1
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 May 31, 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 July 12, 2001 was 3,379,609.
1.
2
PART I
FINANCIAL INFORMATION
INDEX
Page
No.
Item 1. Financial Statements
Balance Sheets as of May 31, 2001 and August 31, 2000......................................... 3
Statements of Operations for the Three Months and Nine Months
Ended May 31,2001 and May 31,2000............................................................. 4
Statements of Cash Flows for the Nine Months Ended May 31,
2001 and May 31, 2000......................................................................... 5
Notes to Financial Statements................................................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................................................... 8
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 - None
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.
3
RIVIERA TOOL COMPANY
FINANCIAL STATEMENTS
BALANCE SHEETS
MAY 31, AUGUST 31,
ASSETS 2001 2000
------ -------------------- --------------------
CURRENT ASSETS NOTE (UNAUDITED) (AUDITED)
-------------- -------------------- --------------------
Cash.................................................................... $ 34,304 $ 113,699
Accounts receivable..................................................... 5,594,165 7,052,169
Costs and estimated gross profit in excess
of billings on contracts in process................................... 2 2,711,770 8,564,651
Inventories............................................................. 306,675 306,675
Federal income tax refundable........................................... - 673,897
Prepaid expenses and other current assets............................... 81,936 170,170
---------------- ----------------
Total current assets................................................ 8,728,850 16,881,261
PROPERTY, PLANT AND EQUIPMENT, NET........................................ 3 16,571,467 17,445,289
PERISHABLE TOOLING........................................................ 575,167 538,743
OTHER ASSETS.............................................................. 135,770 210,770
---------------- ----------------
Total assets........................................................ $ 26,011,254 $ 35,076,063
================ ================
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
CURRENT LIABILITIES
-------------------
Current portion of long-term debt....................................... 4 $ 1,983,964 $ 1,983,964
Accounts payable........................................................ 515,735 1,410,834
Accrued liabilities..................................................... 593,187 434,689
---------------- ----------------
Total Current liabilities........................................... 3,092,886 3,829,487
LONG-TERM DEBT............................................................ 4 5,781,736 10,303,197
DEFERRED TAX LIABILITY.................................................... 243,110 1,538,000
ACCRUED LEASE EXPENSE..................................................... 691,510 689,758
---------------- ----------------
Total liabilities................................................... 9,809,242 16,360,442
---------------- ----------------
PREFERRED STOCK - no par value,
$100 mandatory redemption value:
Authorized - 5,000 shares
Issued and outstanding - None......................................... - -
STOCKHOLDERS' EQUITY:
Preferred Stock - no par value,
Authorized - 200,000 shares
Issued and outstanding - None.......................................... - -
Common stock - No par value:
Authorized - 9,785,575 shares
Issued and outstanding - 3,379,609 shares at
May 31, 2001 and August 31, 2000....................................... 15,115,466 15,115,466
Retained earnings....................................................... 1,086,546 3,600,155
---------------- ----------------
Total stockholders' equity.......................................... 16,202,012 18,715,621
---------------- ----------------
Total liabilities and stockholders' equity.......................... $ 26,011,254 $ 35,076,063
================ ================
SEE NOTES TO FINANCIAL STATEMENTS
3.
