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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 May 31, 2003
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 no. 001-12673
RIVIERA TOOL COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Michigan 38-2828870
------------------------------ -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5460 Executive Parkway S.E., Grand Rapids, Michigan 49512
--------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(616) 698-2100
--------------------------------------------------
(Registrant's telephone number, including area code)
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
---
There were 3,379,609 shares of the Registrant's common stock outstanding as July
14 ,2003.
1.
PART I
FINANCIAL INFORMATION
INDEX
Page No.
Item 1. Financial Statements
Balance Sheets as of May 31, 2003 and August 31, 2002............................................. 3
Statements of Operations for the Three Months and Nine Months
Ended May 31, 2003 and 2002...................................................................... 4
Statements of Cash Flows for the Three Months and Nine Months
Ended May 31, 2003 and 2002...................................................................... 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 ....................................... 12
Item 4. Controls and Procedures
PART II
OTHER INFORMATION
INDEX
Item 1. Legal Proceedings - None
Item 2. Changes in Securities and Use of Proceeds - None
Item 3. Default Upon Senior Securities - None
Item 4. Submission of Matters to a vote of Security - None
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8 - K.
Signatures
Certifications
2.
RIVIERA TOOL COMPANY
FINANCIAL STATEMENTS
BALANCE SHEETS
MAY 31, AUGUST 31,
ASSETS 2003 2002
------ -------------------- --------------------
CURRENT ASSETS NOTE (UNAUDITED) (AUDITED)
- -------------- ---- -------------------- --------------------
Cash.................................................................... $ -- $ 2,337,743
Accounts receivable..................................................... 4,893,681 2,899,075
Costs in excess of billings on contracts in process..................... 2 6,885,947 3,988,346
Inventories............................................................. 250,569 250,569
Prepaid expenses and other current assets............................... 357,470 184,313
---------------- ----------------
Total Current assets.......................................... 12,387,667 9,660,046
PROPERTY, PLANT AND EQUIPMENT, NET........................................ 3 13,272,485 14,471,879
PERISHABLE TOOLING........................................................ 616,901 548,606
OTHER ASSETS.............................................................. 325,198 303,060
---------------- ----------------
Total assets.................................................. $ 26,602,251 $ 24,983,591
================ ================
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt....................................... 4 $ 231,805 $ 10,354,499
Notes payable........................................................... 4 6,153,371
Accounts payable........................................................ 6,393,653 1,694,779
Accrued liabilities..................................................... 930,031 448,171
---------------- ----------------
Total Current liabilities..................................... 13,708,860 12,497,449
LONG-TERM DEBT............................................................ 4 -- --
ACCRUED LEASE EXPENSE..................................................... 649,451 675,735
---------------- ----------------
Total liabilities............................................. 14,358,311 13,173,184
---------------- ----------------
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
Issued and outstanding - 3,379,609 shares at
May 31, 2003 and August 31, 2002..................................... 15,115,466 15,115,466
Retained deficit........................................................ (2,871,526) (3,305,059)
---------------- ----------------
Total stockholders' equity.................................... 12,243,940 11,810,407
---------------- ----------------
Total liabilities and stockholders' equity.................... $ 26,602,251 $ 24,983,591
================ ================
See notes to financial statements
3.
RIVIERA TOOL COMPANY
STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED ENDED
----------------------------------------------------------------------
MAY 31,
----------------------------------------------------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
SALES .................................................. $ 9,919,178 $ 3,702,425 $ 22,561,901 $ 10,518,181
COST OF SALES .......................................... 8,826,409 3,565,402 20,306,338 10,704,359
------------ ------------ ------------ ------------
GROSS PROFIT (LOSS) .................................... 1,092,769 137,023 2,255,563 (186,178)
SELLING AND ADMINISTRATIVE EXPENSES .................... 505,935 440,943 1,244,540 1,284,749
------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS ......................... 586,834 (303,920) 1,011,023 (1,470,927)
OTHER EXPENSE:
Interest expense .................................... 118,330 149,769 417,315 486,748
Other (Income)/expense) ............................. 77,405 (1,057) 160,175 (1,268)
------------ ------------ ------------ ------------
TOTAL OTHER EXPENSE - NET ........................ 195,735 148,712 577,490 485,480
INCOME (LOSS) BEFORE TAXES ON INCOME .................. 391,099 (452,632) 433,533 (1,956,407)
------------ ------------ ------------ ------------
INCOME TAXES ........................................... -- -- -- --
------------ ------------ ------------ ------------
NET INCOME (LOSS) AVAILABLE FOR COMMON SHARES ......... $ 391,099 $ (452,632) $ 433,533 $ (1,956,407)
============ ============ ============ ============
BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE ....... $ .12 $ (.13) $ .13 $ (.58)
============ ============ ============ ============
BASIC AND DILUTED COMMON SHARES OUTSTANDING ............ 3,379,609 3,379,609 3,379,609 3,379,609
============ ============ ============ ============
See notes to financial statements
4.
