UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-1227
Chicago Rivet & Machine Co.
(Exact Name of Registrant as Specified in Its Charter)
Illinois 36-0904920
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
901 Frontenac Road, Naperville, Illinois 60563
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (630) 357-8500
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
--- ---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes No X
--- ---
As of March 31, 2004, 966,132 shares of the registrant's common stock were
outstanding.
CHICAGO RIVET & MACHINE CO.
INDEX
PART I. FINANCIAL INFORMATION Page
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Consolidated Balance Sheets at March 31, 2004
and December 31, 2003 2-3
Consolidated Statements of Operations for the Three
Months Ended March 31, 2004 and 2003 4
Consolidated Statements of Retained Earnings for the
Three Months Ended March 31, 2004 and 2003 5
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2004 and 2003 6
Notes to the Consolidated Financial Statements 7-8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-10
Controls and Procedures 11
PART II. OTHER INFORMATION 12-20
ITEM 1. FINANCIAL STATEMENTS.
CHICAGO RIVET & MACHINE CO.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2004 AND DECEMBER 31, 2003
MARCH 31, DECEMBER 31,
2004 2003
----------- ------------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 5,528,420 $ 5,530,099
Certificates of deposit 455,000 455,000
Accounts receivable - net of allowances 5,644,423 4,549,168
Inventories:
Raw materials 1,243,268 1,109,463
Work in process 1,863,580 1,760,990
Finished goods 2,230,869 2,363,335
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Total inventories 5,337,717 5,233,788
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Deferred income taxes 602,191 602,191
Other current assets 263,765 218,560
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Total current assets 17,831,516 16,588,806
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Property, Plant and Equipment:
Land and improvements 1,015,635 1,015,635
Buildings and improvements 5,782,062 5,779,993
Production equipment, leased machines and other 28,180,305 28,201,191
----------- -----------
34,978,002 34,996,819
Less accumulated depreciation 23,799,594 23,447,245
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Net property, plant and equipment 11,178,408 11,549,574
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Total assets $29,009,924 $28,138,380
=========== ===========
See Notes to the Consolidated Financial Statements
2
CHICAGO RIVET & MACHINE CO.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2004 AND DECEMBER 31, 2003
MARCH 31, DECEMBER 31,
2004 2003
------------ ------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable 1,754,825 1,310,044
Accrued wages and salaries 936,968 754,394
Contributions due profit sharing plan 62,986 133,243
Other accrued expenses 607,302 370,940
------------ ------------
Total current liabilities 3,362,081 2,568,621
Deferred income taxes 1,541,275 1,580,275
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Total liabilities 4,903,356 4,148,896
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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 26,443,436 26,326,352
Treasury stock, 171,964 shares at cost (3,922,098) (3,922,098)
------------ ------------
Total shareholders' equity 24,106,568 23,989,484
------------ ------------
Total liabilities and shareholders' equity $ 29,009,924 $ 28,138,380
============ ============
See Notes to the Consolidated Financial Statements
3
CHICAGO RIVET & MACHINE CO.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(UNAUDITED)
2004 2003
------------ ------------
Net sales 10,141,957 $ 10,189,258
Lease revenue 27,007 47,205
------------ ------------
10,168,964 10,236,463
Cost of goods sold and costs
related to lease revenue 8,146,558 7,850,934
------------ ------------
Gross profit 2,022,406 2,385,529
Selling and administrative expenses 1,596,779 1,694,677
------------ ------------
425,627 690,852
Other income and expenses:
Interest income 14,381 19,799
Interest expense - (9,585)
Gain from the disposal of equipment 430 4,300
Other income, net of other expense 2,550 3,875
------------ ------------
Income before income taxes 442,988 709,241
Provision for income taxes 152,000 244,000
------------ ------------
Net Income $ 290,988 $ 465,241
============ ============
Average common shares outstanding 966,132 966,132
============ ============
Per share data:
Net income per share $ 0.30 $ 0.48
============ ============
Cash dividends declared per share $ 0.18 $ 0.43
============ ============
See Notes to the Consolidated Financial Statements
4
CHICAGO RIVET & MACHINE CO.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(UNAUDITED)
2004 2003
------------ ------------
Retained earnings at beginning of period $ 26,326,352 $ 26,445,973
Net income for the three months ended 290,988 465,241
Cash dividends declared in the period;
$.18 per share in 2004 and $.43 in 2003 (173,904) (415,437)
------------ ------------
Retained earnings at end of period $ 26,443,436 $ 26,495,777
============ ============
See Notes to the Consolidated Financial Statements
5
