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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, 2000
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 15, 2000 was 3,379,609.
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PART I
FINANCIAL INFORMATION
INDEX
Page No.
Item 1. Financial Statements
Balance Sheets as of November 30, 2000
and August 31, 2000........................................ 3
Statements of Operations for the Three Months
Ended November 30, 2000 and 1999........................... 4
Statements of Cash Flows for the Three Months
Ended November 30, 2000 and 1999........................... 5
Notes to Financial Statements.............................. 6
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 - None
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 20, 2000:
a. The following directors were elected to serve until the
meeting of shareholders in 2003 and until their
successors are elected (amounts shown in parentheses
represent the number of votes cast for, against or
withheld, and abstentions, respectively):
(i) John C. Kennedy (2,720,911 / 6,443)
(ii) Thomas H. Highley (2,662,886 / 64,468)
The following directors of the Company continued until
the annual meeting of shareholders in the year indicated
parenthetically and until their successors are elected:
Leonard H. Wood (2001) Daniel W. Terpsma (2001)
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):
(2,711,139 / 15,690 / 525)
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.
Exhibit 27 Financial Data Schedule
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RIVIERA TOOL COMPANY
FINANCIAL STATEMENTS
BALANCE SHEETS
NOVEMBER 30, AUGUST 31,
ASSETS 2000 2000
------ -------------------- --------------------
CURRENT ASSETS NOTE (UNAUDITED)
-------------- ---- -------------------- --------------------
Cash.................................................................... $ 33,134 $ 113,699
Accounts receivable..................................................... 6,535,585 7,052,169
Costs and estimated gross profit in excess
of billings on contracts in process................................ 2 7,532,968 8,564,651
Inventories............................................................. 306,675 306,675
Federal income tax refundable........................................... 673,897 673,897
Prepaid expenses and other current assets............................... 181,633 170,170
---------------- ----------------
Total current assets.......................................... 15,263,892 16,881,261
PROPERTY, PLANT AND EQUIPMENT, NET........................................ 3 17,219,472 17,445,289
PERISHABLE TOOLING........................................................ 588,088 538,743
OTHER ASSETS.............................................................. 210,770 210,770
---------------- ----------------
Total assets.................................................. $ 33,282,222 $ 35,076,063
================ ================
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt....................................... 4 $ 1,983,964 $ 1,983,964
Accounts payable........................................................ 815,138 1,410,834
Accrued liabilities..................................................... 355,852 434,689
---------------- ----------------
Total Current liabilities..................................... 3,154,954 3,829,487
LONG-TERM DEBT............................................................ 4 9,687,005 10,303,197
DEFERRED TAX LIABILITY.................................................... 1,366,742 1,538,000
ACCRUED LEASE EXPENSE..................................................... 690,343 689,758
---------------- ----------------
Total liabilities............................................. 14,899,044 16,360,442
---------------- ----------------
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, 2000 and August 31, 2000................................ 15,115,466 15,115,466
Retained earnings....................................................... 1 3,267,712 3,600,155
---------------- ----------------
Total stockholders' equity.................................... 18,383,178 18,715,621
---------------- ----------------
Total liabilities and stockholders'
equity...................................................... $ 33,282,222 $ 35,076,063
================ ================
See notes to financial statements
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RIVIERA TOOL COMPANY
STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED
NOVEMBER 30
-------------------------------------
2000 1999
---------------- ----------------
SALES.................................................................. $ 4,591,897 $ 5,855,021
COST OF SALES.......................................................... 4,326,424 4,658,033
---------------- ---------------
GROSS PROFIT..................................................... 265,473 1,196,988
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES............................................ 528,303 454,489
---------------- ---------------
(LOSS)/INCOME FROM OPERATIONS.................................... (262,830) 742,499
OTHER (EXPENSE)
INTEREST EXPENSE.................................................... (240,689) (205,809)
OTHER EXPENSE....................................................... (182) --
---------------- ---------------
TOTAL OTHER EXPENSE.............................................. (240,871) (205,809)
(LOSS)/INCOME BEFORE TAXES ON INCOME................................... (503,701) 536,690
---------------- ---------------
INCOME TAX (BENEFIT)/ EXPENSE.......................................... (171,258) 182,475
---------------- ---------------
NET (LOSS)/ INCOME AVAILABLE FOR COMMON
SHARES............................................................. $ (332,443) $ 354,215
================ ===============
BASIC (LOSS)/ EARNINGS PER COMMON SHARE................................ $ (.10) $ .10
================ ===============
BASIC COMMON SHARES OUTSTANDING........................................ 3,379,609 3,379,609
================ ===============
DILUTED (LOSS) / EARNINGS PER COMMON SHARE............................. $ (.10) $ .10
================ ===============
DILUTED COMMON SHARES OUTSTANDING...................................... 3,379,609 3,379,609
================ ===============
See notes to financial statements
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RIVIERA TOOL COMPANY
STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED
NOVEMBER 30,
-----------------------------------------
2000 1999
------------------ -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss).................................................... $ (332,443) $ 354,215
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization.................................... 476,212 472,766
Deferred taxes................................................... (171,258) 182,475
(Increase) decrease in assets:
Accounts receivable........................................... 516,584 588,646
Costs and estimated gross profit in
excess of billings on contracts in
