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 September 30, 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 September 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 September 30, 2001
and December 31, 2000 2-3
Consolidated Statements of Operations for the Three
and Nine Months Ended September 30, 2001 and 2000 4
Consolidated Statements of Retained Earnings for the
Nine Months Ended September 30, 2001 and 2000 5
Consolidated Statements of Cash Flows for the Nine Months
Ended September 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 12-17
1
CHICAGO RIVET & MACHINE CO.
Consolidated Balance Sheets
September 30, 2001 and December 31, 2000
September 30, December 31,
2001 2000
----------- -----------
(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 2,188,577 $ 2,265,442
Certificates of deposit 1,677,882 1,429,886
Accounts receivable - net of allowances 5,676,025 5,037,231
Inventories:
Raw materials 1,715,919 2,010,984
Work in process 1,885,087 2,156,092
Finished goods 2,725,164 3,037,108
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Total inventories 6,326,170 7,204,184
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Deferred income taxes 665,191 705,191
Other current assets 407,716 191,668
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Total current assets 16,941,561 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 27,907,894 26,686,705
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34,604,519 33,374,980
Less accumulated depreciation 20,391,286 19,051,463
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Net property, plant and equipment 14,213,233 14,323,517
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Total assets $31,154,794 $31,157,119
=========== ===========
See Notes to the Consolidated Financial Statements
2
CHICAGO RIVET & MACHINE CO.
Consolidated Balance Sheets
September 30, 2001 and December 31, 2000
September 30, December 31,
2001 2000
----------- -----------
(Unaudited)
Liabilities and Shareholders' Equity
Current Liabilities:
Current portion of note payable $ 1,800,000 $ 1,800,000
Accounts payable 1,497,022 1,065,561
Accrued wages and salaries 1,189,235 753,577
Contributions due profit sharing plan 257,986 437,076
Other accrued expenses 545,195 774,974
Federal and state income taxes payable 150,908 1,123
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Total current liabilities 5,440,346 4,832,311
Note payable 2,082,760 3,432,760
Deferred income taxes 1,373,275 1,373,275
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Total liabilities 8,896,381 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 24,568,305 23,828,665
Treasury stock, 170,964 shares at cost (3,895,122) (3,895,122)
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Total shareholders' equity 22,258,413 21,518,773
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Total liabilities and shareholders' equity $31,154,794 $31,157,119
=========== ===========
See Notes to the Consolidated Financial Statements
3
CHICAGO RIVET & MACHINE CO.
Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2001 and 2000
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ----------------------------
2001 2000 2001 2000
---- ---- ---- ----
Net sales $ 9,342,407 $ 10,284,719 $ 31,070,990 $ 34,958,334
Lease revenue 56,165 60,851 171,662 189,060
----------- ------------ ------------ ------------
9,398,572 10,345,570 31,242,652 35,147,394
Cost of goods sold and costs
related to lease revenue 7,068,030 8,082,881 23,842,571 25,694,467
----------- ------------ ------------ ------------
Gross profit 2,330,542 2,262,689 7,400,081 9,452,927
Selling and administrative expenses 1,697,704 1,794,694 5,073,298 6,175,680
----------- ------------ ------------ ------------
632,838 467,995 2,326,783 3,277,247
Other income and expenses:
Interest income 34,732 55,348 117,946 147,657
Interest expense (52,174) (113,080) (219,548) (274,661)
Gain from disposal of equipment 23,844 224 42,436 253
Other income, net of other expense 3,756 5,096 12,058 13,235
----------- ------------ ------------ ------------
Income before income taxes 642,996 415,583 2,279,675 3,163,731
Provision for income taxes 216,000 141,000 776,000 1,073,000
----------- ------------ ------------ ------------
Net income $ 426,996 $ 274,583 $ 1,503,675 $ 2,090,731
=========== ============ ============ ============
Average common shares outstanding 967,132 978,532 967,132 1,039,679
=========== ============ ============ ============
Per share data:
Net income per share $ 0.44 $ 0.28 $ 1.55 $ 2.01
=========== ============ ============ ============
Cash dividends declared per share $ 0.18 $ 0.18 $ 0.79 $ 0.89
=========== ============ ============ ============
See Notes to the Consolidated Financial Statements
4
CHICAGO RIVET & MACHINE CO.
