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United States Securities and Exchange Commission
Washington D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended August 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 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 SE
GRAND RAPIDS, MI 49512
---------------------------------- ---------------------
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (616) 698-2100
Securities registered pursuant to Section 12(b) of the Act: Common Stock, no
par value
Securities registered pursuant to 12(g) of the Act: None
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 shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [ ] No [X]
The aggregate market value of the voting common stock of the Registrant (based
upon the last reported sale of the Common Stock at that date by the American
Stock Exchange) held by non-affiliates was $8,102,591 as of November 24, 2003.
The number of shares outstanding of the Registrant's common stock as of December
1, 2003 was 3,379,605 shares of common stock without par value.
DOCUMENTS INCORPORATED BY REFERENCE:
Part of Form 10-K Into Which Portions
Document of Documents are Incorporated
- --------------------------------------- -------------------------------------
Portions of the Proxy Statement for the Parts I, II III and IV
Registrant's 2004 Annual Meeting of
Shareholders to be filed within
120 days after the end of Registrant's
fiscal year are incorporated by
reference in Parts I, II III and IV.
1
THE MATTERS DISCUSSED IN THIS ANNUAL REPORT ON FORM 10-K 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.
RIVIERA TOOL COMPANY
Annual Report on Form 10-K
December 1, 2003
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business........................................................................ 3
Item 2. Properties...................................................................... 7
Item 3. Legal Proceedings............................................................... 7
Item 4. Submission of Matters to a Vote of Security Holders............................. 7
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters..................................................... 7
Item 6. Selected Financial Data......................................................... 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................................. 9
Item 7A. Quantitative and Qualitative Disclosures about Market Risk...................... 14
Item 8. Financial Statements and Supplementary Data..................................... 15
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.......................................... 29
PART III
Item 10. Directors and Executive Officers................................................ 29
Item 11. Executive Compensation.......................................................... 29
Item 12. Security Ownership of Certain Beneficial Owners and Management.................. 29
Item 13. Certain Relationships and Related Transactions.................................. 29
Item 14. Principal Accountant Fees and Services.......................................... 30
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K................ 30
SIGNATURES...................................................................... 30
2
PART I
ITEM 1. BUSINESS
GENERAL
Riviera Tool Company (the "Company") is a designer and manufacturer of
large scale, complex stamping die systems used to form sheet metal parts. Most
of the stamping die systems sold by the Company are used in the production of
automobile and truck body parts such as roofs, hoods, fenders, doors, door
frames, structural components and bumpers. The following table sets forth the
Company's sales (in millions) and percentage of total sales by major customers,
DaimlerChrysler, Ford Motor Company, General Motors Corporation, Mercedes-Benz
and BMW (the "OEM's") in fiscal years 2001, 2002 and 2003.
YEAR ENDED AUGUST 31,
-----------------------------------------------
2001 2002 2003
------------- ------------- ------------
CUSTOMER AMOUNT % AMOUNT % AMOUNT %
- ---------------------------------------------- ------------- ------------- ------------
Suppliers of Mercedes-Benz $ -- --% $ -- --% $ 19.2 56%
BMW -- -- 0.6 4 0.3 1
Suppliers of BMW -- -- 0.6 4 3.0 10
DaimlerChrysler AG............................ 2.6 21.7% 0.9 6 1.9 6
Suppliers of DaimlerChryslerAG................ -- -- 0.2 1 1.0 1
Ford Motor Company............................ 0.2 1.7 -- -- 0.9 1
Suppliers of Ford Motor Co.................... 3.0 25.0 0.8 6 2.4 7
General Motors Corporation.................... 4.0 33.3 8.5 61 0.5 2
Suppliers of General Motors Corporation....... 1.9 15.8 0.6 4 0.2 --
Other auto and truck manufacturers
and their suppliers.................... 0.3 2.5 1.8 14 4.7 16
------------- ------------- ------------
Total Sales............................ $ 12.0 100% $ 14.0 100% $ 34.1 100%
============= ============= ============
The Company was originally incorporated in 1967 and was incorporated in
its present form in 1988, under the laws of the State of Michigan.
INDUSTRY TRENDS
The principal factor affecting tooling demand is the level of capital
spending on manufacturing equipment for use in the production of new products or
models and, in the Company's case, predominantly the automotive industry. The
market for U.S. produced tooling has both cyclical and structural factors which
drive tooling product demand.
The cyclical factors are associated with the consumer demand levels as
well as capital spending in various end-use sectors. Generally, tooling sales
are less dependent on the level of automotive unit sales, but are more dependent
on the introduction of new and updated product designs into the marketplace. The
introduction of a new automotive model creates a demand for new tooling. This
new tooling then creates the product parts that are assembled into the new
models. Some slight variations in the production platform, such as changes to
the drive train of an automobile, may involve no new tooling but may entail
slight modifications in existing tooling in order to allow the production of
components with these minor modifications. For the most part, the vast majority
of new models require completely new tooling.
