U.S. 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 November 30, 2001
Commission File Number 001 - 12673
RIVIERA TOOL COMPANY
A Michigan Corporation
I.R.S. Employer Identification No. 38-2828870
5460 Executive Parkway S.E., Grand Rapids, Michigan 49512
Telephone: (616) 698 - 2100
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ -----
The number of Common Shares outstanding at January 11, 2002 was 3,379,609.
1.
PART I
FINANCIAL INFORMATION
INDEX
Page No.
Item 1. Financial Statements
Balance Sheets as of November 30, 2001 and August 31, 2001........................................ 4
Statements of Operations for the Three Months Ended November 30, 2001 and 2000....................
5
Statements of Cash Flows for the Three Months Ended November 30, 2001 and 2000....................
6
Notes to Financial Statements..................................................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............
9
Item 3. Quantitative and Qualitative Disclosures about Market Risk - None................................. --
PART II
OTHER INFORMATION
INDEX
Item 1. Legal Proceedings - The Company is involved in legal
proceedings which are ordinary or routine to its operations. In
the opinion of management, no existing proceedings would have a
significant effect on the financial condition, results of
operations and cash flows of the Company, if determined against
the Company.
Item 2. Changes in Securities - None
Item 3. Default Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - The
following matters were submitted to a vote of the Company's
common shareholders at its annual shareholders meeting on
December 18, 2001:
a. The following directors were elected to serve until the
meeting of shareholders in 2004 and until their
successors are elected (amounts shown in parentheses
represent the number of votes cast for, against or
withheld, and abstentions, respectively):
(i) Leonard H. Wood (2,884,911 / 198,983)
(ii) Daniel W. Terpsma (3,055,211 / 28,683)
The following directors of the Company continued until
the annual meeting of shareholders in the year indicated
parenthetically and until their successors are elected:
Thomas H. Highley (2003) John C. Kennedy (2003)
Kenneth K. Rieth (2002)
b. Ratification of Selection of Independent
Auditors-(amounts shown in parentheses represent the
number of votes cast for, against or withheld, and
abstentions, respectively): (3,061,420 / 22,254 / 220)
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8 - K.
6(a) Exhibits - None
6(b) Reports on Form 8-K - None.
2.
RIVIERA TOOL COMPANY
FINANCIAL STATEMENTS
BALANCE SHEETS
NOVEMBER 30, AUGUST 31,
ASSETS 2001 2001
------ -------------------- --------------------
CURRENT ASSETS NOTE (UNAUDITED) (AUDITED)
-------------- ---- -------------------- --------------------
Cash.................................................................... $ -- $ 282,721
Accounts receivable..................................................... 4,456,856 3,449,430
Costs and estimated gross loss in excess
of billings on contracts in process................................ 2 4,648,007 4,153,569
Inventories............................................................. 308,977 308,977
Prepaid expenses and other current assets............................... 130,497 97,289
---------------- ----------------
Total current assets.......................................... 9,544,337 8,291,986
PROPERTY, PLANT AND EQUIPMENT, NET........................................ 3 15,682,715 16,146,059
PERISHABLE TOOLING........................................................ 546,742 572,822
OTHER ASSETS.............................................................. 135,770 135,770
---------------- ----------------
Total assets.................................................. $ 25,909,564 $ 25,146,637
================ ================
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt....................................... 4 $ 7,225,648 $ 1,875,631
Accounts payable........................................................ 464,041 898,212
Accrued liabilities..................................................... 485,244 342,007
---------------- ----------------
Total Current liabilities..................................... 8,174,933 3,115,850
LONG-TERM DEBT............................................................ 4 3,050,448 6,526,729
ACCRUED LEASE EXPENSE..................................................... 688,004 692,094
---------------- ----------------
Total liabilities............................................. 11,913,385 10,334,673
---------------- ----------------
PREFERRED STOCK - no par value, $100 mandatory redemption value:
Authorized - 5,000 shares
Issued and outstanding - no shares................................. -- --
STOCKHOLDERS' EQUITY:
Preferred stock - no par value,
Authorized - 200,000 shares
Issued and outstanding - no shares................................... -- --
Common stock - No par value:
Authorized - 9,785,575 shares 1
Issued and outstanding - 3,379,609 shares at
November 30, 2001 and August 31, 2001................................ 15,115,466 15,115,466
Retained deficit........................................................ 1 (1,119,287) (303,502)
---------------- ----------------
Total stockholders' equity.................................... 13,996,179 14,811,964
---------------- ----------------
Total liabilities and stockholders'
Equity...................................................... $ 25,909,564 $ 25,146,637
================ ================
See notes to financial statements
3.