Consolidated Statements of Retained Earnings
For the Nine Months Ended September 30, 2001 and 2000
(Unaudited)
2001 2000
---- ----
Retained earnings at beginning of period $ 23,828,665 $ 22,302,048
Net income for the nine months ended 1,503,675 2,090,731
Cash dividends declared in the period,
$.79 and $.89 per share in 2001 and 2000, respectively (764,035) (955,456)
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Retained earnings at end of period $ 24,568,305 $ 23,437,323
============ ============
See Notes to the Consolidated Financial Statements
5
CHICAGO RIVET & MACHINE CO.
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2001 and 2000
(Unaudited)
2001 2000
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Cash flows from operating activities:
Net income $1,503,675 $2,090,731
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,418,608 1,400,418
Net gain on the sale of properties (42,436) (253)
Deferred income taxes 40,000 50,000
Changes in operating assets and liabilities:
Accounts receivable (638,794) 330,243
Inventories 878,014 (18,957)
Other current assets (216,048) (15,537)
Accounts payable 431,461 (335,847)
Accrued expenses 261,569 97,204
Unearned revenue (234,780) 225,105
Income taxes payable 149,785 (693,695)
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Net cash provided by operating activities 3,551,054 3,129,412
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Cash flows from investing activities:
Capital expenditures (1,322,612) (1,564,332)
Proceeds from the sale of properties 56,724 15,425
Proceeds from held-to-maturity securities 2,235,989 1,906,327
Purchases of held-to-maturity securities (2,483,985) (2,183,619)
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Net cash used in investing activities (1,513,884) (1,826,199)
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Cash flows from financing activities:
Borrowings under term loan agreement - 3,882,760
Payments under term loan agreement (1,350,000) (1,350,000)
Purchase of treasury stock - (3,669,972)
Cash dividends paid (764,035) (955,456)
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Net cash used in financing activities (2,114,035) (2,092,668)
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Net decrease in cash and cash equivalents (76,865) (789,455)
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 $2,188,577 $2,625,005
========== ==========
See Notes to the Consolidated Financial Statements
6
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 September 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 nine-month period ending
September 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.
7
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
-------- --------- ----- ------------
Three Months Ended September 30, 2001:
Net sales and lease revenue $ 7,748,260 $ 1,650,312 $ - $ 9,398,572
Depreciation 359,590 60,699 57,422 477,711
Segment profit 1,099,633 397,111 - 1,496,744
Selling and administrative expenses 836,306 836,306
Interest expense 52,174 52,174
Interest income (34,732) (34,732)
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Income before income taxes 642,996
------------
Capital expenditures 592,232 - - 592,232
Segment assets:
Inventory 3,698,180 2,627,990 - 6,326,170
Property, plant and equipment, net 11,039,833 1,794,312 1,379,088 14,213,233
Other assets - - 10,615,391 10,615,391
------------
31,154,794
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Three Months Ended September 30, 2000:
Net sales and lease revenue $ 8,022,136 $ 2,323,434 $ - $10,345,570
Depreciation 343,956 63,861 58,983 466,800
Segment profit 599,860 721,841 - 1,321,701
Selling and administrative expenses 848,386 848,386
Interest expense 113,080 113,080
Interest income (55,348) (55,348)
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Income before income taxes 415,583
------------
Capital expenditures 63,635 118,244 12,408 194,287
Segment assets:
Inventory 3,957,677 2,985,001 - 6,942,678
Property, plant and equipment, net 10,869,966 1,887,612 1,499,128 14,256,706
Other assets - - 10,763,031 10,763,031
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31,962,415
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8
CHICAGO RIVET & MACHINE CO.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Assembly
Fastener Equipment Other Consolidated
-------- --------- ----- ------------
Nine Months Ended September 30, 2001:
Net sales and lease revenue $25,042,640 $ 6,200,012 $ - $31,242,652
Depreciation 1,059,653 182,097 176,858 1,418,608
Segment profit 2,967,047 1,786,999 - 4,754,046
Selling and administrative expenses 2,372,769 2,372,769
Interest expense 219,548 219,548
Interest income (117,946) (117,946)
-----------
Income before income taxes 2,279,675
-----------
Capital expenditures 1,194,605 13,209 114,798 1,322,612
Nine Months Ended September 30, 2000:
Net sales and lease revenue $ 27,759,283 $ 7,388,111 $ - $35,147,394
Depreciation 1,028,718 194,631 177,069 1,400,418
Segment profit 3,885,525 2,440,349 - 6,325,874
Selling and administrative expenses 3,035,139 3,035,139
Interest expense 274,661 274,661
Interest income (147,657) (147,657)
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Income before income taxes 3,163,731
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Capital expenditures 1,382,526 161,456 20,350 1,564,332
9
CHICAGO RIVET & MACHINE CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Net sales and lease revenues for the third quarter of 2001 amounted to
$9,398,572, which is a decline of 9.2% compared to the same period of 2000.