The structural factors affecting automotive tooling demand include the
OEMs trend to shorter product cycles (30-36 month product cycle) as well as
compressed tooling lead times (9-12 months). Additionally, the implementation of
globalized manufacturing strategies, including the increasing competitiveness of
foreign toolmakers, as well as the capture of domestic industry production share
by offshore-based firms affect domestic automotive tooling demand.
3
PRODUCTS AND SERVICES
Dies. The Company's dies are used in the high-speed production of sheet
metal stamped parts and assemblies. Production of such parts is a multiple step
process involving a series of dies. Typically, the first die is used to cut the
appropriate size metal blank from a sheet or coil of steel. The next die draws
the metal blank into its primary shape and subsequent dies are used to bend
edges or corners, create flanges, trim-off excess metal and pierce assembly
holes. A customer usually orders only one series of dies for each separate part.
Normally, the dies do not require replacement due to usage because the life of
well-maintained dies is sufficient to carry production to the point when styling
changes dictate production of new dies. The dies manufactured by the Company
generally include automation features, adding to the complexity of design and
construction. These automation features facilitate rapid introduction and
removal of the work piece or raw material into and out of the die, thereby
increasing production speeds and reducing labor cost for part manufacturers.
Engineering of Product and Process. As the OEMs continue their efforts
to reduce lead times of new model launches, the Company produces concurrently,
rather than sequentially, many of its tool designs and manufacturing processes.
In certain instances, before the final design by the customer is complete, the
Company already has ordered many of the raw materials, such as steel, and may
have begun various machining operations. Typically, the Company will receive
part data or descriptions in the form of electronic files which the customer
wants the Company to build the tool to produce that part. The part and tool
design then is created by the Company utilizing computer aided-design ("CAD")
software. The Company then utilizes computer software which simulates the
metal-forming process within the die. This simulation data then is utilized in
final die design to reduce the need for expensive and time-consuming reworking
of the die during the tryout process. Upon completion of tool design, the
Company develops the computer programs (computer-aided-manufacturing ("CAM")
software) which drive the cutter paths on the machine tools. These machine tools
fabricate many components for the tool. A variety of machine tools are utilized
to cut and polish the various parts and surfaces of the tool, including the
Company's high-speed machining centers and 5-axis machining centers, all of
which are computer-numerically-controlled ("CNC"). The process of utilizing
high-speed CNC machining centers reduces the traditional requirement for
expensive and time-consuming hand finishing. After the tool components are
produced or purchased, they are assembled and fitted together.
Prototype Tooling and Parts. Prototype tooling and parts are utilized
during the design phase of new models for which the automobile manufacturers
validate the fit and function of the respective components and assemblies and
the repeatability of the respective production processes. The parts manufactured
from prototype tools are also often used in crash testing.
Typically, prototype tools associated with the primary metal forming
operations are manufactured from an alloy casting or mild steel and subsequently
machined using the mathematical database and related CNC programs. After
machining, the prototype tools are assembled and tested to validate the
integrity and repeatability of the final manufacturing process. The results of
the validation process are incorporated into the mathematical database, which
will then be used to manufacture the final production tools. After testing the
primary forming operations, prototype parts are manufactured using special means
such as computerized laser-cutting machines to trim off excess scrap and to
incorporate various slots and holes. These parts are then sent to the automobile
manufacturers for further testing and evaluation. The results of this testing
and evaluation may require the incorporation of additional design and
manufacturing process modifications prior to construction of the production
tooling.
MANUFACTURING
The manufacturing process starts when the Company is awarded a tooling
contract. The engineering process commences when an electronic "model" of the
part to be produced is transmitted to the Company as a mathematical database or
electronic files. Company engineers use the mathematical database to generate
computer-aided die designs and die face cutter path programs. These cutter path
programs are used by the machine tools to manufacture
4
the inner workings of the die. Most material is removed and the cutting is done
by CNC machine tools, which utilize the computer-generated cutter path programs
to cut and polish the various parts of the tool. After the tool components are
produced or purchased, they are assembled and fitted together. Finally, after
the die is constructed, the Company produces a "tryout" or run of parts. These
parts are then evaluated statistically for process repeatability and dimensional
validation on the Company's coordinate measuring machine. During this automated
validation process, the tool is statistically compared to the mathematical
database. The Company utilizes "simulation" software that simulates the
metal-forming process within the die prior to final part and die design. This
front-end simulation data is then utilized in final die design in order to
reduce the need for expensive and time-consuming reworking of the die during the
tryout process.
On average, 10 months elapse from the time the Company is awarded a
contract until the final set of dies is shipped to the customer.
QS 9000/TE CERTIFICATION
The Company is certified under the Tooling and Equipment Supplement
("TE Supplement") QS-9000 and ISO-9000 Quality Standards. The TE
Supplement/QS-9000 standard was developed jointly by DaimlerChrysler, Ford, and
General Motors to establish a single set of quality requirements for their
tooling suppliers. ISO 9000 is an international quality standard for all
industries.
The TE Supplement has become the international standard of all quality
systems in the tooling industry, designed to ensure that systems are in place to
prevent defects from occurring in the design, manufacturing and validation
phases of our processes. The Company, by receiving the TE Supplement/QS-9000
certification, has demonstrated that its quality systems are in place to meet
customer requirements.