RIVIERA TOOL COMPANY
STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED
NOVEMBER 30
---------------- --- ----------------
2001 2000
---------------- ----------------
SALES.................................................................. $ 3,363,674 $ 4,591,897
COST OF SALES.......................................................... 3,545,576 4,326,424
---------------- ----------------
GROSS PROFIT (LOSS).............................................. (181,902) 265,473
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES............................................ 465,867 528,303
---------------- ----------------
LOSS FROM OPERATIONS............................................. (647,769) (262,830)
OTHER (EXPENSE)
INTEREST EXPENSE.................................................... (167,779) (240,689)
OTHER EXPENSE....................................................... (237) (182)
---------------- ----------------
TOTAL OTHER EXPENSE.............................................. (168,016) (240,871)
LOSS BEFORE INCOME TAX BENEFIT......................................... (815,785) (503,701)
---------------- ----------------
INCOME TAX BENEFIT..................................................... -- (171,258)
---------------- -----------------
NET LOSS AVAILABLE FOR COMMON SHARES $ (815,785) $ (332,443)
================ ================
BASIC AND DILUTED LOSS PER COMMON SHARE................................ $ (.24) $ (.10)
================ ================
BASIC AND DILUTED COMMON SHARES OUTSTANDING............................ 3,379,609 3,379,609
================ ================
See notes to financial statements
4.
RIVIERA TOOL COMPANY
STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED
NOVEMBER 30,
-----------------------------------------
2001 2000
------------------ -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss............................................................. $ (815,785) $ (332,443)
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization.................................... 477,441 476,212
Deferred taxes................................................... -- (171,258)
(Increase) decrease in assets:
Accounts receivable........................................... (1,007,426) 516,584
Costs and estimated gross profit/loss in
excess of billings on contracts in
process....................................................... (494,438) 1,031,683
Perishable tooling............................................ 26,080 (49,345)
Prepaid expenses and other current assets..................... (33,208) (11,463)
Increase (decrease) in liabilities:
Accounts payable.............................................. (434,170) (595,696)
Accrued lease expense......................................... (4,090) 585
Accrued liabilities........................................... 143,236 (78,837)
------------------ -----------------
Net cash provided by/(used in) operating activities....................
$ (2,142,360) $ 786,022
------------------ -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment........................... (14,097) (250,395)
------------------ -----------------
Net cash used in investing activity.................................... $ (14,097) $ (250,395)
------------------ -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments)on revolving
credit line......................................................... 2,369,728 (120,202)
Principal payments on notes payable to bank and
non-revolving equipment line of credit.............................. (495,992) (495,990)
------------------ -----------------
Net cash provided by/(used in) financing
activities.......................................................... $ 1,873,736 $ (616,192)
------------------ -----------------
NET DECREASE IN CASH................................................... $ (282,721) $ (80,565)
------------------ -----------------
CASH - Beginning of Period............................................. 282,721 113,699
------------------ -----------------
CASH - End of Period................................................... $ -- $ 33,134
================== =================
See notes to financial statements
5.
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2001
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements (the "Financial
Statements") of Riviera Tool Company (the "Company") have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission.
Accordingly, the Financial Statements do not include all the information and
footnotes normally included in the annual financial statements prepared in
accordance with generally accepted accounting principles.
In the opinion of management, the Financial Statements reflect all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
such information in accordance with generally accepted accounting principles.