process....................................................... 1,031,683 59,626
Perishable tooling............................................ (49,345) (32,256)
Prepaid expenses and other current assets..................... (11,463) (128,627)
Increase (decrease) in liabilities:
Accounts payable.............................................. (595,696) (131,727)
Accrued lease expense......................................... 585 4,671
Accrued liabilities........................................... (78,837) (489,704)
----------------- ----------------
Net cash provided by operating activities.............................. $ 786,022 $ 880,085
----------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment........................... (250,395) (418,422)
----------------- ----------------
Net cash used in investing activity.................................... $ (250,395) $ (418,422)
----------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on revolving credit line.......................... (120,202) (30,710)
Principal payments on long-term debt................................. (495,990) (383,229)
----------------- ----------------
Net cash used in financing activities.................................. $ (616,192) $ (413,939)
----------------- ----------------
NET INCREASE/(DECREASE) IN CASH........................................ $ (80,565) $ 47,724
----------------- ----------------
CASH - Beginning of Period............................................. 113,699 113,183
----------------- ----------------
CASH - End of Period................................................... $ 33,134 $ 160,907
================= ================
See notes to financial statements
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RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2000
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 20, 2000, for the fiscal year ended August 31, 2000.
The results of operations for the three-month period ended November 30, 2000 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,
2000 2000
------------------ -----------------
Costs incurred on contracts in process under the
percentage of completion method..................................... $ 13,145,166 $ 19,549,230
Estimated gross profit................................................. 274,515 1,150,000
------------------ -----------------
Total.......................................................... 13,419,681 20,699,230
Less progress payments received and progress
billings to date.................................................... 5,886,713 12,173,130
Plus costs incurred on contracts in process under
the completed contract method....................................... -- 38,550
------------------ -----------------
Costs and estimated gross profit in excess
of billings on contracts in process.......................... $ 7,532,968 $ 8,564,650
================== =================
Included in estimated gross profit for August 31, 2000 and November 30, 2000 are
jobs with losses accrued of $1,407,405 and $1,019,783, respectively.
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consist of the following:
NOVEMBER 30, AUGUST 31,
2000 2000
------------------ ----------------
Lease and leasehold improvements................................................ $ 1,418,284 $ 1,293,845
Office furniture and fixtures................................................... 194,256 194,256
Machinery and equipment......................................................... 22,504,420 22,468,979
Construction in Process......................................................... 199,926 110,349
Computer equipment and software................................................. 2,083,450 2,082,512
Transportation equipment........................................................ 126,365 126,365
------------------ ----------------
Total cost................................................................. 26,526,701 26,276,306
Accumulated depreciation and amortization....................................... 9,307,229 8,831,017
------------------ ----------------
Net carrying amount........................................................ $ 17,219,472 $ 17,445,289
================== ================
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RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2000
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,
2000 2000
------------------ -----------------
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 $10.0 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, 2001, and bears interest, payable monthly,
at either London Interbank Offered Rate ("LIBOR") plus 2.25% or at .25% below
the bank's prime rate, at the election of the Company, as follows:
- LIBOR plus 2.25%............................................................ $ -- $ 1,500,000
- The bank's prime rate less .25% (as of November 30, 2000, an effective
rate of 9.25%).............................................................. 4,959,817 3,580,019
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, at the election of the Company, as follows:
- LIBOR plus 2.25%............................................................ -- 1,025,000
- The bank's prime rate less .25% (as of November 30, 2000, an effective
rate of 9.25%).............................................................. 1,029,166 166,667
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......................................................................... 2,777,768 2,944,436
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.......................................................................... 766,667 816,666
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 as follows:
- LIBOR plus 2.25%............................................................ -- 2,135,000
- The bank's prime rate less .25% (as of November 30, 2000, an effective
rate of 9.25%).............................................................. 2,137,551 119,373
------------------ -----------------
Total long-term debt.................................................. 11,670,969 12,287,161
Less current portion.................................................. 1,983,964 1,983,964
------------------ -----------------
Long-term debt-- Net.................................................. $ 9,687,005 $ 10,303,197
================== =================
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RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2000
NOTE 4 -- LONG-TERM DEBT-CONTINUED
The debt agreements require the Company to maintain certain ratios/levels of
tangible net worth, working capital, liabilities to tangible net worth, earnings
before interest, taxes, depreciation and amortization to debt service and
prohibit the payment of common stock cash dividends. The Company was not in
compliance with the earnings before interest, taxes, depreciation and
amortization to debt service ratio as of November 30, 2000. The Company
anticipates that their lender will waive such covenant violation until December
1, 2001. The Company was in compliance with all other covenants.