RAW MATERIALS
The steel, castings and other components utilized by the Company in the
manufacturing process are available from many different sources and the Company
is not dependent on any single source. The Company typically purchases its raw
materials on a purchase order basis as needed and has generally been able to
obtain adequate supplies of raw materials for its operations.
MARKETING AND SALES
The Company's marketing emphasis is on DaimlerChrysler, Ford, General
Motors, Mercedes-Benz and BMW and their respective tier one suppliers. The
Company maintains excellent relationships with DaimlerChrysler, Ford, General
Motors, Mercedes-Benz and BMW that directly accounted for approximately 10%, in
the aggregate, of the Company's revenues in 2003. For the year ended August 31,
2003, DaimlerChrysler, Ford, General Motors, Mercedes-Benz, BMW and their
respective tier one suppliers accounted for approximately 84%, in the aggregate,
of the Company's revenues. For the year ended August 31, 2002, DaimlerChrysler,
Ford, General Motors, Mercedes-Benz and BMW directly accounted for 67%, in the
aggregate, of the Company's revenues. These direct sales, combined with their
tier one suppliers, represented approximately 78% of the Company's fiscal 2002
revenues.
The Company typically sells its tooling systems to either OEMs directly
or to manufacturers of products under contract with such OEMs (tier one
suppliers). Sales efforts are conducted primarily by the Company's Vice
President of Sales, President, senior management and project management
personnel. Frequent contact is made with domestic and foreign automobile
manufacturers, purchasing agents, platform managers and tier one suppliers.
Typically, the Company's sales process begins when a package or request for
quotation is received from the tier one supplier or OEM. Generally, the Company
recommends process and design changes to improve the cost and quality of a
product. The Company maintains a computer database with historical information
regarding dies it has previously manufactured. This database assists the Company
in quoting prices for dies and enables it to respond to most quotation requests
quickly and accurately. If a customer decides to accept the Company's quotation,
a purchase
5
order is issued subject to price adjustments for engineering changes as
requested by the customer. Bids generally are awarded based on technological
capability, price, quality and past performance.
BACKLOG AND SEASONALITY
The Company's backlog of awarded contracts, which are all believed to
be firm, was approximately $27 million and $21 million as of August 31, 2003 and
2002, respectively. The Company expects all backlog contracts will be reflected
in sales during fiscal years ended August 31, 2004 and 2005. The Company's sales
of stamping dies do not follow a seasonal pattern; however, the timing of new
model introductions and existing model restyling tooling programs are dependent
on DaimlerChrysler, Ford, General Motors, Mercedes-Benz, BMW and their
respective introduction of new models.
COMPETITION
Large, complex automotive stamping dies are manufactured primarily by
three supplier groups: a) domestic independent tool and die manufacturers, b)
foreign independent tool and die manufacturers, and c) captive or in-house tool
and die shops owned and operated by OEMs.
The independent tool and die manufacturer industry has significant
barriers to entry, which can reduce competition in the large-scale die market.
These barriers include the highly capital intensive and technically complex
requirements of the industry. Additionally, attracting and retaining employees
skilled in the use of advanced design and manufacturing technology is a
multi-year process. A new competitor most likely would lack much of the
credibility and historical customer relationships that take years to develop.
Finally, the OEMs maintain in-house, captive tool and die capacity in
order to meet a portion of their needs. General Motors, for example, maintains
the largest captive capacity and, based on estimates from various trade
publications, supplies an estimated 75-80% of its own die construction needs.
Ford produces approximately 50% and DaimlerChrysler 25% of their own respective
needs. Independent suppliers, like the Company, tend to have a competitive
advantage over the OEMs' in-house die shops due to the OEMs' higher cost
structure.
With the advent of simultaneous engineering in the automobile industry,
proximity of the OEMs' design engineers may effect the placement of the die
manufacturer. However, foreign competition may have certain advantages over
domestic die manufacturers including lower capital costs, currency exchange
advantages, government assistance and lower labor costs.
SIGNIFICANT CUSTOMERS
The Company maintains excellent relationships with DaimlerChrysler,
Ford, General Motors, Mercedes-Benz and BMW which directly accounted for
approximately 10%, in the aggregate, of the Company's revenues in 2003. For the
year ended August 31, 2003, DaimlerChrysler, Ford, General Motors, Mercedes-Benz
and BMW and their respective tier one suppliers accounted for approximately 84%,
in the aggregate, of the Company's revenues.
EMPLOYEES
The Company's work force consists of approximately 150 full-time
employees, of which approximately 30 are managerial and engineering personnel.
The balance consists of hourly employees engaged in manufacturing and indirect
labor support. Included among these hourly workers are approximately 100 skilled
tradesmen who are either journeymen tool and die makers or machinists. None of
the Company's employees are covered by a collective bargaining agreement. The
Company has not experienced any work stoppages and considers its relations with
its employees to be good. The Company has a discretionary contribution 401(K)
plan. The Company has no pension liabilities arising from any defined benefit
plan.