CHICAGO RIVET & MACHINE CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(UNAUDITED)
2004 2003
----------- -----------
Cash flows from operating activities:
Net income $ 290,988 $ 465,241
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 432,678 463,318
Net gain on the sale of equipment (430) (4,300)
Deferred income taxes (39,000) -
Changes in operating assets and liabilities:
Accounts receivable, net (1,095,255) (353,787)
Inventories (103,929) (343,716)
Other current assets (45,205) 3,394
Accounts payable 444,781 287,356
Accrued wages and salaries 182,574 227,244
Accrued profit sharing (70,257) (331,556)
Other accrued expenses 236,362 344,905
----------- -----------
Net cash provided by operating activities 233,307 758,099
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Cash flows from investing activities:
Capital expenditures (61,512) (82,298)
Proceeds from the sale of properties 430 4,300
Proceeds from held-to-maturity securities 200,000 2,900,000
Purchases of held-to-maturity securities (200,000) (200,000)
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Net cash provided by (used in) investing activities (61,082) 2,622,002
----------- -----------
Cash flows from financing activities:
Payments under term loan agreement - (450,000)
Cash dividends paid (173,904) (173,904)
----------- -----------
Net cash used in financing activities (173,904) (623,904)
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Net increase (decrease) in cash and cash equivalents (1,679) 2,756,197
Cash and cash equivalents at beginning of period 5,530,099 2,204,430
----------- -----------
Cash and cash equivalents at end of period $ 5,528,420 $ 4,960,627
=========== ===========
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, 2004 and December 31, 2003 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, 2004 are
not necessarily indicative of the results to be expected for the year.
3. The Company extends credit on the basis of terms that are customary within
our markets 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
------------ ------------ ---------- -------------
Three Months Ended March 31, 2004:
Net sales and lease revenue $ 8,261,283 $ 1,907,681 $ - $ 10,168,964
Depreciation 371,340 28,518 32,820 432,678
Segment profit 574,733 434,003 - 1,008,736
Selling and administrative expenses 580,129 580,129
Interest expense - -
Interest income (14,381) (14,381)
------------
Income before income taxes 442,988
------------
Capital expenditures 61,512 - - 61,512
Segment assets:
Accounts receivable, net 4,767,831 876,592 - 5,644,423
Inventory 3,396,822 1,940,895 - 5,337,717
Property, plant and equipment, net 8,789,175 1,420,013 969,220 11,178,408
Other assets - - 6,849,376 6,849,376
------------
29,009,924
------------
Three Months Ended March 31, 2003:
Net sales and lease revenue $ 8,360,151 $ 1,876,312 $ - $ 10,236,463
Depreciation 370,696 40,101 52,521 463,318
Segment profit 1,003,112 443,455 - 1,446,567
Selling and administrative expenses 747,540 747,540
Interest expense 9,585 9,585
Interest income (19,799) (19,799)
------------
Income before income taxes 709,241
------------
Capital expenditures 71,881 10,417 - 82,298
Segment assets:
Accounts receivable, net 4,468,032 880,452 - 5,348,484
Inventory 4,123,346 2,310,311 - 6,433,657
Property, plant and equipment, net 9,755,512 1,501,276 1,144,390 12,401,178
Other assets - - 6,274,140 6,274,140
------------
30,457,459
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8
CHICAGO RIVET & MACHINE CO.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results for the first quarter of 2004 were somewhat encouraging.
Revenues and profits were both stronger than those of the prior three quarters,
although both fell short of the results achieved during the first quarter of
2003. In addition, demand for some of our products seems to be improving, albeit
modestly.
Within the fastener segment, revenues amounted to $8,261,283, which is
slightly more than 1% below fastener segment revenues recorded in the first
quarter of 2003. However, while there was not a significant change in total
revenues within this segment, a larger portion of the total revenues was related
to the shipment of lower margin parts than was the case during the first quarter
of 2003. In addition, we incurred significant costs related to pre-production
approval for many new parts. While it is normal to incur such costs prior to
launching full production, it is unusual to have so many new parts in such a
short span of time. These costs amounted to approximately 4% of segment revenues
during the quarter, and were the primary reason that manufacturing costs
increased compared to the first quarter of 2003. We anticipate that revenues
from the shipment of these new parts will ramp up during the remainder of the
year and that this business will have a positive impact upon results.
Revenues within the assembly equipment segment, improved slightly
compared with the first quarter of 2003 and amounted to $1,907,681. Gross
margins within this segment were essentially unchanged from the year earlier
period. Slight increases in the cost of raw materials were offset by modest
improvements in efficiency and a reduction in depreciation expense. Demand for
assembly equipment, while exhibiting some signs of improvement, remains soft.
