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 June 30, 2001 Commission File Number 0-1227
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CHICAGO RIVET & MACHINE CO.
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(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
901 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 June 30, 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
Consolidated Balance Sheets at June 30, 2001
and December 31, 2000 2-3
Consolidated Statements of Operations for the Three
and Six Months Ended June 30, 2001 and 2000 4
Consolidated Statements of Retained Earnings for the
Six Months Ended June 30, 2001 and 2000 5
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2001 and 2000 6
Notes to the Consolidated Financial Statements 7-9
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Quantitative and Qualitative Information About Market Risk 11
PART II. OTHER INFORMATION 12-16
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CHICAGO RIVET & MACHINE CO.
Consolidated Balance Sheets
June 30, 2001 and December 31, 2000
June 30, December 31,
2001 2000
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(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 3,143,136 $ 2,265,442
Certificates of deposit 731,103 1,429,886
Accounts receivable - net of allowances 5,674,063 5,037,231
Inventories:
Raw materials 1,891,642 2,010,984
Work in process 1,756,672 2,156,092
Finished goods 2,767,185 3,037,108
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Total inventories 6,415,499 7,204,184
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Deferred income taxes 685,191 705,191
Other current assets 292,454 191,668
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Total current assets 16,941,446 16,833,602
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Property, Plant and Equipment:
Land and improvements 1,010,595 1,010,595
Buildings and improvements 5,686,030 5,677,680
Production equipment, leased
machines and other 27,384,772 26,686,705
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34,081,397 33,374,980
Less accumulated depreciation 19,977,405 19,051,463
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Net property, plant and equipment 14,103,992 14,323,517
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Total assets $31,045,438 $31,157,119
=========== ===========
See Notes to the Consolidated Financial Statements
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CHICAGO RIVET & MACHINE CO.
Consolidated Balance Sheets
June 30, 2001 and December 31, 2000
June 30, 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 1,554,933 1,065,561
Accrued wages and salaries 942,701 753,577
Contributions due profit sharing plan 180,986 437,076
Other accrued expenses 509,830 774,974
Federal and state income taxes payable 145,452 1,123
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Total current liabilities 5,133,902 4,832,311
Note payable 2,532,760 3,432,760
Deferred income taxes 1,373,275 1,373,275
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Total liabilities 9,039,937 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 24,315,393 23,828,665
Treasury stock, 170,964 shares at cost (3,895,122) (3,895,122)
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Total shareholders' equity 22,005,501 21,518,773
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Total liabilities and shareholders' equity $ 31,045,438 $ 31,157,119
============ ============
See Notes to the Consolidated Financial Statements
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CHICAGO RIVET & MACHINE CO.
Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 2001 and 2000
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
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2001 2000 2001 2000
------------ ------------ ------------ ------------
Net sales $ 11,159,885 $ 12,301,502 $ 21,728,583 $ 24,673,615
Lease revenue 56,364 64,586 115,497 128,209
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11,216,249 12,366,088 21,844,080 24,801,824
Cost of goods sold and costs
related to lease revenue 8,396,627 8,719,362 16,774,541 17,611,586
------------ ------------ ------------ ------------
Gross profit 2,819,622 3,646,726 5,069,539 7,190,238
Selling and administrative expenses 1,676,349 2,234,902 3,375,594 4,380,986
------------ ------------ ------------ ------------
1,143,273 1,411,824 1,693,945 2,809,252
Other income and expenses:
Interest income 36,452 40,332 83,214 92,309
Interest expense (72,606) (110,641) (167,374) (161,581)
Gain (loss) from disposal of equipment 10,609 (10,115) 18,592 29
Other income, net of other expense 5,710 4,313 8,302 8,139
------------ ------------ ------------ ------------
Income before income taxes 1,123,438 1,335,713 1,636,679 2,748,148
Provision for income taxes 386,000 441,000 560,000 932,000
------------ ------------ ------------ ------------
Net income $ 737,438 $ 894,713 $ 1,076,679 $ 1,816,148
============ ============ ============ ============
Average common shares outstanding 967,132 1,003,080 967,132 1,070,588
============ ============ ============ ============
Per share data:
Net income per share $ 0.76 $ 0.89 $ 1.11 $ 1.70
============ ============ ============ ============
Cash dividends declared per share $ 0.18 $ 0.18 $ 0.61 $ 0.71
============ ============ ============ ============
See Notes to the Consolidated Financial Statements
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CHICAGO RIVET & MACHINE CO.