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RIVIERA TOOL COMPANY
STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
--------------------------------- ------------------------------
MAY 31, MAY 31, MAY 31, MAY 31,
2001 2000 2001 2000
--------------- ---------------- -------------- --------------
SALES ................................................ $ 2,301,545 $ 6,674,923 $ 9,279,578 $ 17,705,544
COST OF SALES ........................................ 3,149,592 5,364,041 11,208,182 15,170,645
------------ ------------ ------------ ------------
GROSS INCOME/(LOSS) ............................ (848,047) 1,310,882 (1,928,604) 2,534,899
SELLING AND ADMINISTRATIVE EXPENSES .................. 427,070 457,895 1,276,818 1,690,828
------------ ------------ ------------ ------------
INCOME/(LOSS) FROM OPERATIONS (1,275,117) 852,987 (3,205,422) 844,071
OTHER INCOME/(EXPENSE)
INTEREST EXPENSE .................................. (146,882) (248,591) (602,978) (656,677)
OTHER EXPENSE ..................................... - 13,211 (98) 12,009
GAIN (LOSS) ON ASSET DISPOSALS .................... - (50,201) -- (100,892)
------------ ------------ ------------ ------------
TOTAL OTHER EXPENSE - NET ...................... (146,882) (285,581) (603,076) (745,560)
INCOME/(LOSS) BEFORE TAXES ON INCOME ................. (1,421,999) 567,406 (3,808,498) 98,511
------------ ------------ ------------ ------------
INCOME TAX (CREDIT)/EXPENSE .......................... (483,480) 198,018 (1,294,889) 38,593
------------ ------------ ------------ ------------
NET INCOME/(LOSS) AVAILABLE FOR COMMON
SHARES ........................................... $ (938,519) $ 369,388 $ (2,513,609) $ 59,918
============ ============ ============ ============
BASIC AND DILUTED INCOME/(LOSS)
PER COMMON SHARE ................................. (.28) $ .11 $ (.74) $ .02
============ ============ ============ ============
BASIC AND DILUTED COMMON SHARES
OUTSTANDING .......................................... 3,379,609 3,379,609 3,379,609 3,379,609
============ ============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS
4.
5
RIVIERA TOOL COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED
----------------------------------------
MAY 31, 2001 MAY 31, 2000
------------------ ----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income/(loss).................................................... $ (2,513,609) $ 59,918
Adjustments to reconcile net income(loss)to net cash
from operating activities:
Depreciation..................................................... 1,428,632 1,418,927
Loss on disposal of assets....................................... - 100,893
Deferred taxes................................................... (1,294,890) (350,580)
(Increase) decrease in assets:
Accounts receivable........................................... 1,458,004 (1,286,712)
Federal income tax receivable................................. 673,897 -
Costs and estimated gross profit in
excess of billings on contracts in
process....................................................... 5,852,881 1,181,157
Inventory..................................................... - 35,000
Perishable tooling............................................ (36,424) (61,410)
Prepaid expenses and other current assets..................... 88,234 (79,812)
Increase (decrease) in liabilities:
Accounts payable.............................................. (895,099) (77,182)
Accrued lease expense......................................... 1,752 14,013
Accrued liabilities........................................... 158,498 (667,730)
----------------- ----------------
Net Cash provided by operating activities.............................. $ 4,921,876 $ 286,482
----------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of assets......................................... - 8,500
Increase (Decrease) in other assets.................................. 75,000 (75,000)
Additions to property, plant and equipment........................... (554,810) (1,362,487)
----------------- ----------------
Net cash used in investing activity.................................... $ (479,810) $ (1,428,987)
----------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
(Payments on) Proceeds from revolving credit line..................... (3,072,429) 2,439,070
Principal payments on long-term debt................................. (1,449,032) (1,393,424)
----------------- ----------------
Net cash (used in) provided by
financing activities.................................................. $ (4,521,461) $ 1,045,646
----------------- ----------------
NET DECREASE IN CASH................................................... $ (79,395) $ (96,859)
----------------- ----------------
CASH - Beginning of Period............................................. 113,699 113,183
----------------- ----------------
CASH - End of Period................................................... $ 34,304 $ 16,324
================= ================
SEE NOTES TO FINANCIAL STATEMENTS
5.
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RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS
MAY 31, 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 20, 2000, for the fiscal year ended August 31, 2000.
The results of operations for the three and nine month periods ended May 31,
2001 are 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:
MAY 31, AUGUST 31,
2001 2000
------------------ -----------------
Costs incurred on contracts in process under the
percentage of completion method..................................... $ 7,900,893 $ 19,549,230
Estimated gross profit/(loss).......................................... (278,000) 1,150,000
------------------ -----------------
Total.......................................................... 7,622,893 20,699,230
Less progress payments received and progress
billings to date.................................................... 4,911,123 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.......................... $ 2,711,770 $ 8,564,650
================== =================
Included in estimated gross profit for May 31, 2001 and August 31, 2000 are jobs
with losses accrued of $865,024 and $1,407,405, respectively.