6
ENVIRONMENTAL MATTERS
The Company is subject to environmental laws and regulations concerning
emissions to the air, discharges to waterways, and generation, handling,
storage, transportation, treatment and disposal of waste materials. The Company
also is subject to other Federal and state laws and regulations regarding health
and safety issues. The Company believes that it is currently in material
compliance with applicable environmental and health and safety laws and
regulations.
ITEM 2. PROPERTIES
The Company's facilities are located in Grand Rapids, Michigan, and
consist of approximately 178,000 square feet of space, of which 28,000 square
feet is utilized for office, engineering and employee service functions.
Constructed in 1989, the facility is leased with a lease term expiring in 2018.
The facility lease provides for annual payments of $944,847 plus an escalation
of base rent of approximately $.14 per square foot. The Company has an option to
renew this lease for an additional ten-year term at a rate based upon the then
prevailing market rates for similar properties. The Company believes its
facilities are modern, well maintained, adequately insured and suitable for
their present and intended uses.
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently a party to any legal proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of the fiscal year,
covered by this report, to a vote of security holders through the solicitation
of proxies or otherwise.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock ("Common Stock") is traded on the American
Stock Exchange ("AMEX") under the symbol RTC. The Common Stock commenced trading
on the AMEX on March 7, 1997, through an initial public offering of the
Company's Common Stock. Prior to that date, there was no public market for the
Common Stock. The table below sets forth the high and low sales prices as
reported by AMEX for each period reported.
FISCAL 2002 FISCAL 2003
------------------ -----------------
HIGH LOW HIGH LOW
---- --- ---- ---
1st quarter................. $1.55 $1.00 $1.49 $1.04
2nd quarter................. $1.23 $0.78 $2.45 $1.01
3rd quarter................. $1.85 $1.00 $3.55 $1.75
4th quarter................. $1.82 $1.28 $5.10 $2.81
As of October 17, 2003, the Company's common stock was held by 44
registered holders of record and approximately 982 beneficial stockholders.
The Company has not historically paid cash dividends on its Common
Stock. The payment of Common Stock cash dividends is within the discretion of
the Company's Board of Directors, with prior written consent of its primary
lender; however, in view of the current working capital needs and in order to
finance future growth, it is unlikely that the Company will pay any cash
dividends on its Common Stock in the foreseeable future.
7
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction
with Management's Discussion and Analysis of Financial Condition and Results of
Operations and the Financial Statements and related Notes contained herein. All
amounts are in thousands, except per share data.
YEAR ENDED AUGUST 31,
----------------------------------------------------------------
1999 2000 2001 2002 2003
--------- --------- --------- --------- ---------
STATEMENT OF OPERATIONS DATA:
Sales ............................................ $ 22,821 $ 25,187 $ 12,047 $ 14,050 $ 34,084
Gross Profit (Loss) .............................. 5,875 3,794 (3,062) (630) 3,377
Income (Loss) from Operations .................... 3,856 1,655 (4,712) (2,289) 1,687
Interest Expense ................................. 343 890 725 653 779
Other (Income)/Expense ........................... (169) 119 5 59 8
Income (Loss) before Income Taxes ................ 3,682 645 (5,442) (3,002) 900
Income Tax Expense (Benefit) ..................... 1,252 242 (1,538) -- --
--------- --------- --------- --------- ---------
Net Income (Loss) available for common shares .... $ 2,430 $ 404 $ (3,904) $ (3,002) $ 900
--------- --------- --------- --------- ---------
Diluted Earnings (Loss) per common share ......... $ .72 $ .12 $ (1.16) $ (.89) $ .27
========= ========= ========= ========= =========
Diluted common shares outstanding ................ 3,379 3,379 3,379 3,379 3,379
OTHER DATA:
Depreciation and amortization expense ............ $ 1,579 $ 1,940 $ 1,952 $ 1,913 $ 1,840
AS OF AUGUST 31,
--------------------------------------------------------------
1999 2000 2001 2002 2003
--------- --------- --------- --------- ---------
BALANCE SHEET DATA:
Working Capital ........................ $ 10,981 $ 13,051 $ 5,176 $ (3,513) $ 7,762
Total Assets ........................... 33,928 35,076 25,146 24,984 33,751
Current Portion of Long-Term Debt ...... 1,889 1,984 1,876 3,855 639
Revolving Line of Credit ............... 2,032 5,080 3,143 6,500 5,982
Long-term Debt, less current portion ... 7,207 5,223 3,384 -- 2,418
Common Stockholders' Equity ............ 18,312 18,715 14,812 11,810 12,710
The following table is derived from the Company's Statement of Operations and
sets forth, for the periods indicated, selected operating data as a percentage
of sales.