RIVIERA TOOL COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED ENDED
------------------------------------------------------------
MAY 31,
------------------------------------------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss)) ............................................... $ 391,099 $ (452,632) $ 433,533 $(1,956,407)
Adjustments to reconcile net income/(loss) to net
cash from operating activities:
Depreciation and amortization ................................ 460,482 477,441 1,381,446 1,432,323
(Increase) decrease in assets:
Accounts receivable ....................................... 4,825,325 890,849 (1,994,606) (1,142,965)
Costs in excess of billings on contracts in process ....... (5,440,988) 98,040 (2,897,601) 222,513
Perishable tooling ........................................ (34,650) (6,198) (68,295) 32,004
Prepaid expenses and other current assets ................. 20,061 (65,952) (173,157) (101,378)
Increase (decrease) in liabilities:
Accounts payable .......................................... 2,122,045 (88,699) 4,698,874 (322,437)
Accrued liabilities ....................................... 397,135 23,222 481,860 236,274
Accrued lease expense ..................................... (8,761) (4,089) (26,284) (12,269)
----------- ----------- ----------- -----------
Net cash provided by/(used in) operating activities ................ $ 2,731,748 $ 871,982 $ 1,835,770 $(1,612,342)
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in other assets ......................................... -- -- (22,138) (42,290)
Additions to property, plant and equipment ....................... (121,706) (186,545) (182,052) (224,463)
----------- ----------- ----------- -----------
Net cash used in investing activities .............................. $ (121,706) $ (186,545) $ (204,190) $ (266,753)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments)on revolving credit line .............. (2,454,658) (594,964) (3,327,388) 2,761,763
Issuance of debt ................................................. -- -- 3,367,948 --
Principal payments on notes payable to bank
and non-revolving equipment line of credit ...................... (155,384) (183,991) (4,009,883) (1,111,974)
----------- ----------- ----------- -----------
Net cash provided by/(used in) financing activities ................ $(2,610,042) (778,955) $(3,969,323) $ 1,649,789
----------- ----------- ----------- -----------
NET INCREASE/(DECREASE) IN CASH .................................... $ -- (93,518) $(2,337,743) $ (229,306)
CASH - Beginning of Period ......................................... -- 146,934 2,337,743 282,722
----------- ----------- ----------- -----------
CASH - End of Period ............................................... $ -- 53,416 $ -- $ 53,416
=========== =========== =========== ===========
5.
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2003
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
December 17, 2002, for the fiscal year ended August 31, 2002.
The results of operations for the three and nine month periods ended May 31,
2003 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:
MAY 31, AUGUST 31,
2003 2002
------------ ------------
Costs incurred on contracts in process under the
Percentage of completion method ........................................ $ 23,382,313 $ 11,248,868
Estimated gross profit (loss) ............................................. 1,000,000 (670,000)
------------ ------------
Total ............................................................. 24,382,313 10,578,868
Less progress payments received and progress billings to date ............. 17,496,366 6,682,206
Plus costs incurred on contracts in process under
the completed contract method .......................................... -- 91,682
------------ ------------
Costs in excess of billings on contracts in process ............... $ 6,885,947 $ 3,988,346
============ ============
Included in estimated gross loss for May 31, 2003 and August 31, 2002 are jobs
with losses accrued of $886,535 and $973,985, respectively.
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consist of the following:
MAY 31, AUGUST 31,
2003 2002
----------- -----------
Lease and leasehold improvements ........................................... $ 1,367,908 $ 1,367,908
Office furniture and fixtures .............................................. 164,417 157,868
Machinery and equipment .................................................... 22,372,260 22,353,184
Construction in Process .................................................... 53,823 1,399
Computer equipment and software ............................................ 2,223,366 2,119,363
Transportation equipment ................................................... 61,919 61,919
----------- -----------
Total cost ............................................................ 26,243,693 26,061,641
Accumulated depreciation and amortization .................................. 12,971,208 11,589,762
----------- -----------
Net carrying amount ................................................... $13,272,485 $14,471,879
=========== ===========
6.
