins in this segment. During the first quarter of 2001, reduced
consulting and legal expenses, reductions in salary expense, lower commission
expense and lower profit sharing expense contributed to a reduction of
approximately $450,000 in selling and administrative expenses compared to the
first quarter of 2000. These savings helped offset the decline in gross margins,
and net income for the quarter amounted to $339,241 or $.35 per share on 967,132
average shares outstanding.
The Company's financial condition continues to be sound. Working
capital at the end of the quarter was $11.7 million, which is approximately $.3
million lower than at the end of the prior quarter. Inventory levels, which are
also lower than at the beginning of the year, are still somewhat above ideal
levels and efforts to reduce the level of inventories will continue in the
months ahead. Capital expenditures amounted to $.3 million during the quarter,
primarily for new equipment related to the manufacture of fasteners. At March
31, the balance due on the term note was $4.78 million and the average interest
rate was 7.2%. The Company also has a $1.0 million line of credit available
through Bank of America. There is no charge for this facility until it is
utilized. We believe that current cash, cash equivalents and the available
credit facility will be sufficient to provide adequate working capital to meet
the Company's needs for the foreseeable future.
Conditions within our markets continue to be uncharacteristically weak.
The level of incoming orders within the fastener segment is well below that
enjoyed at this time last year, and we have not seen consistent indications that
the situation will improve in the short term. Within the assembly equipment
segment, activity is more comparable to that of one year ago; however,
conditions in that segment were already showing softness at this time last year.
While we anticipate conditions will improve, we do not expect a significant
change in our business to occur until the overall economy begins a recovery. In
the interim, we will continue to seek out profitable business wherever
opportunities exist, and we will continue to place emphasis on proven cost
control measures.
The foregoing discussion contains certain "forward-looking statements" which are
inherently subject to risks and uncertainties that may cause actual events to
differ materially from those discussed herein. Factors which may cause such
differences in events include, among other things, our ability to maintain our
relationships with our significant customers; increases in the prices of, or
limitations on the availability of, our primary raw materials; or a downturn in
the automotive industry, upon which we rely for sales revenue, and which is
cyclical and dependent on, among other things, consumer spending, international
economic conditions and regulations and policies regarding international trade.
Many of these factors are beyond our ability to control or predict. Readers are
cautioned not to place undue reliance on these forward-looking statements. We
undertake no obligation to publish revised forward-looking statements to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
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CHICAGO RIVET & MACHINE CO.
QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK
Over time, the Company is exposed to market risks arising from changes
in interest rates. The Company has not historically used derivative financial
instruments. As of March 31, 2001, $4.78 million of floating-rate debt was
exposed to changes in interest rates compared to $5.23 million as of December
31, 2000. This exposure was primarily linked to the London Inter-Bank Offering
Rate and the lender's prime rate under the Company's term loan. A hypothetical
10% change in these rates would not have had a material effect on the Company's
quarterly earnings.
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PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
99.1 Interim Report to Shareholders for the quarter ended March
31, 2001.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the current period.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHICAGO RIVET & MACHINE CO.
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(Registrant)
Date: May 4, 2001
/s/ John A. Morrissey
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John A. Morrissey
Chairman of the Board of Directors
and Chief Executive Officer
Date: May 4, 2001
/s/ John C. Osterman
---------------------------------
John C. Osterman
President, Chief Operating
Officer and Treasurer
(Principal Financial Officer)
Date: May 4, 2001
/s/ Michael J. Bourg
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Michael J. Bourg
Controller (Principal Accounting
Officer)
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CHICAGO RIVET & MACHINE CO.
EXHIBITS
INDEX TO EXHIBITS
Exhibit
Number Page
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99.1 Interim Report to Shareholders for the
quarter ended March 31, 2001 14-15
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