These Financial Statements should be read in conjunction with the financial
statements and footnotes thereto included in the Company's Form 10-K dated
November 12, 2001, for the fiscal year ended August 31, 2001.
The results of operations for the three-month period ended November 30, 2001 is
not indicative of the results to be expected for the full year.
NOTE 2 - COSTS AND BILLINGS ON CONTRACTS IN PROCESS
Costs and billings on contracts in process are as follows:
NOVEMBER 30, AUGUST 31,
2001 2001
------------------ -----------------
Costs incurred on contracts in process under the
percentage of completion method..................................... $ 6,668,019 $ 8,587,454
Estimated gross loss................................................... (800,000) (650,000)
------------------ -----------------
Total.......................................................... 5,868,019 7,937,454
Less progress payments received and progress
billings to date.................................................... 1,220,012 3,783,885
Plus costs incurred on contracts in process under
the completed contract method....................................... -- --
------------------ -----------------
Costs and estimated gross loss in excess
of billings on contracts in process.......................... $ 4,648,007 $ 4,153,569
================== =================
Included in estimated gross loss for November 30, 2001 and August 31, 2001 are
jobs with losses accrued of $944,126 and $763,980, respectively.
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consist of the following:
NOVEMBER 30, AUGUST 31,
2001 2001
------------------ ----------------
Lease and leasehold improvements................................................ $ 1,501,015 $ 1,501,015
Office furniture and fixtures................................................... 194,993 194,993
Machinery and equipment......................................................... 22,865,732 22,865,732
Construction in Process......................................................... 29,718 23,913
Computer equipment and software................................................. 2,218,670 2,210,378
Transportation equipment........................................................ 133,365 133,365
------------------ ----------------
Total cost................................................................. 26,943,493 26,929,396
Accumulated depreciation and amortization....................................... 11,260,778 10,783,337
------------------ ----------------
Net carrying amount........................................................ $ 15,682,715 $ 16,146,059
================== ================
6.
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2001
NOTE 4 - LONG-TERM DEBT
The Company's long-term debt, which is subject to certain covenants discussed
below, consists of the following:
NOVEMBER 30, AUGUST 31,
2001 2001
------------------ -----------------
REVOLVING WORKING CAPITAL CREDIT LINE
The revolving working capital credit line is collateralized by substantially
all assets of the Company and provides for borrowing, subject to certain
collateral requirements of up to $6.5 million. The agreement requires a
commitment fee of .25% per annum on the average daily unused portion of the
revolving credit line. The credit line is due September 1, 2002, and bears
interest, payable monthly, at 1.0% above the bank's prime rate(as of November
30, 2001, an effective rate of 6.5%)............................................ $ 5,512,518 $ 3,142,790
NOTES PAYABLE TO BANK
Note payable to bank, collateralized by substantially all assets of the Company,
is due July 19, 2002, and is payable in monthly installments of $54,167 plus
interest, payable monthly, at either LIBOR plus 2.25% or at .25% below the
bank's prime rate (as of November 30, 2001, an effective rate of 5.25%), at the
election of the Company......................................................... 379,166 541,667
Note payable to bank, collateralized by specific assets of the Company, payable
in monthly installments of $55,556, plus simple interest of 7.26%, due December
31, 2003...................................................................... 2,111,096 2,277,764
Note payable to bank, collateralized by specific assets of the Company, payable
in monthly installments of $16,666 plus simple interest of 8.04%, due September
1, 2004......................................................................... 566,667 616,667
NON-REVOLVING EQUIPMENT LINE OF CREDIT
$3,271,000 equipment line of credit is collateralized by specific assets of the
Company, is due November 1, 2004, and is payable in monthly installments of
$38,941 plus interest, payable monthly, at either LIBOR plus 2.25% or at .25%
below the bank's prime rate (as of November 30, 2001, an effective rate of
5.25%), at the election of the Company.......................................... 1,706,649 1,823,472
------------------ -----------------
Total long-term debt................................................. $ 10,276,096 $ 8,402,360
Less current portion................................................. 7,225,648 1,875,631
------------------ -----------------
Long-term debt-- Net................................................. $ 3,050,448 $ 6,526,729
================= ================
In accordance with the third amended loan agreement, the Company is required to
maintain certain levels of tangible net worth, ratio of total liabilities to
tangible net worth, and earnings before interest, taxes, depreciation and
amortization and prohibit the payment of common stock cash dividends. At
November 30, 2001, the Company was in compliance with the earnings before
interest, taxes, depreciation and amortization covenants. The Company was not in
compliance with the tangible net worth and ratio of total liabilities to
tangible net worth covenants as of November 30, 2001. The Company anticipates
that their lender will waive these covenant violations through December 1, 2002.