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2003
NOTE 4 - DEBT
On December 23, 2003, the Company refinanced its outstanding debt. Under such
refinancing, the Company obtained a $7.5 million Revolving Line of Credit and a
$2.0 million Term Loan, each expiring December 1, 2003. The unpaid balance of
approximately $1.4 million with the Company's former lender was converted into a
five-year subordinated note. The Company's current indebtedness, which is
subject to certain covenants discussed below, consists of the following:
MAY 31, AUGUST 31,
2003 2002
------------------- ------------------
REVOLVING WORKING CAPITAL CREDIT LINE
- -------------------------------------
The revolving working capital credit line is collateralized by substantially all
assets of the Company and provided for borrowing, subject to certain collateral
requirements up to $7.5 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 December 1, 2003, and bears interest, payable monthly, at
1.0% above the bank's prime rate (as of May 31, 2003, an effective rate of
5.25%).......................................................................... $ 3,172,612 $ --
The credit line was paid and terminated on December 23, 2002.................... -- 6,500,000
NOTES PAYABLE TO BANKS
- ----------------------
Note payable to bank, payable in monthly installments of $33,334, plus interest
at the bank's prime rate plus 1.25% (as of May 31, 2003, an effective rate of
5.50%), due December 1, 2003.................................................... 1,866,667
Subordinated note payable to bank, payable in monthly installments of $31,000,
including interest at 11%, due January 1, 2008.................................. 1,345,897 --
Note payable to bank, paid on December 23, 2002................................. -- 1,611,092
Note payable to bank, paid on December 23, 2002................................. -- 416,667
NON-REVOLVING EQUIPMENT LINE OF CREDIT
- --------------------------------------
$3,271,000 equipment line of credit, paid on December 23, 2002.................. -- 1,826,740
------------------- -------------------
Total debt........................................................... 6,385,176 10,354,499
------------------- -------------------
Less current portion of long-term debt............................... -- --
Less notes payable................................................... 6,385,176 10,354,499
------------------- -------------------
Long-term debt-- Net................................................. $ -- $ --
=================== ===================
7.
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2003
NOTE 4 - DEBT - CONTINUED
Under the loan agreement, the Company is required to maintain certain levels of
Tangible Net Worth, Debt to Tangible Net Worth and Debt Service Coverage. At May
31, 2003, the Company was in compliance with all of these covenants except for
the Tangible Net Worth covenant. The loan agreement expires December 1, 2003 and
the related debt is recorded as current portion of long-term debt and current
notes payable. The Company is negotiating with its primary lender for a longer
term loan agreement and anticipates such will be completed in the fourth quarter
of 2003.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table presents, for the periods therein, the components of the
Company's Statements of Operations as a percentage of sales.
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED ENDED
---------------------------------------------------------
MAY 31,
---------------------------------------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
SALES .................................................... 100.0% 100.0% 100.0% 100.0%
COST OF SALES ............................................ 89.0% 96.3% 90.0% 101.8%
----- ----- ----- -----
GROSS PROFIT (LOSS) ................................ 11.0% 3.7% 10.0% (1.8%)
SELLING AND ADMINISTRATIVE EXPENSES ...................... 5.1% 11.9% 5.5% 12.2%
----- ----- ----- -----
INCOME (LOSS) FROM OPERATIONS ...................... 5.9% (8.2%) 4.5% (14.0%)
INTEREST EXPENSE ......................................... 1.2% 4.0% 1.8% 4.6%
OTHER EXPENSE ............................................ 0.8% -- 0.8% --
----- ----- ----- -----
TOTAL INTEREST & OTHER EXPENSE ..................... 2.0% 4.0% 2.6% 4.6%
INCOME (LOSS) BEFORE
TAXES ON INCOME ........................................ 3.9% (12.2%) 1.9% (18.6%)
INCOME TAXES ............................................. -- -- -- --
----- ----- ----- -----
NET LOSS ..................................... 3.9% (12.2%) 1.9% (18.6%)
===== ===== ===== =====
FORWARD-LOOKING STATEMENT; RISKS AND UNCERTAINTIES
CERTAIN INFORMATION INCLUDED IN THIS QUARTERLY REPORT ON FORM 10-Q AND OTHER
MATERIALS FILED OR TO BE FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE
COMMISSION CONTAIN CERTAIN STATEMENTS THAT MAY BE CONSIDERED FORWARD-LOOKING.