Consolidated Statements of Retained Earnings
For the Six Months Ended June 30, 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 six months ended 1,076,679 1,816,148
Cash dividends declared in the period,
$.61 and $.71 per share in 2001 and 2000, respectively (589,951) (779,327)
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Retained earnings at end of period $ 24,315,393 $ 23,338,869
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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 Six Months Ended June 30, 2001 and 2000
(Unaudited)
2001 2000
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Cash flows from operating activities:
Net income $ 1,076,679 $ 1,816,148
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 940,897 933,618
Net gain on the sale of properties (18,592) (29)
Deferred income taxes 20,000 -
Changes in operating assets and liabilities:
Accounts receivable (636,832) (196,762)
Inventories 788,685 (4,001)
Other current assets (100,786) 139,633
Accounts payable 489,372 (355,747)
Accrued wages and salaries 189,124 123,287
Accrued profit sharing (256,090) (362,665)
Other accrued expenses (265,144) 177,533
Income taxes payable 144,329 (360,695)
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Net cash provided by operating activities 2,371,642 1,910,320
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Cash flows from investing activities:
Capital expenditures (730,380) (1,370,045)
Proceeds from the sale of properties 27,600 13,725
Proceeds from held-to-maturity securities 1,584,886 1,052,594
Purchases of held-to-maturity securities (886,103) (1,653,733)
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Net cash used in investing activities (3,997) (1,957,459)
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Cash flows from financing activities:
Borrowings under term loan agreement - 3,882,760
Payments under term loan agreement (900,000) (900,000)
Purchase of treasury stock - (3,669,972)
Cash dividends paid (589,951) (779,327)
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Net cash used in financing activities (1,489,951) (1,466,539)
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Net increase (decrease) in cash and cash equivalents 877,694 (1,513,678)
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 $ 3,143,136 $ 1,900,782
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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 interim financial
statements contain all adjustments necessary to present fairly the financial
position of the Company as of June 30, 2001 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 and six-month period ending June 30,
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 June 30, 2001:
Net sales and lease revenue $ 8,987,735 $ 2,228,514 $ - $ 11,216,249
Depreciation 353,173 60,699 59,718 473,590
Segment profit 1,250,140 654,034 - 1,904,174
Selling and administrative expenses 744,582 744,582
Interest expense 72,606 72,606
Interest income (36,452) (36,452)
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Income before income taxes 1,123,438
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Capital expenditures 384,525 274 52,795 437,594
Segment assets:
Inventory 3,782,991 2,632,508 - 6,415,499
Property, plant and equipment, net 10,649,367 1,999,879 1,454,746 14,103,992
Other assets - - 10,515,896 10,515,896
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31,035,387
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Three Months Ended June 30, 2000:
Net sales and lease revenue $ 9,822,683 $ 2,543,405 $ - $ 12,366,088
Depreciation 344,064 65,385 59,043 468,492
Segment profit 1,701,793 805,048 - 2,506,841
Selling and administrative expenses 1,100,819 1,100,819
Interest expense 110,641 110,641
Interest income (40,332) (40,332)
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Income before income taxes 1,335,713
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Capital expenditures 265,609 36,149 6,430 308,188
Segment assets:
Inventory 3,980,335 2,947,387 - 6,927,722
Property, plant and equipment, net 11,149,755 1,833,693 1,547,246 14,530,694
Other assets - - 10,734,491 10,734,491
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32,192,907
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CHICAGO RIVET & MACHINE CO.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Assembly
Fastener Equipment Other Consolidated
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Six Months Ended June 30, 2001:
Net sales and lease revenue $ 17,294,380 $ 4,549,700 $ - $ 21,844,080
Depreciation 700,063 121,398 119,436 940,897
Segment profit 1,867,414 1,389,888 - 3,257,302
Selling and administrative expenses 1,536,463 1,536,463
Interest expense 167,374 167,374
Interest income (83,214) (83,214)
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Income before income taxes 1,636,679
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Capital expenditures 602,373 13,209 114,798 730,380
Six Months Ended June 30, 2000:
Net sales and lease revenue $ 19,737,147 $ 5,064,677 $ - $ 24,801,824
Depreciation 684,762 130,770 118,086 933,618
Segment profit 3,285,665 1,718,508 - 5,004,173
Selling and administrative expenses 2,186,753 2,186,753
Interest expense 161,581 161,581
Interest income (92,309) (92,309)
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Income before income taxes 2,748,148
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Capital expenditures 1,318,891 43,212 7,942 1,370,045
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CHICAGO RIVET & MACHINE CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Second quarter revenues reflect the continuing weakness that has
characterized the manufacturing segment of the economy for some time. Overall,
our second quarter revenues declined 9.3% compared to the second quarter of 2000
and amounted to $11,216,249. While revenues declined in both segments of our
business, weak demand for capital goods has impacted the assembly equipment
segment to a greater degree, and second quarter revenues within this segment
decreased 12.4% compared to 2000. Within the fastener segment, where conditions
also continue to be soft, second quarter revenues declined 8.5%. On a year to
date basis, revenues within the assembly equipment segment trail 2000 by 10.2%,
while revenues within the fastener segment are off 12.4%.