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
MAY 31, AUGUST 31,
2001 2000
------------------ ----------------
Lease and leasehold improvements................................................ $ 1,415,785 $ 1,293,845
Office furniture and fixtures................................................... 194,993 194,256
Machinery and equipment......................................................... 22,583,951 22,468,979
Construction in Process......................................................... 365,706 110,349
Computer equipment and software................................................. 2,144,316 2,082,512
Transportation equipment........................................................ 126,365 126,365
----------------- ---------------
Total cost................................................................. 26,831,116 26,276,306
Accumulated depreciation and amortization....................................... (10,259,649) (8,831,017)
----------------- ---------------
Net carrying amount........................................................ $ 16,571,467 $ 17,445,289
================= ===============
6.
7
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2001
NOTE 4 - LONG-TERM DEBT
The Company's long-term debt, which is subject to certain covenants discussed
below, consists of the following:
MAY 31, AUGUST 31,
2001 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 May 31,2001,
an effective rate of 6.75%)........................................... 2,007,590 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 May 31, 2001,
an effective rate of 6.75%)........................................... 704,170 166,667
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........................................................................ 2,444,432 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......................................................................... 666,663 816,666
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 May 31, 2001, an effective rate
of 6.75%).............................................................. 1,942,845 119,373
------------ --------------
Total long-term debt................................................. 7,765,700 12,287,161
Less current portion................................................. 1,983,964 1,983,964
------------ --------------
Long-term debt-- Net................................................. 5,781,736 $ 10,303,197
============ ==============
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
7.
8
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 and the working capital as of May 31, 2001.
On April 9, 2001, the Company's lender agreed to waive the earnings before
interest, taxes, depreciation and amortization to debt service ratio covenant
violation for a period of not less than twelve months. The Company anticipates
that their lender will waive the working capital covenant violation until June
1, 2002.
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 FOR THE NINE
MONTHS ENDED MONTHS ENDED
-------------------------- -------------------------
MAY 31, MAY 31, MAY 31, MAY 31,
2001 2000 2001 2000
----------- ----------- ----------- ----------
SALES..................................................... 100.0% 100.0% 100.0% 100.0%
COST OF SALES............................................. 136.8% 80.4% 120.8% 85.7%
--------- --------- --------- ---------
GROSS INCOME/(LOSS)................................. (36.8%) 19.6% (20.8%) 14.3%
SELLING AND ADMINISTRATIVE EXPENSE........................ 18.6% 6.8% 13.8% 9.5%
--------- --------- --------- ---------
INCOME/(LOSS) FROM OPERATIONS....................... (55.4%) 12.8% (34.6%) 4.8%
OTHER INCOME (EXPENSE)
INTEREST EXPENSE........................................ (6.4%) (3.7%) (6.5%) (3.7%)
OTHER................................................... - (0.6%) - (0.5%)
--------- --------- --------- ---------
TOTAL OTHER EXPENSE - NET........................... (6.4%) (4.3%) (6.5%) (4.2%)
INCOME/(LOSS) BEFORE TAXES ON INCOME...................... (61.8%) 8.5% (41.1%) 0.6%
INCOME TAX EXPENSE/(CREDIT)............................... (21.0%) 3.0% (14.0%) 0.2%
--------- --------- --------- ---------
NET INCOME/(LOSS)............................. (40.8%) 5.5% (27.1%) 0.4%
========= ========= ========= =========
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," 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 MAY 31, 2001 TO THE THREE MONTHS ENDED MAY
31, 2000.
REVENUES - Revenues for the three months ended May 31, 2001 totaled $2.3 million
as compared to $6.7 million for the three months ended May 31, 2000, a decrease
of $4.4 million or 65.6%.