FOR THIS PURPOSE, ANY STATEMENTS CONTAINED IN THIS REPORT THAT ARE NOT
STATEMENTS
8.
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. IN ADDITION, FROM TIME TO TIME, THE COMPANY MAY RELEASE OR PUBLISH
FORWARD-LOOKING STATEMENTS RELATING TO SUCH MATTERS AS ANTICIPATED FINANCIAL
PERFORMANCE, BUSINESS PROSPECTS, TECHNOLOGICAL DEVELOPMENTS AND SIMILAR MATTERS.
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 PROVIDES A SAFE HARBOR FOR
FORWARD-LOOKING STATEMENTS. IN ORDER TO COMPLY WITH THE TERMS OF THE SAFE
HARBOR, THE COMPANY NOTES THAT A VARIETY OF FACTORS COULD CAUSE THE COMPANY'S
ACTUAL RESULTS AND EXPERIENCE TO DIFFER MATERIALLY FROM THE ANTICIPATED RESULTS
OR OTHER EXPECTATIONS EXPRESSED IN THE COMPANY'S 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, 2003 TO THE THREE MONTHS ENDED MAY
31, 2002.
REVENUES
Revenues for the three months ended May 31, 2003 totaled $9.9 million as
compared to $3.7 million for the three months ended May 31, 2002, an increase of
$6.2 million or 168%. The revenue increase is a direct result of the Company
being awarded additional contracts during the latter part of fiscal year ended
August 31, 2002 as well as in the second quarter ended February 28, 2003. These
additional contracts resulted in the Company incurring approximately 83,000 shop
floor hours during the third quarter of 2003, as compared to 49,000 during the
same period of 2002, an increase of 34,000 hours or 69%.
As of May 31, 2003, the Company had approximately $26.1 million in contract
backlogs. This compares to approximately $21.7 million as of May 31, 2002, an
increase of $4.4 million or 20%. This backlog, in shop floor hours, increased
from 243,000 as of May 31, 2002 to 254,000 as of May 31, 2003, an increase of
4.5%. The Company was awarded additional contracts in excess of $5.6 million
during the third quarter of 2003, as compared to $17.6 million in the same
quarter last year.
COST OF SALES
Cost of sales was $8.8 million or 89.0% of sales for the three months ended May
31, 2003 as compared to $3.6 million or 96.3% of sales for the three months
ended May 31, 2002. The increase in gross margin was largely due to the increase
in revenue, which absorbed more of the Company's fixed overhead.
Direct costs increased from $1.6 million for the three months ended May 31, 2002
to $6.4 million for the three months ended May 31, 2003, as a percent of sales
it increased from 42.2% to 64.8%. Direct labor expense was $872,000 in 2002 as
compared to $1,710,000 in 2003 however, as a percent of sales, direct labor
expense decreased from 23.6% to 17.2%. While direct labor expense increased by
$838,000 or 96%, actual shop floor hours increased from 49,000 to 83,000. The
increase in shop floor hours was a direct result of higher contract levels for
the three months ended May 31, 2003. Other direct cost increases included
$1,418,000 in direct material expense and $2,611,000 in outside service
expenses. As a percent of sales, these other direct expenses represented 47.6%
for the three months ended May 31, 2003 as compared to 18.6% for the three
months ended May 31, 2002. These increases were largely due to the increased
volumes and related outsourcing contracts. The Company, as a result of its
increased backlog, is outsourcing certain stamping die construction to other die
manufacturers. As a result, the Company has recorded approximately $1.9 million
of expense during the third quarter of 2003 related to the outsourcing die
construction. The remaining outside services expense increases included
approximately $197,000 in patterns and $517,000 in other outside services.
9.
Engineering expense increased from $424,000 for the three months ended May 31,
2002 to $660,000 for the three months ended May 31, 2003 however, as a percent
of sales, engineering expense decreased from 11.4% to 6.7%. This increase was a
result of the higher engineering component of the Company's contract backlog
including project management of certain contracts. The Company has increased its
engineering staff in the past few quarters to process the additional awarded
contracts.
Manufacturing overhead expense during the third quarter of 2003 increased by
$158,000 over the same period last year, however due to increased revenues,
manufacturing overhead, as a percent of sales, decreased from 42.7% for the
three months ended May 31, 2002 to 17.5% for the three months ended May 31,
2003.
