SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2002 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 (IRS 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, 2002
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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, 2002
and December 31, 2001 2-3
Consolidated Statements of Operations for the Three
Months Ended March 31, 2002 and 2001 4
Consolidated Statements of Retained Earnings for the
Three Months Ended March 31, 2002 and 2001 5
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2002 and 2001 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
CHICAGO RIVET & MACHINE CO.
Consolidated Balance Sheets
March 31, 2002 and December 31, 2001
March 31, December 31,
2002 2001
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(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 3,962,763 $ 4,692,999
Certificates of deposit 556,601 177,882
Accounts receivable - net of allowances 5,302,148 3,995,148
Inventories:
Raw materials 1,549,850 1,649,051
Work in process 2,266,155 1,766,068
Finished goods 2,667,085 2,635,549
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Total inventories 6,483,090 6,050,668
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Deferred income taxes 607,191 607,191
Other current assets 374,109 335,590
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Total current assets 17,285,902 15,859,478
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Property, Plant and Equipment:
Land and improvements 1,010,595 1,010,595
Buildings and improvements 5,738,460 5,738,460
Production equipment, leased
machines and other 27,992,264 27,958,777
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34,741,319 34,707,832
Less accumulated depreciation 21,304,062 20,889,297
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Net property, plant and equipment 13,437,257 13,818,535
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Total assets $30,723,159 $29,678,013
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See Notes to the Consolidated Financial Statements
2
CHICAGO RIVET & MACHINE CO.
Consolidated Balance Sheets
March 31, 2002 and December 31, 2001
March 31, December 31,
2002 2001
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(Unaudited)
Liabilities and Shareholders' Equity
Current Liabilities:
Current portion of note payable $ 1,800,000 $ 1,800,000
Accounts payable 1,500,810 929,634
Accrued wages and salaries 1,015,892 751,582
Contributions due profit sharing plan 115,986 294,986
Other accrued expenses 599,808 384,110
Federal and state income taxes payable 399,742 82,742
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Total current liabilities 5,432,238 4,243,054
Note payable 1,182,760 1,632,760
Deferred income taxes 1,429,275 1,429,275
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Total liabilities 8,044,273 7,305,089
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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 24,988,778 24,682,816
Treasury stock, 170,964 shares at cost (3,895,122) (3,895,122)
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Total shareholders' equity 22,678,886 22,372,924
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Total liabilities and shareholders' equity $ 30,723,159 $ 29,678,013
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See Notes to the Consolidated Financial Statements
3
CHICAGO RIVET & MACHINE CO.
Consolidated Statements of Operations
Three Months Ended March 31, 2002 and 2001
(Unaudited)
2002 2001
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Net sales $ 10,398,136 $ 10,568,698
Lease revenue 54,190 59,133
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10,452,326 10,627,831
Cost of goods sold and costs
related to lease revenue 7,876,521 8,377,914
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Gross profit 2,575,805 2,249,917
Selling and administrative expenses 1,654,723 1,699,245
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921,082 550,672
Other income and expenses:
Interest income 21,956 46,762
Interest expense (24,374) (94,768)
Gain from the disposal of equipment 24,577 7,983
Other income, net of other expense 3,875 2,592
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Income before income taxes 947,116 513,241
Provision for income taxes 322,000 174,000
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Net Income $ 625,116 339,241
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Average common shares outstanding 967,132 967,132
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Per share data:
Net income per share $ 0.65 $ 0.35
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Cash dividends declared per share $ 0.33 $ 0.43
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See Notes to the Consolidated Financial Statements
4
CHICAGO RIVET & MACHINE CO.
Consolidated Statements of Retained Earnings
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
2002 2001
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Retained earnings at beginning of period $ 24,682,816 $ 23,828,665
Net income for the three months ended 625,116 339,241
Cash dividends declared in the period;
$.33 per share in 2002 and $.43 in 2001 (319,154) (415,863)
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Retained earnings at the end of period $ 24,988,778 $ 23,752,043
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See Notes to the Consolidated Financial Statements
5
CHICAGO RIVET & MACHINE CO.