FISCAL YEAR ENDED AUGUST 31,
---------------------------------
1999 2000 2001 2002 2003
---- ---- ---- ---- ----
STATEMENT OF OPERATIONS DATA:
Net Sales...................................... 100% 100% 100% 100% 100%
Gross Profit (Loss)............................ 26 15 (25) (4) 10
Income (Loss) from Operations.................. 17 7 (39) (16) 5
Interest Expense............................... 1 4 6 5 2
Income (Loss) before Income Taxes.............. 16 3 (45) (21) 3
Federal Income Tax Expense (Benefit)........... 5 1 (13) -- --
--- --- --- --- ---
Net Income (Loss) available for common shares.. 11% 2% (32%) (21%) 3%
=== === === === ===
OTHER DATA:
Depreciation and amortization expense.......... 7% 8% 16% 14% 5%
8
QUARTERLY FINANCIAL DATA
The following is a condensed summary of quarterly results of operations for
2001, 2002 and 2003 (in thousands, except per share data):
NET INCOME DILUTED
/(LOSS) -----------------------
AVAILABLE EARNINGS
GROSS OPERATING FOR (LOSS) COMMON
PROFIT/ INCOME/ COMMON PER SHARES
REVENUES (LOSS) (LOSS) SHARES SHARE OUTSTANDING
-------- --------- --------- ---------- --------- -----------
2001: First .... $ 4,592 $ 265 $ (263) $ (332) $ (.10) 3,379
Second ... 2,386 (1,346) (1,667) (1,243) (.37) 3,379
Third .... 2,302 (848) (1,275) (939) (.28) 3,379
Fourth ... 2,767 (1,133) (1,507) (1,390) (.41) 3,379
-------- -------- -------- --------- -------- -----
Total ... $ 12,047 $ (3,062) $ (4,712) $ (3,904) $ (1.16) 3,379
======== ======== ======== ========= ======== =====
2002: First .... $ 3,364 $ (182) $ (648) $ (818) $ (.24) 3,379
Second ... 3,452 (141) (519) (688) (.20) 3,379
Third .... 3,702 137 (304) (453) (.13) 3,379
Fourth ... 3,532 (444) (818) (1,043) (.32) 3,379
-------- -------- -------- --------- -------- -----
Total ... $ 14,050 $ (630) $ (2,289) $ (3,002) $ (.89) 3,379
======== ======== ======== ========= ======== =====
2003: First .... $ 4,339 $ 293 $ (29) $ (189) $ (.06) 3,379
Second ... 8,304 869 453 231 .07 3,379
Third .... 9,919 1,093 587 391 .12 3,379
Fourth ... 11,522 1,121 676 467 .14 3,379
-------- -------- -------- --------- -------- -----
Total ... $ 34,084 $ 3,376 $ 1,687 $ 900 $ .27 3,379
======== ======== ======== ========= ======== =====
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The matters discussed in this Management's Discussion and Analysis of
Financial Condition and Results of Operations 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.
GENERAL OVERVIEW
The Company is a designer and manufacturer of large scale, complex
stamping die systems used to form sheet metal parts. Most of the stamping die
systems sold by the Company are used in the high-speed production of automobile
and truck body parts such as doors, door frames, structural components and
bumpers. A majority of the Company's sales are to DaimlerChrysler, Ford Motor
Company, General Motors Corporation, Mercedes-Benz, BMW and their tier one
suppliers of sheet metal stamped parts and assemblies.
CRITICAL ACCOUNTING POLICIES
Management's Discussion and Analysis of Financial Condition and Results
of Operations is based upon the Company's Financial Statements. These financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States of America. These principles require the use of
estimates and assumptions that affect amounts reported and disclosed in the
financial statements and related notes. The accounting policies that may involve
a higher degree of judgment, estimates and complexity include revenue
recognition using
9
percentage of completion estimates and the assessment of asset impairments. The
Company uses the following methods and assumptions in its estimates.
- Revenue recognition - The Company recognizes revenue on time and
material contracts utilizing the completed-contract method. Revenue is
recognized on all other contracts utilizing the
percentage-of-completion method. Under the completed-contract method,
the contract is considered complete when all costs except for
insignificant items have been incurred and the project has been
approved by the customer. Under the percentage-of-completion method,
estimated contract earnings are based on total estimated contract
profits multiplied by the ratio of labor hours incurred to total
estimated labor hours on the contract. Provisions for total estimated
losses on contracts in process are recognized in the period such losses
are determined. Changes in job performance, conditions and estimated
profitability may result in revisions to costs and income and are
recognized in the period such revisions are determined.
- Net book value of long-lived assets - The Company periodically reviews
the carrying value of its long-lived assets held and used. This review
is performed using estimated future cash flows. If the carrying value
of a long-lived asset is considered to be impaired, an impairment
charge is recorded for the amount that the carrying value of the
long-lived asset exceeds its fair value.
NEW ACCOUNTING STANDARDS
In May 2003, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 150, "Accounting for
Certain Financial Instruments with Characteristics of Both Liabilities and
Equity." SFAS No. 150 requires certain financial instruments that embody
obligations of the issuer and have characteristics of both liabilities and
equity to be classified as liabilities. Many of these instruments previously
were classified as equity or temporary equity and as such, SFAS No. 150
represents a significant change in practice in the accounting for a number of
mandatorily redeemable equity instruments and certain equity derivatives that
frequently are used in connection with share repurchase programs. SFAS No. 150
is effective for all financial instruments created or modified after May 31,
2003, and to other instruments at the beginning of the first interim period
beginning after June 15, 2003. The adoption of SFAS No. 150 is not expected to
have a material effect on the Company's results of operations, liquidity, or
financial condition.