SELLING & ADMINISTRATIVE EXPENSES
Selling and administrative expenses increased from $441,000 for the three months
ended May 31, 2002 to $506,000 for the three months ended May 31, 2003. As a
percent of sales, selling and administrative expense decreased from 11.9% to
5.1%.
INTEREST EXPENSE
Interest expense for the three months ended May 31, 2003 was approximately
$118,000 as compared to approximately $150,000 for the three months ended May
31, 2002. As a percentage of sales, interest expense decreased from 4.0% in the
quarter ended May 31, 2002 to 1.2% for the quarter ended May 31, 2003. This
decrease was the result of lower debt levels and interest rates during the
quarter ended May 31, 2003 as compared to the previous comparable quarter.
OTHER EXPENSE - Other expense for the three months ended May 31, 2003 was
approximately $77,000 due to fees and expenses incurred during the second
quarter of 2003 in relation to the Company's debt refinancing. Such expenses and
fees are being amortized over the term of the financing (one year).
COMPARISON OF THE NINE MONTHS ENDED MAY 31, 2003 TO THE NINE MONTHS ENDED MAY
31, 2002.
REVENUES
Revenues for the nine months ended May 31, 2003 totaled $22.6 million as
compared to $10.5 million for the nine months ended May 31, 2002, an increase of
$12.1 million or 115%. The revenue increase is a direct result of the Company
receiving additional orders during the past year. For the nine months ended May
31, 2003, the Company had incurred approximately 213,000 shop floor hours as
compared to 138,000 during the same period of 2002, an increase of 75,000 hours
or 54%.
COST OF SALES
Cost of sales was $20.3 million or 90.0% of sales for the nine months ended May
31, 2003 as compared to $10.7 million or 101.8% of sales for the same period
last year. The increase in gross margin was due to the Company's increased
backlog and revenues thus resulting in improved absorption of the Company's
fixed manufacturing overhead.
Direct costs increased from $4.9 million in 2002 to $13.5 million in 2003 and,
as a percent of sales, direct costs increased from 47.0% to 60.0%. Direct labor
expense was $4.2 million in 2003 as compared to $2.7 million in 2002 however, as
a percent of sales, direct labor expense decreased from 25.2% in 2002 to 18.4%
in 2003. The increase in direct labor expense of $1.5 million was a direct
result of higher contract level requirements and resulting increase in shop
floor hours during the first three quarters of 2003. Direct material expense
increased from $1.7 million in 2002 to $4.1 million in 2003, however as a result
of the increase in revenue, direct material expense, as a percent of sales,
increased from 16.3% in 2002 to 18.1% in 2003. Outside service expenses
increased from
10.
$623,000 in 2002 to $5.3 million in 2003 and, as a percent of sales, increased
from 5.9% to 23.5%. This significant increase was largely due to the increased
volumes and related outsourcing contracts. The Company, as a result of its
increased backlog, is outsourcing certain stamping die construction to other die
manufacturers and has recorded approximately $3.0 million of related expense
during the first nine months of 2003. The remaining outside services expense
increases included approximately $429,000 in patterns and $1.25 million in other
outside services.
Engineering expense increased from $1.1 million for the nine months ended May
31, 2002 to $1.7 million for same period of 2003 however, as a percent of sales
engineering expense decreased from 10.1% to 7.6%. The increase in engineering
expense was largely in salaries as a result of the Company increasing its
engineering staffing levels for the Company's increased backlog.
Manufacturing overhead expense increased from $4.7 million for the nine months
ended May 31, 2002 to $5.0 million for the same period in 2003, however, due to
increased revenues, it decreased, as a percent of sales, from 44.6% to 22.3%.
The largest increases during this period in 2003 as compared to 2002 included
$129,000 in payroll tax expense and $111,000 in medical, workers compensation
and general insurance.
SELLING & ADMINISTRATIVE EXPENSES
Selling and administrative expenses decreased from $1,285,000 or 12.2% of sales
for the nine months ended May 31, 2002 to $1,244,000 or 5.5% of sales in 2003.
INTEREST EXPENSE
Interest expense for the nine months ended May 31, 2003, compared to 2002,
decreased slightly to $417,000 or 1.8% of sales from $487,000 or 4.6% of sales.
This decrease was the result of lower debt levels and interest rates during the
nine months ended May 31, 2003 as compared to the previous comparable period.