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
2002 2001
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Cash flows from operating activities:
Net income $ 625,116 $ 339,241
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Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 484,012 467,307
Net gain on the sale of equipment (24,577) (7,983)
Changes in operating assets and liabilities:
Accounts receivable (1,307,000) (657,759)
Inventories (432,422) 145,973
Other current assets (38,519) (43,200)
Accounts payable 426,106 343,793
Accrued wages and salaries 264,310 398,052
Accrued profit sharing (179,000) (382,165)
Other accrued expenses 215,698 (76,040)
Income taxes payable 317,000 172,887
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Net cash provided by operating activities 350,724 700,106
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Cash flows from investing activities:
Capital expenditures (104,327) (292,786)
Proceeds from the sale of properties 26,170 16,600
Proceeds from held-to-maturity securities 21,281 1,154,885
Purchases of held-to-maturity securities (400,000) (356,103)
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Net cash provided by (used in) investing
activities (456,876) 522,596
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Cash flows from financing activities:
Payments under term loan agreement (450,000) (450,000)
Cash dividends paid (174,084) (174,080)
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Net cash used in financing activities (624,084) (624,080)
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Net increase (decrease) in cash and cash
equivalent (730,236) 598,622
Cash and cash equivalents at beginning of period 4,692,999 2,265,442
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Cash and cash equivalents at end of period $ 3,962,763 $2,864,064
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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 financial
statements contain all adjustments necessary to present fairly the financial
position of the Company as of March 31, 2002 and December 31, 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-month period ended March 31, 2002 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 industry. 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
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Three Months Ended March 31, 2002:
Net sales and lease revenue $ 8,639,317 $ 1,813,009 $ -- $ 10,452,326
Depreciation 369,359 58,769 55,884 484,012
Segment profit 1,198,107 472,574 -- 1,670,681
Selling and administrative expenses 721,147 721,147
Interest expense 24,374 24,374
Interest income (21,956) (21,956)
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Income before income taxes 947,116
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Capital expenditures 104,327 -- -- 104,327
Segment assets:
Accounts receivable, net 4,386,103 916,045 -- 5,302,148
Inventory 4,020,607 2,462,483 -- 6,483,090
Property, plant and equipment, net 10,476,762 1,677,240 1,283,255 13,437,257
Other assets -- -- 5,500,664 5,500,664
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30,723,159
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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:
Accounts receivable, net 4,572,972 1,122,018 -- 5,694,990
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 -- -- 4,435,227 4,435,227
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31,328,807
8
CHICAGO RIVET & MACHINE CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results for the first quarter were mixed. Net income for the current
quarter improved dramatically compared to the results posted in the first
quarter of 2001. The improvement in net income is primarily attributable to the
cumulative success of a variety of cost control measures that have been
implemented over the past year in response to the prevailing market conditions.
The success of these efforts is readily apparent in comparisons of the most
recent quarter with the year earlier quarter. Margins were further improved due
to lower tooling costs, as well as reductions in heating costs. These changes
resulted in an overall 14% increase in gross profit compared with the first
quarter of 2001. In addition, results for the current quarter also reflect
reductions in selling and administrative expenses and a $46,000 reduction in net
interest expense.
While there have been reports that the recession has ended, we have yet
to see tangible evidence of a widespread recovery. Revenues from the fastener
segment improved approximately 4% compared to the first quarter of 2001, but the
improvement has been limited to a few customers, rather than a broadly based one
that would indicate a significant change in business prospects. The increase in
fastener segment revenues was more than offset by a 22% decline in revenues
within the assembly equipment segment, where spending continues to be
restrained. Overall, compared to the first quarter of 2001, revenues declined by
1.7% to $10,452,326. The rather disappointing performance with respect to
revenues tempers our enthusiasm over an otherwise strong quarterly performance.
The Company's financial condition continues to be sound. Working
capital at the end of the quarter was $11.9 million, which is approximately $.2
million higher than at the end of the prior quarter. The increase in the
accounts receivable balance is due to the increase in sales recorded during the
latter portion of the first quarter, compared to the latter portion of the
fourth quarter. Inventory levels, although somewhat higher than the level at the
beginning of the quarter, remain well below the level of one year ago. At March
31, the balance due on the term note was $2.98 million and the average interest
rate was 2.9%. 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.
Our markets remain extremely competitive and our customers continue to
press for price reductions. These conditions are not expected to change in the
near term and will continue to exert pressure on our margins. In response, we
plan to continue emphasizing cost controls and to continue our efforts to
solicit new and profitable business from existing customers as well as from new
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.
9
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, 2002, $2.98 million of floating-rate debt was
exposed to changes in interest rates compared to $3.43 million as of December
31, 2001. 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.
10
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,
2002.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the current period.
11
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 3, 2002
/s/ John A. Morrissey
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John A. Morrissey
Chairman of the Board of Directors
and Chief Executive Officer
Date: May 3, 2002
/s/ John C. Osterman
-----------------------------------
John C. Osterman
President, Chief Operating Officer
and Treasurer (Principal Financial
Officer)
Date: May 3, 2002
/s/ Michael J. Bourg
-----------------------------------
Michael J. Bourg
Controller (Principal Accounting
Officer)
12
CHICAGO RIVET & MACHINE CO.
EXHIBITS
INDEX TO EXHIBITS
Exhibit
Number
99.1 Interim Report to Shareholders for the
quarter ended March 31, 2002
13