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure." SFAS No. 148 amends SFAS
No. 123, "Accounting for Stock-Based Compensation" to provide alternative
methods of transition to SFAS No. 123's fair value method of accounting for
stock-based employee compensation; however, it does not amend SFAS No. 123 to
require companies to account for employee stock options using the fair value
method. The statement also requires disclosure of the effects of an entity's
accounting policy with respect to stock-based employee compensation on reported
net income and earnings per share in the summary of significant accounting
policies in annual and interim financial statements. The disclosure provisions
of SFAS No. 148 were adopted on August 31, 2003. As allowed by SFAS No. 148, the
Company has not adopted the fair value method of accounting for stock options.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." The Statement supersedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets to be Disposed of."
SFAS No. 144 retains the fundamental provisions of SFAS No. 121 for (a)
recognition and measurement of the impairment of long-lived assets to be held
and used and (b) measurement of long-lived assets to be disposed by sale. SFAS
No. 144 is effective for fiscal years beginning after December 15, 2001. The
Company has determined that its current accounting policy is consistent with
SFAS No. 144.
In July 2001, the FASB issued SFAS No. 141, "Business Combinations."
SFAS No. 141 requires the purchase method of accounting for all business
combinations initiated after June 30, 2001. The FASB also issued SFAS No. 142,
"Goodwill and Other Intangible Assets." SFAS No. 142 requires, among other
things, the discontinuance of the amortization of goodwill and certain other
identified intangibles. In addition, the statement includes provisions for the
reassessment of the value and useful lives of existing recognized intangibles
(including goodwill),
10
reclassification of certain intangibles both in and out of the previously
reported goodwill and the identification of reporting units for the purposes of
assessing potential future impairments of goodwill and other intangibles. The
Company adopted these standards effective September 1, 2002 and the adoption did
not have a significant impact on the financial statements.
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Company's Financial Statements and the Notes thereto included elsewhere
herein.
FISCAL 2003 COMPARED TO FISCAL 2002
Revenue. Total revenue increased from approximately $14 million in 2002 to $34
million in 2003, an increase of 143%. This increase was a result of the Company
receiving significant tooling programs for the Mercedes-Benz M Class sports
utility vehicle and a new "crossover" vehicle yet to be introduced. The
Company's customer for these vehicles is the Tier 1 supplier to Mercedes-Benz
for these particular vehicles. For a portion of these tooling systems the
Company is performing engineering services and manages certain die manufacturing
subcontracted by the Company, with the Company being responsible for the
engineering and performance of these tools. During fiscal 2003, the Company
recorded approximately $9.4 million of outsourced revenue or 25% of total fiscal
2003 sales.
The Company's backlog of awarded contracts, which are all believed to be firm,
was approximately $27 million and $24 million as of August 31, 2003 and 2002,
respectively, an increase of 12.5%. The Company expects all backlog contracts
will be reflected in sales during fiscal years ending August 31, 2004 and 2005.
Despite the backlog, the Company continues to see a general "softness" in the
overall domestic automotive tooling industry. The Company believes that such
should improve in 2004 if the domestic automakers commit to increasing future
new model restyling and support manufacturing such tooling systems utilizing
domestic suppliers.
Cost of Goods Sold. Cost of goods sold increased from $14.7 million for 2002 to
$30.7 million for 2003. However, as a percent of sales, cost of goods sold
decreased from 104.5% for 2002 to 90.1% for 2003. Direct costs (materials and
labor) increased by $14.6 million, from $6.8 million for 2002 to $21.4 million
for 2003. Engineering expense increased by $815,500 from $1.6 million for 2002
to $2.3 million for 2003. Lastly, of the cost of goods sold, manufacturing
overhead increased by $580,000 from $6.3 million for 2002 to $6.9 million for
2003. Additional details of these changes in cost of sales for 2002 and 2003 are
as follows:
- Direct materials expense increased from $2.4 million for 2002 to $6.4
million for 2003 and as a percent of sales from 16.8% to 18.8%. This
increase was largely due to higher contract material requirements during
2003 as compared to 2002. Outside services expense increased from $923,000
for 2002 to $9.4 million for 2003 and as a percent of sales from 6.6% to
27.5%. This increase was largely due to the Company incurring $7.3 million
of expense related to its outsourced revenue. The balance of the outside
services expense was due to sales volumes and corresponding increases in
outsourcing certain machining, die patterns, laser cutting, heat treat and
outside design services.
- Direct labor expense increased from $3.6 million for 2002 to $5.7
million for 2003. However, as a percent of sales, direct labor decreased
from 25.5% to 16.7%. This change was a result of the Company incurring a
56% increase in direct labor hours, from 189,000 hours in 2002 to 294,000
in 2003. Of the total direct labor expense, regular or straight time
increased by $909,000 however as a percent of sales, decreased from 20.1%
for 2002 to 10.9% for 2003 due to increased sales volume. Overtime expense
increased from $756,000 for 2002 to $1.9 million for 2003, however as a
percent of sales, only increased from 5.4% for 2002 to 5.7% for 2003.