8.
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This decrease has been a result of the Company not securing additional contracts
during the recent nine-month period. Although the Company has been involved in
significant contract quoting activity during this period, its customers have
been tentative in releasing contracts to tooling manufacturers. This lack of
contract releases has created very competitive pricing on those tooling
contracts that have been released during this period. Although the Company has
been successful in securing contracts during this period, the Company has been
very selective in the bidding process to ensure that those contracts have
contribution margin. This market has negatively impacted both the Company and
the tooling industry as a whole. It is the Company's belief that based upon
quoting activity, 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. These containments include direct labor
layoffs of approximately 100 employees or 61% of the workforce. The Company
anticipates the decline in contract releases will also negatively effect the
Company's financial results at least through 2001.
The Company incurred 40,031 shop floor hours during the third quarter of 2001 as
compared to 89,299 during the same period of 2000. The decrease was 49,268 hours
or 55.2%. This decrease was a direct result of lower contract levels during the
third quarter of 2001.
COST OF SALES - Cost of sales were $3.1 million or 136.8% of sales for the three
months ended May 31, 2001 as compared to $5.4 million or 80.4% of sales for the
three months ended May 31, 2000.
The gross margin decrease was largely due to the decrease in shop floor hours
and resulting revenue, despite cost containment measures taken by the Company
during this period. Cost of sales for the quarter ended May 31, 2001, as
compared to the same period last year, included decreases in the Company's
direct cost expense of $1,820,000, engineering expenses of $150,000 and
manufacturing overhead of $245,000. However, due to the decrease in revenue
during the third quarter of 2001, these expenses increased as a percent of sales
by 11.8%, 5.8% and 38.8%, respectively, as compared to the same period last
year.
The decrease in direct cost expense was primarily due to decreases of $940,000
in labor expense and $707,000 in outside services expense for the three months
ended May 31, 2001 over the same period last year. The decrease in labor expense
was due to the Company incurring less labor hours during the quarter ended May
31, 2001 over the same period last year, as a result of the Company's decreased
contract levels. The decrease in contract levels also lowered the Company's
outside services expense requirements.
The decrease in engineering expense was primarily due to decreases in wages and
salaries. As a result, the Company experienced a decrease in wages and salaries
of $160,000 or 39.3% during the third quarter of 2001 as compared to the same
period last year.
Manufacturing overhead expense decreased from $1,739,000 for the three months
ended May 31, 2000 to $1,495,000 for the three months ended May 31, 2001. This
change was due to decreases in wages and salaries of $161,000, manufacturing
supplies of $73,000, perishable tooling expense of $57,000, health insurance
expense of $41,000, machinery repairs and maintenance expense of $32,000, and
workers compensation insurance expense of $13,000. Increases included rent
expense of $80,000 and property tax expense of $54,000.
9.
10
SELLING & ADMINISTRATIVE EXPENSES - Selling and administrative expenses
decreased from approximately $458,000 or 6.9% of sales for the three months
ended May 31, 2000 to approximately $427,000 or 18.6% of sales for the three
months ended May 31, 2001. This change was due to decreases in wages and
salaries of $151,000 and 401(k) expense of $11,000. Increases include $93,000 in
legal and professional expense and $50,000 in State of Michigan Single Business
Tax.
INTEREST EXPENSE - Interest expense for the three months ended May 31, 2001 was
approximately $147,000 as compared to approximately $249,000 for the same period
last year. As a percentage of sales, interest expense increased from 3.7% in the
quarter ended May 31, 2000 as compared to 6.4% for the quarter ended May 31,
2001.
The decrease in interest expense was a result of the Company carrying lower debt
levels as well as lower interest rates during the third quarter of 2001 as
compared to 2000.
COMPARISON OF THE NINE MONTHS ENDED MAY 31, 2001 TO THE NINE MONTHS ENDED MAY
31, 2000
REVENUES - Revenues for the nine months ended May 31, 2001 totaled $9.3 million
as compared to $17.7 million for the nine months ended May 31, 2000, an decrease
of $8.4 million or 47.6%.