Lower operating levels were the primary factor contributing to the year
to year decline in earnings. In addition to the reduction in revenues, lower
sales volume contributed to reduced operating efficiencies in both segments of
our operations. This was the case in both the most recent quarter and the first
six months of 2001. Further, in many cases, competitive pressures dictated that
we accept lower than desired margins on new business that was obtained during
the quarter. However, operating expenses were also significantly lower during
the second quarter of 2001 compared with the second quarter of 2000. Legal and
professional fees returned to more normal levels and were $274,000 lower than in
the prior year period. Reductions in expenditures for a variety of other selling
and administrative expenses, including salaries, commissions, and interest
expense, amounted to an additional reduction of $285,000 during the current
quarter compared to the same period in 2000. As a result, net income for the
second quarter of 2001 amounted to $737,438, or $.76 per share on 967,132
average shares outstanding compared to $894,713, or $.89 per share on 1,003,080
average shares outstanding during the second quarter of 2000. On a year to date
basis, results reflect similar conditions. Namely, reduced volumes, and the
resulting reductions in operating efficiencies, had the effect of reducing gross
margins, while significant year to year reductions in selling and administrative
expenses partially offset the reduction in gross margins.
The Company's financial condition continues to be sound. Working
capital at the end of the quarter was $11.8 million, a modest increase compared
to the prior quarter, although still approximately $.2 million lower than at the
end of the year. Inventory levels, which declined in the first quarter, were
further reduced during the second quarter of the year and are now nearly $.8
million lower than at the beginning of the year. Efforts to reduce the level of
inventories will continue in the months ahead. Capital expenditures amounted to
$.4 million during the quarter, primarily for new equipment related to the
manufacture of fasteners. At June 30, the balance due on the term note was $4.3
million and the average interest rate was 5.6%. 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.
So far, 2001 has been a very challenging year. Efforts to secure new
business at profitable levels have met only limited success to date, and the
general contraction in the manufacturing sector of the economy and the resultant
decrease in orders from our existing customer base have more than offset the
benefits of any new business gained this year. While we still expect conditions
will improve, there are, as yet, few indications that our situation will improve
appreciably in the near term. In the interim, we will continue our focus on cost
control and our efforts to solicit profitable business from both new and
existing customers.
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 June 30, 2001, $4.33 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 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on May
8, 2001. The only proposal voted upon was the election of seven directors for a
term ending at the Annual Meeting in 2002. The seven persons nominated by the
Company's Board of Directors received the following votes and were elected:
NAME VOTES FOR VOTES WITHHELD
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Edward L. Chott 895,926 26,151
Nirendu Dhar 895,926 26,151
William T. Divane, Jr. 896,487 25,750
John R. Madden 896,178 25,971
John A. Morrissey 892,288 28,450
Walter W. Morrissey 894,080 27,170
John C. Osterman 892,288 28,450
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
99.1 Interim Report to Shareholders for the quarter ended June
30, 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: August 7, 2001 /s/ John A. Morrissey
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John A. Morrissey
Chairman of the Board of Directors
and Chief Executive Officer
Date: August 7, 2001 /s/ John C. Osterman
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John C. Osterman
President, Chief Operating
Officer and Treasurer
(Principal Financial Officer)
Date: August 7, 2001 /s/ Michael J. Bourg
-----------------------------------
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 June 30, 2001 15 - 16
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