- Engineering expense increased from $1.6 million, 11.1% of sales, for
2002 to $2.4 million, 7.0% of sales, for 2003. This 50% increase was due to
the Company's increase in awarded contracts during 2003 and the
11
Company increasing the number of engineering personnel necessary to fulfill
the design and project management portions of the contracts.
- Manufacturing overhead was $6.3 million or 44.9% of sales for 2002 as
compared to $6.9 million or 20.2% of sales for 2003. During 2003, increases
in manufacturing overhead were largely due to a $326,000 increase in
vacation, holiday pay and payroll tax expenses and a $100,000 increase in
medical insurance premiums. The decrease of approximately 50% of
manufacturing overhead, as a percent of sales, was largely due to improved
overhead absorption from sales increases.
Selling and Administrative Expense. Selling and administrative expense for 2003
remained consistent with 2002 at $1.7 million. As a percent of sales, selling
and administrative expense decreased from 11.8% for 2002 to 5.0% for 2003 due to
the increased sales volume. The largest selling and administrative expense
increases for 2003 included: $124,000 in supervision salaries and $39,000 in
directors and officers insurance premiums and director fees. These increases
were offset by decreases in computer maintenance expense.
Interest Expense. Interest expense increased from $653,000 for 2002 to $779,000
for 2003. This increase was largely due to the Company incurring $230,000 of
debt issuance and guarantees amortization expense during 2003. These costs were
incurred in the Company's December 2002 refinancing.
FISCAL 2002 COMPARED TO FISCAL 2001
Revenue. Total revenue increased from approximately $12 million in 2001 to $14
million in 2002, an increase of 17%. This increase was a result of the market
for foreign auto manufacturers tooling contract opportunities opening up to
US-based tooling manufacturers. The Company received contracts, directly and
indirectly, from Nissan and BMW during the twelve month period.
As of August 31, 2002, the Company's backlog was approximately $24 million as
compared to $7 million at August 31, 2001. During the last quarters of 2002, the
Company received a major contract (approximately $17 million) that should
positively affect the Company's financial performance during the second quarter
of fiscal 2003. The Company's results in 2002 continued to reflect the very
competitive contract pricing market, which was mitigated by continuing the
Company's strategy of bidding on contracts that would maintain contribution
margin on contracts awarded to the Company. This combined with a continuation of
the Company's cost containment initiatives enabled the Company to reduce
negative margins by $2.3 million.
Cost of Goods Sold. Cost of goods sold decreased from $15.1 million for 2001 to
$14.7 million for 2002, as a percent of sales, cost of goods sold decreased from
125.4% for 2001 to 104.5% for 2002. This was mainly due to a decrease of
$708,000 in direct costs, as well as a $114,000 decrease in manufacturing
overhead expense. These decreases were offset by an increase of $394,000 in
engineering expense.
Of the cost of goods sold, direct costs were $6.8 million, 48.5% of sales, in
2002 as compared to $7.5 million, 62.4% of sales, in 2001. Direct materials
expense decreased from $2.7 million in 2001 to $2.4 million in 2002 and as a
percent of sales from 22.2% to 16.8%. This decrease was largely due to lower
contract material requirements during 2002.
Direct labor expense decreased from $3.9 million in 2001 to $3.6 million in 2002
and as a percent of sales, from 32.4% to 26.3%. This decrease was a result of
the Company incurring a 7% decrease in direct labor hours, from 204,000 hours in
2001 to 189,000 in 2002. Of the total direct labor expense, overtime expense
decreased from $1.0 million in 2001 to $697,000 in 2002, a decrease of 33.3%.
This decrease was a result of the Company having lower labor requirements during
2002.
12
Engineering expense increased from $1.2 million, 9.7% of sales, for 2001 to $1.6
million, 11.1% of sales, for 2002. This 33.3% increase was due to the Company's
increased contract backlog during the latter part of 2002. This backlog resulted
in the Company increasing the number of engineering personnel necessary to
fulfill the engineering portion of the increased backlog.
Manufacturing overhead was $6.3 million or 44.9% of sales in 2002 as compared to
$6.4 million or 53.3% of sales in 2001. During 2002, decreases in manufacturing
overhead included: $65,000 in indirect labor, $59,000 in payroll taxes, $48,000
in workers compensation insurance, $30,000 in building maintenance and $22,000
in depreciation expense. These 2002 decreases were offset by increases
including: $62,000 in manufacturing supplies, $47,000 in perishable tooling,
$24,000 in general insurance and $23,000 in supervision salaries.
During fiscal 2001, the Company recorded a $765,000 loss on certain contracts
with one of its customers. This loss was a result of a dispute between the
Company and its customer over the manufacture of stamping die systems for an
auto frame assembly. This dispute resulted in the Company being a Defendant in a
lawsuit with the customer ("Plaintiff") asking for recovery of $850,000 in
damages. The Company and its customer settled this matter on April 17, 2002
resulting in no additional expense to the Company.