OTHER EXPENSE
Other expense for the nine months ended May 31, 2003 was approximately $161,000
or 0.7% of sales. This cost was due to fees and expenses incurred during the
second quarter of 2003 in relation to the Company's debt refinancing. Such
expenses and fees are being amortized over the term of the financing (one year).
FEDERAL INCOME TAXES
For the nine months ended May 31, 2003, the Company decreased its valuation
allowance by $147,000 to reflect the deferred tax assets utilized to reduce
current income taxes.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended May 31, 2003, the Company's cash provided by operating
activities was $1,836,000. This largely resulted from increases of $1,995,000 in
account receivables and $2,898,000 in contracts in process. These increases were
offset by a $5,181,000 increase in accounts payable and accrued expenses. From
investing activities, the Company incurred an increase in other assets (cash
surrender value of life insurance policies) of $22,000 and acquired $182,000 in
plant, property and equipment. The Company used $3,327,000 to reduce the
revolving credit line and $642,000 to reduce long-term and subordinated debt.
The Company believes that the unused portion of the Revolving Line of Credit and
funds generated from operations including continuing receipt of progress
payments from the Company's major customer will be sufficient to cover
anticipated cash needs through fiscal 2003. However, depending on the level of
future sales, and the terms of such 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.
11.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
None.
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains controls and procedures designed to ensure that
information required to be disclosed in the reports that the Company files or
submits under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time period specified in the rules
and forms of the Securities and Exchange Commission. Based upon their evaluation
of those controls and procedures performed within 90 days of the filing date of
this report, the Chief Executive and Chief Financial Officers of the Company
concluded that the Company's disclosure controls and procedures were adequate.
The Company made no significant changes in its internal controls or in other
factors that could significantly affect those controls subsequent to the date of
the evaluation of those controls by the Chief Executive and Chief Financial
Officers.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Under the Company's loan agreement with its primary lender, the Company is
required to maintain certain levels of Tangible Net Worth, Debt to Tangible Net
Worth and Debt Service Coverage. At May 31, 2003, the Company was in compliance
with all of these covenants except for the Tangible Net Worth covenant. The loan
agreement expires December 1, 2003 and the related debt is recorded as current
portion of long-term debt and current notes payable. The Company is negotiating
with its primary lender for a longer-term loan agreement and anticipates such
will be completed in the fourth quarter of 2003.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
None
(b) Reports on Form 8-K:
None
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 14, 2003
Riviera Tool Company
/s/ Kenneth K. Rieth
----------------------
Kenneth K. Rieth
President and Chief Executive Officer
(Principal Executive Officer)
12.
/s/ Peter C. Canepa
----------------------
Peter C. Canepa
Chief Financial Officer, Treasurer and
Secretary (Principal Financial
and Accounting Officer)
13.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Riviera Tool Company (the
"Company") on Form 10-Q for the period ending May 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof, I, Kenneth K. Rieth,
Chief Executive Officer of registrant, certify, pursuant to 18 U.S.C. ss. 1350,
as adopted pursuant to ss. 302 of the Sarbanes-Oxley Act of 2002, that:
(1) I have reviewed this quarterly report on Form 10-Q of Riviera Tool
Company;
(2) Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report; and
(3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of
registrant as of, and for, the periods presented in this quarterly report; and
(4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
(5) The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
(6) The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Dated: July 14, 2003
By: /s/ Kenneth K. Rieth
---------------------
Kenneth K. Rieth
Chief Executive Officer
14.
This certification accompanies this Report on Form 10-Q pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required
by such Act, be deemed filed by registrant for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended.
15.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Riviera Tool Company (the
"Company") on Form 10-Q for the period ending May 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof, I, Peter C. Canepa, Chief
Financial Officer of registrant, certify, pursuant to 18 U.S.C. ss. 1350, as
adopted pursuant to ss. 302 of the Sarbanes-Oxley Act of 2002, that:
(1) I have reviewed this quarterly report on Form 10-Q of Riviera Tool
Company;
(2) Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report; and
(3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of
registrant as of, and for, the periods presented in this quarterly report; and
(4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
(5) The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
(6) The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Dated: July 14, 2003
By: /s/ Peter C. Canepa
--------------------
Peter C. Canepa
Chief Financial Officer
16.
This certification accompanies this Report on Form 10-Q pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required
by such Act, be deemed filed by registrant for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended.
17.
10-Q EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
EX-99.1 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
EX-99.2 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002