7.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table presents, for the periods indicated, the components of the
Company's Statement of Operations as a percentage of sales.
FOR THE THREE MONTHS ENDED
NOVEMBER 30
------------------------------
2001 2000
------------ -----------
SALES................................................................... 100.0% 100.0%
COST OF SALES........................................................... 105.4% 94.2%
------------ -----------
GROSS PROFIT /(LOSS)....................................... (5.4%) 5.8%
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE............................. 13.8% 11.5%
------------ -----------
LOSS FROM OPERATIONS...................................... (19.2%) (5.7%)
INTEREST EXPENSE...................................................... (5.0%) (5.2%)
------------ -----------
TOTAL INTEREST EXPENSE ........................................ (5.2%)
LOSS BEFORE INCOME TAX BENEFIT.......................................... (24.2%) (10.9%)
INCOME TAXES BENEFIT.................................................... -- (3.7%)
------------ -----------
NET LOSS.................................................... (24.2%) (7.2%)
============ ===========
THE MATTERS DISCUSSED IN THIS QUARTERLY REPORT ON FORM 10-Q CONTAIN CERTAIN
FORWARD-LOOKING STATEMENTS. FOR THIS PURPOSE, ANY STATEMENTS CONTAINED IN THIS
REPORT THAT ARE NOT STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE
FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING THE FOREGOING, WORDS SUCH AS "MAY,"
"WILL," "EXPECT," BELIEVE," "ANTICIPATE," "UNDERSTANDING," OR "CONTINUE," THE
NEGATIVE OR OTHER VARIATION THEREOF, OR COMPARABLE TERMINOLOGY, ARE INTENDED TO
IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS BY THEIR NATURE INVOLVE
SUBSTANTIAL RISKS AND UNCERTAINTIES, AND ACTUAL RESULTS MAY DIFFER MATERIALLY
DEPENDING UPON A VARIETY OF FACTORS, INCLUDING CONTINUED MARKET DEMAND FOR THE
TYPES OF PRODUCTS AND SERVICES PRODUCED AND SOLD BY THE COMPANY.
COMPARISON OF THE THREE MONTHS ENDED NOVEMBER 30, 2001 TO THE THREE MONTHS ENDED
NOVEMBER 30, 2000.
REVENUES - Revenues for the three months ended November 30, 2001 totaled $3.4
million as compared to $4.6 million for the three months ended November 30,
2000, a decrease of $1.2 million or 27%. This was a result of the decrease in
market demand for automotive tooling systems during the past eighteen months. In
addition, limited contracts have been released during this period and of those
contracts that were released, most were competitively bid and resulted in
extreme erosion of contract pricing. These factors continue to lower contract
revenue as well as contract margins during fiscal 2002. The Company, in securing
new contracts during fiscal 2001 and the first quarter of 2002, utilized a
strategy of bidding on contracts at rates that would maintain contribution
margin if such was awarded to the Company.
8.
As a result of these market conditions, the Company has instituted specific cost
containment measures. These containments include direct labor layoffs of
approximately 75 employees or 45% of the normal workforce and suspension of the
Company's matching contribution to the Company 401(K) Plan for all employees.
The Company anticipates the decline in contract releases will also negatively
effect the Company's financial results at least through 2002.
COST OF SALES - Cost of sales was $3.5 million or 105% of sales for the three
months ended November 30, 2001 as compared to $4.3 million or 94% of sales for
the three months ended November 30, 2000. The decrease in gross margin was
largely due to the decrease in revenue as well as erosion of contract pricing
during the past eighteen months. The Company continues to review and lower all
fixed expenses where applicable in order to maintain the lowest possible cost
rate.