The Company incurred 165,946 shop floor hours during the three quarters of 2001
as compared to 255,179 during the same period of 2000. The decrease was 89,233
hours or 35.0%. This decrease was a direct result of lower contract levels
during the three quarters of 2001 as compared to the same period of 2000.
COST OF SALES - Cost of sales were $11.2 million or 120.8% of sales for the nine
months ended May 31, 2001 as compared to $15.2 million or 85.7% of sales for the
nine months ended May 31, 2000.
The gross margin decrease was largely due to the decrease in shop floor hours
and resulting revenue, despite cost containment measures taken by the Company
during this period. Cost of sales for the nine months ended May 31, 2001, as
compared to the same period last year, included decreases in the Company's
direct cost expense of $3,414,000, engineering expenses of $386,000 and
manufacturing overhead of $162,000. However, due to the decrease in revenue,
these expenses increased as a percent of sales by 8.4%, 2.4% and 24.3%,
respectively, as compared to the same period last year.
The decrease in direct cost expense was primarily due to a decrease of
$1,671,000 in labor expense and $1,609,000 in outside services expense for the
nine months ended May 31, 2001 over the same period last year. The decrease in
labor was due to the Company incurring less labor hours during the nine months
ended May 31, 2001 over the same period last year, as a result of the Company's
decreased contract levels. The decrease in contract levels also lowered the
Company's outside services expense requirements.
The decrease in engineering expense was due to wages and salaries expense. As a
result of the Company's cost containment measures, the Company experienced a
32.4% decrease in wages and salaries during the first three quarters of 2001 as
compared to the same period last year.
Manufacturing overhead expense decreased from $5,081,000 for the nine months
ended May 31, 2000 to $4,919,000 for the nine months ended May 31, 2001. The
largest decreases were $143,000 in wages, $140,000 in manufacturing supplies
expense, $94,000 in perishable tooling expense and $43,000 in medical
10.
11
insurance expense. Increases included $175,000 in facility rent expense and
$125,000 in property tax expense.
SELLING & ADMINISTRATIVE EXPENSES - Selling and administrative expenses
increased from approximately $1,691,000 or 9.6% of sales for the nine months
ended May 31, 2000 to approximately $1,276,818 or 13.8% of sales for the nine
months ended May 31, 2001. This decrease was primarily due to decreases of
$315,000 in officer and office wages and salaries, $79,000 in State of Michigan
Single Business Tax expense, $28,000 in public company expense and $22,000 in
401(k) expense. The primary increase was $50,000 in legal and professional fee
expense.
INTEREST EXPENSE - Interest expense for the nine months ended May 31, 2001 was
approximately $603,000 as compared to approximately $657,000 for the same period
last year. As a percentage of sales, interest expense increased from 3.7% for
the nine months ended May 31, 2000 as compared to 6.5% for the nine months ended
May 31, 2001.
FEDERAL INCOME TAXES
The effective federal income tax rate was 34% and 39% for the nine months ended
May 31, 2001 and May 31, 2000, respectively. 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 nine months ended May 31, 2001, the Company's cash from operating
activities was $4,921,876, primarily from the decrease in account receivables of
$1.5 million, a $5.9 million decrease in contracts in process, a $1.3 million
decrease in deferred tax liabilities, and a $0.7 million decrease in accounts
payable and accrued liabilities. The Company invested in additional machinery
and equipment of $0.6 million and reduced its long-term debt obligations by $1.5
million. The Company utilized the remainder of the cash flows to reduce its
revolving bank working capital credit line by $3.1 million. 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: July 12, 2001
Riviera Tool Company
/s/ Kenneth K. Rieth /s/ Peter C. Canepa
-------------------- -------------------
Kenneth K. Rieth Peter C. Canepa
President and Chief Executive Officer Chief Financial Officer,
(Principal Executive Officer) Treasurer and Secretary
(Principal Financial and
Accounting Officer)