During the quarter, inventory balances increased slightly. In response
to concerns over the availability of raw materials, brought on by surging global
demand, we have increased our stock of raw materials used in the manufacture of
fasteners and are likely to further increase our supplies during the second
quarter, unless market conditions improve. Nevertheless, our overall inventory
levels are well below those of one year ago. The increase in the accounts
receivable balance at the end of the first quarter of 2004, compared to the end
of 2003 is due to higher sales during the current period and this increase was
not unexpected. Trade payables are slightly higher than one year ago, primarily
due to purchases associated with the new fastener segment business discussed
above. Management believes that the company's current cash, cash equivalents,
and operating cash flow will be sufficient to provide adequate working capital
for the foreseeable future.
The economic recovery has finally begun to manifest itself in our
business. Certainly, conditions are not as robust as we would like, but what we
have seen is a welcome change from the recent past. Our markets remain extremely
competitive and industry capacity still exceeds demand, suggesting that margins
will remain under pressure. As previously reported, price and availability of
raw materials continues to be a concern. Global demand has caused material
prices to increase substantially and has had an impact upon material
availability. We have implemented temporary material surcharges in an effort to
recover these higher costs. To date, this effort has had mixed results, as many
customers have agreed to the surcharges; however, there are customers with whom
we have longer term supply agreements who have, so far, refused to accept these
surcharges. Our ability to recover these higher costs without losing market
share will have a significant impact on our success in the months ahead. We
continue to seek out new, profitable business and to focus on reducing costs to
remain competitive in our marketplace.
The foregoing discussion is only intended to provide highlights of operations
for the periods covered. Additional information is contained in our Form 10-Q,
which has been filed with the SEC and is available to shareholders upon request
from the Company, or via the internet through the SEC's EDGAR database. This
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; increased global competition; increases in the
prices of, or limitations on the availability of, our primary raw materials; or
a
9
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.
Item 4. Controls and Procedures.
(a) Disclosure Controls and Procedures. The Company's management, with
the participation of the Company's Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of the Company's disclosure controls
and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the
end of the period covered by this report. Based on such evaluation, the
Company's Chief Executive Officer and Chief Financial Officer have concluded
that, as of the end of such period, the Company's disclosure controls and
procedures are effective in recording, processing, summarizing and reporting, on
a timely basis, information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act.
(b) Internal Control Over Financial Reporting. There have not been any
changes in the Company's internal control over financial reporting (as such term
is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
fiscal quarter to which this report relates that have materially affected, or
are reasonably likely to materially affect, the Company's internal control over
financial reporting.
11
PART II -- OTHER INFORMATION
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities.
Under the terms of a stock repurchase authorization originally approved
by the Board of Directors of the Company in February of 1990, as amended, the
Company is authorized to repurchase up to an aggregate of 200,000 shares of its
common stock, in the open market or in private transactions, at prices deemed
reasonable by management. Cumulative purchases under the repurchase
authorization have amounted to 162,996 shares at an average price of $15.66 per
share. The Company has not purchased any shares of its common stock since 2002.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
31 Rule 13a-14(a) or 15d-14(a) Certifications
31.1 Certification Pursuant to Rule 13a-14(a) or 15d-14(a), as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification Pursuant to Rule 13a-14(a) or 15d-14(a), as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 Section 1350 Certifications
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1 Interim Report to Shareholders for the quarter ended March 31, 2004.
(b) Reports on Form 8-K
Current Report on Form 8-K, Item 12, Results of Operations
and Financial Condition, dated May 3, 2004.
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: May 3, 2004
/s/ John A. Morrissey
----------------------------------
John A. Morrissey
Chairman of the Board of Directors
and Chief Executive Officer
Date: May 3, 2004
/s/ John C. Osterman
----------------------------------
John C. Osterman
President, Chief Operating
Officer and Treasurer
(Principal Financial Officer)
Date: May 3, 2004
/s/ Michael J. Bourg
----------------------------------
Michael J. Bourg
Controller (Principal Accounting
Officer)
13
CHICAGO RIVET & MACHINE CO.
EXHIBITS
INDEX TO EXHIBITS
Exhibit
Number Page
- ------ ----
31 Rule 13a-14(a) or 15d-14(a) Certifications
31.1 Certification Pursuant to Rule 13a-14(a) or 15d-14(a), as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 15
31.2 Certification Pursuant to Rule 13a-14(a) or 15d-14(a), as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 16
32 Section 1350 Certifications
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 17
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 18
99.1 Interim Report to Shareholders for the quarter ended March 31, 2004 19 - 20
14