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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
-----------------------------
2000 1999
------------ -----------
SALES................................................................... 100.0% 100.0%
COST OF SALES........................................................... 94.2% 79.5%
------------ -----------
GROSS PROFIT............................................... 5.8% 20.5%
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE............................. 11.5% 7.8%
------------ -----------
(LOSS) / INCOME FROM OPERATIONS........................... (5.7%) 12.7%
INTEREST (EXPENSE)
INTEREST EXPENSE...................................................... (5.2%) (3.5%)
------------ -----------
TOTAL INTEREST EXPENSE ........................................ (5.2%) (3.5%)
(LOSS) / INCOME BEFORE TAXES ON INCOME.................................. (10.9%) 9.2%
INCOME TAXES(BENEFIT)/EXPENSE........................................... (3.7%) 3.1%
------------ -----------
NET (LOSS)/INCOME........................................... (7.2%) 6.1%
============ ===========
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, 2000 TO THE THREE MONTHS ENDED
NOVEMBER 30, 1999.
REVENUES - Revenues for the three months ended November 30, 2000 totaled $4.6
million as compared to $5.9 million for the three months ended November 30,
1999, a decrease of $1.3 million or 21%. This decrease has been a result of the
Company not securing additional contracts during the recent six-month period.
Although the Company has been involved in significant contract quoting activity
during this period, its customers have been tentative in releasing such
contracts to tooling manufacturers. This has negatively impacted both the
Company and the tooling industry as a whole. It is the Company's belief that
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based upon this quoting activity that the release of orders is imminent, however
such delays could continue as the OEM's focus on the recent decline in unit
sales as well as the effects of global mergers during the past year. The Company
believes that the OEM's are reviewing their various product platforms and plans,
on a global basis, in order to maximize and streamline model offerings within
their global platforms. As a result of these market conditions, the Company has
instituted specific cost containment measures during the first quarter. These
containments include direct labor layoffs of approximately 35 employees, a 20%
pay-cut for all salaried employees and a 10% pay-cut for all hourly employees.
The Company anticipates this decline in contract releases will also negatively
effect the Company's financial results at least through the second quarter of
2001.
COST OF SALES - Cost of sales was $4.3 million or 94% of sales for the three
months ended November 30, 2000 as compared to $4.7 million or 80% of sales for
the three months ended November 30, 1999. The decrease in gross margin was
largely due to the decrease in revenue as well as an increase in manufacturing
overhead expenses.
Direct costs expense decreased from $2.7 million in 1999 to $2.2 million in
2000, however as a percent of sales it increased from 46.0% to 47.6%. Direct
labor expense was $1.3 million in 2000 as compared to $1.4 million in 1999,
however as a percent of sales, direct labor increased from 24.7% in 1999 to
27.8% in 2000. Direct labor hours decreased by 9.0% in the first quarter of 2000
as compared to the same period last year. Direct material increased by $115,000,
while other decreases included outside machining of $125,915, services purchased
expense of $227,186 and outside patterns services expense of $90,267.
Engineering expense decreased from $415,000 for the three months ended November
30, 1999 to $343,000 for the same period this year, however as a percent of
sales engineering expense increased from 7.1% to 7.5% as a result of the
decrease in revenues in the first quarter ended November 30, 2000. The largest
decrease in engineering expense was in engineering salaries which decreased by
$54,000 as the result of the Company implementing cost containment programs.
Manufacturing overhead expense increased from $1,550,000 or 26.5% of sales for
the three months ended November 30, 1999 to $1,795,000 or 39.1% of sales for the
three months ended November 30, 2000. The largest increase in the first three
months of 2000 as compared to 1999 was the increase of $98,500 in supervision
salaries. Other increases included $53,400 in perishable tooling, $37,000 in
building rent, $26,500 in machinery repairs expense, $19,000 in property tax
expense and $12,800 in medical insurance expense.
SELLING & ADMINISTRATIVE EXPENSES - Selling and administrative expenses
increased from $454,000 or 7.8% of sales for the three months ended November 30,
1999 to $528,000 or 11.5% of sales for the three months ended November 30, 2000.
This increase was largely due to increases of $34,000 in legal and professional
fees and $55,000 in public company costs. These increases were a result of the
Company expensing such costs in the second quarter of last year as compared to
the first quarter this year.
INTEREST EXPENSE - Interest expense for the three months ended November 30, 2000
was approximately $241,000 as compared to approximately $205,000 for the three
months ended November 30, 1999. As a percentage of sales, interest expense
increased from 3.5% in the quarter ended November 30, 1999 as compared to 5.2%
for the quarter ended November 30, 2000.
FEDERAL INCOME TAXES
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The effective federal income tax rate was 34% for the three months ended
November 30, 1999 and 2000. As of August 31, 2000, the Company had approximately
$542,000 of a net operating loss carryforward which will expire in fiscal 2020,
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, 2000, the Company's cash from
operating activities was $786,022. From investing activities, the Company
acquired additional machinery and equipment of $250,395. From financing
activities, the Company used $495,990 to reduce long-term debt and $120,202 to
reduce its 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 2001. 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 15, 2001
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)
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