Direct costs expense decreased from $2.2 million in 2000 to $1.6 million in
2001, however as a percent of sales it increased from 47.6% to 48.3%. Direct
labor expense was $0.9 million in 2001 as compared to $1.3 million in 2000,
however as a percent of sales, direct labor expense remained consistent at 28%.
The Company incurred 41,400 shop floor hours during the first quarter of 2002 as
compared to 63,600 during the same period of 2001, a decrease of 22,200 hours or
35%. This decrease was a direct result of lower contract levels during the first
quarter of 2002. Other direct cost decreases included $181,000 in direct
material expense and $40,000 in outside service expenses.
Engineering expense decreased from $343,000 for the three months ended November
30, 2000 to $322,000 for the same period this year, however as a percent of
sales engineering expense increased from 7.5% to 9.6% as a result of the
decrease in revenues in the first quarter ended November 30, 2001. The largest
decrease in engineering expense was $19,500 in engineering salaries as a result
of the Company decreasing its engineering headcount.
Manufacturing overhead expense decreased from $1,795,000 or 39.1% of sales for
the three months ended November 30, 2000 to $1,600,000 or 47.6% of sales for the
three months ended November 30, 2001. The largest increase in the first three
months of 2001 as compared to 2000 was the increase of $32,000 in building rent
and property taxes expense. This increase was a result of the expiration of a
sublease for space in the Company's facility in 2001. This increase was offset
by decreases of $127,000 in labor and payroll taxes, $39,000 in medical
insurance expense, $38,000 in manufacturing supplies and perishable tooling
expense.
SELLING & ADMINISTRATIVE EXPENSES - Selling and administrative expenses
decreased from $528,000 or 11.5% of sales for the three months ended November
30, 2000 to $466,000 or 13.8% of sales for the three months ended November 30,
2001. This decrease was largely due to decreases of $58,000 in State of Michigan
Single Business Tax, $34,000 in public company costs, $30,000 in charitable
contributions, and $15,000 in director fees. These decreases were offset by
increases of $45,000 in legal and professional fees, $18,000 in technology
expense, and $9,000 in selling travel expenses.
INTEREST EXPENSE - Interest expense for the three months ended November 30, 2001
was approximately $168,000 as compared to approximately $241,000 for the three
months ended November 30, 2000. As a percentage of sales, interest expense
decreased from 5.2% in the quarter ended November 30, 2000 to 5.0% for the
quarter ended November 30, 2001. This was a result of lower debt levels as well
as lower interest rates during the quarter ended November 30, 2001 as compared
to the same period last year.
FEDERAL INCOME TAXES
For the three months ended November 30, 2001, the Company recorded a valuation
allowance of $277,367 to offset the income tax benefit. As of November 30, 2001,
the Company had approximately $3,091,000 of net operating loss
9.
carryfowards which will expire in fiscal 2020 through 2022, if unused, as well
as $155,000 of alternative minimum tax credits that do not expire.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended November 30, 2001, the Company's cash used in
operating activities was $2,142,000. This largely resulted from increases of
$1,007,000 in accounts receivable and $494,000 in contracts in process. From
investing activities, the Company acquired additional machinery and equipment of
$14,000. From financing activities, the Company used $496,990 to reduce
long-term debt and borrowed an additional $2,370,000 on the revolving working
capital credit line. The Company believes that the unused portion of the
revolving bank working capital credit line and the funds generated from
operations will be sufficient to cover anticipated cash needs through fiscal
2002. However, depending on the level of future sales, an expanded credit line
may be necessary to finance increases in trade accounts receivable and contracts
in process. The Company believes it will be able to obtain such expanded credit
line, if required, on generally the same terms as the existing credit line.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: January 14, 2002
Riviera Tool Company
/s/ Kenneth K. Rieth
----------------------
Kenneth K. Rieth
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Peter C. Canepa
----------------------
Peter C. Canepa
Chief Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)
10.