Revenues continue to reflect the weakness in the manufacturing sector of the
economy and the related lack of spending for capital equipment. Also, third
quarter revenues are traditionally softer than other quarters due to the impact
of vacation schedules at our facilities as well as at those of our customers,
and this also impacted our revenues during the third quarter. For the third
quarter of 2001, revenues from the fastener segment totaled $7,748,260, a
decrease of 3.4% compared to the third quarter of 2000. Revenues within the
assembly equipment segment declined 29% compared to the third quarter of 2000
and amounted to $1,650,312 during the third quarter of 2001. On a year-to-date
basis, 2001 revenues within the fastener segment totaled $25,042,640, a decline
of 9.8% compared with the first nine months of 2000, while revenues within the
assembly equipment segment amounted to $6,200,012, which is a decline of 16.1%
compared to the year earlier period.
Despite the lower sales revenues, the company was able to report an
improvement in net income for the third quarter of 2001, compared with the third
quarter of 2000. Within the fastener segment, a variety of factors allowed us to
post quarterly results that were significantly better than those of the third
quarter of 2000. These factors include the impact of negotiated reductions in
the cost of certain raw material and supplies, reductions in indirect labor and
salary expense, and lower repair and maintenance expenses. The quarter to
quarter comparison is also more favorable because the third quarter of 2000
included certain unfavorable inventory valuation adjustments which reduced
margins in that period. While cost control measures contributed reductions in
costs for both segments of our operations, those achieved within the assembly
equipment segment were not sufficient to offset the effects of lower volume, and
margins fell short of those recorded in the prior year in both the current
quarter and on a year-to-date basis. As has been the case throughout the current
year, selling and administrative expenses during the third quarter were
appreciably below levels of the prior year, mostly due to lower legal and
professional fees, as well as reductions in salaries and commissions.
Unfortunately, the bankruptcy filing of a large customer generated an increase
in bad debt expense of $150,000, which offset much of the savings in
administrative expenses during the third quarter of 2001. Overall, net income
during the quarter amounted to $426,996, or $.44 per share on 967,132 average
shares outstanding during the quarter, compared with $274,583, or $.28 per share
on 978,532 average shares outstanding during the third quarter of 2000. For the
first nine months, 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.
Working capital at the end of the third quarter amounted to approximately
$11.5 million. While this is somewhat below the level at the beginning of the
year, it remains adequate for our operations. Inventory levels were further
reduced during the third quarter of this year, and at the end of the quarter
were nearly $.9 million lower than at the beginning of the year. Capital
expenditures amounted to $.6 million during the third quarter and were primarily
related to the purchase of equipment used in the manufacture of fasteners. At
September 30, the balance due on the term note was $3.9 million and the interest
rate was 4.56%. The Company also has a $1.0 million line of credit available
through Bank of America, N.A. 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.
The first nine months of 2001 have presented a number of challenges that we
anticipate will persist throughout the fourth quarter. The weakness in the
economy, especially within the manufacturing sector, is expected to continue, at
least in the short term. Accordingly, we plan to continue to emphasize cost
controls, to adjust our level of operations in response to any changes in
business conditions, and to continue soliciting new, profitable business.
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.
10
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 September 30, 2001, $3.88 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.
11
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
September 30, 2001.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the current period.
12
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.
-----------------------------------
(Registrant)
Date: October 30, 2001
/s/ John A. Morrissey
-----------------------------------
John A. Morrissey
Chairman of the Board of Directors
and Chief Executive Officer
Date: October 30, 2001
/s/ John C. Osterman
-----------------------------------
John C. Osterman
President, Chief Operating
Officer and Treasurer
(Principal Financial Officer)
Date: October 30, 2001
/s/ Michael J. Bourg
-----------------------------------
Michael J. Bourg
Controller (Principal Accounting
Officer)
13
CHICAGO RIVET & MACHINE CO.
EXHIBITS
INDEX TO EXHIBITS
Exhibit
Number Page
----
99.1 Interim Report to Shareholders for the
quarter ended September 30, 2001 15 - 17
14