Selling and Administrative Expense. Selling and administrative expense for 2002
remained consistent with 2001 at $1.6 million. As a percent of sales, selling
and administrative expense decreased from 13.7% in 2001 to 11.8% in 2002. The
largest selling and administrative expense increases in 2002 included: $45,000
in supervision and office salaries, $37,000 in computer maintenance, $34,000
legal & professional expense and $24,000 in employee training. These increases
were offset by decreases of $45,000 in insurance expense, $43,000 in deferred
compensation/401(K) expense, $30,000 in miscellaneous expenses, $12,000 in
advertising expense and $20,000 in director fees.
Interest Expense. Interest expense decreased from $725,000 in 2001 to $653,000
in 2002 and, as a percent of sales, from 6.0% to 4.6%. This decrease was due to
lower average debt levels and a decrease in interest rates during 2002.
FEDERAL INCOME TAX
The Company's effective income tax rates were a credit of 28%, 0% and 0% for the
years ended August 31, 2001, 2002 and 2003, respectively. The Company had
approximately $155,000 of alternative minimum tax credits as of August 31, 2003,
the use of which does not expire, and federal net operating loss carryforwards
of $3,691,900 which expire, if unused, in fiscal 2021 and 2022. The Company has
a valuation allowance of $1,301,000 and $1,003,000 at August 31, 2002 and 2003,
respectively, for net deferred tax assets which may not ultimately be realized.
LIQUIDITY AND CAPITAL RESOURCES
The Company's need for working capital increased during 2003 as a result of the
increase in awarded contracts and the related revenue increase. The Company
financed these needs through internally generated funds, bank financing and
customer progress payments. During fiscal 2003, the Company used $586,000 of
operational cash flow. This was largely generated as a result of an increase of
$10.1 million in current assets funded largely by an increase of $9.2 million in
trade accounts payable, accrued outsourced contracts payable and accrued
liabilities. The Company utilized $414,000 in the acquisitions of assets. During
2003, the Company reduced its long-term debt by $1.3 million.
The Company anticipates less than $650,000 in capital expenditures for fiscal
2004. The Company believes its $27 million backlog and projected cash flow from
operations together with its increased Revolving Line of Credit financing will
be sufficient to finance the Company's operations in 2004.
13
The Company's total bank debt as of August 31, 2003, is $9,039,089, of which
$638,756 is short-term. As of August 31, 2003, the Company has a $7.5 million
Revolving Line of Credit with a balance outstanding of $5,982,360, and term
notes with an aggregate outstanding balance of $3,056,729. The Revolving Line of
Credit bears interest at the bank's prime rate plus 1.0 percent (an effective
rate of 5.0% at August 31, 2003). The term notes include one note with a balance
of $1,766,667 that bears interest at bank's prime rate plus 1.25 percent (an
effective rate of 5.25% at August 31, 2003) and another note with a balance of
$1,290,061 at a fixed rate of 11%. On November 24, 2003, the Company amended its
loan agreement with its primary lender. Under such agreement the existing
financing was extended to December 1, 2004 and the Revolving Line of Credit was
increased from $7.5 million to $10 million.
The Company believes that the unused portion of its new credit line and the
funds generated from operations, will be sufficient to cover anticipated cash
needs through fiscal 2004. However, depending on the level of future sales,
terms of such sales and cash flow of existing contracts, 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.
However the Company may be required to seek additional sources of funding, if
necessary.
INFLATION
The Company has no long-term, fixed price supply contracts. Although the average
set of dies takes approximately ten months from inception to shipment, any
significant direct material costs are incurred at the beginning of the die
manufacturing process. Historically, the Company has been able to reflect
increases in the prices of labor and material in its selling prices, however
under current industry pricing pressures, the Company is unsure if this will
continue to be the case in the future.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable.
14
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Riviera Tool Company
Grand Rapids, Michigan
We have audited the accompanying balance sheets of Riviera Tool Company
as of August 31, 2003 and 2002, and the related statements of
operations, stockholders' equity and cash flows for each of the three
years in the period ended August 31, 2003. These financial statements
are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of Riviera Tool Company as of
August 31, 2003 and 2002, and the results of its operations and its
cash flows for each of the three years in the period ended August 31,
2003 in conformity with accounting principles generally accepted in the
United States of America.
DELOITTE & TOUCHE LLP
Grand Rapids, Michigan
November 26, 2003
15
Riviera Tool Company
Balance Sheets
August 31
---------------------------------
Note 2002 2003
---- --------------- ---------------
ASSETS
Current Assets
Cash................................................................... $ 2,337,743 $ --
Accounts receivable.................................................... 2,899,075 7,010,039
Costs in excess of billings on contracts in process.................... 3 3,988,346 12,208,666
Inventories............................................................ 4 250,569 248,559
Prepaid expenses and other current assets.............................. 184,313 294,143
--------------- ---------------
Total current assets.......................................... 9,660,046 19,761,407
--------------- ---------------
Property, plant and equipment, net..................................... 5 14,471,879 13,046,289
Perishable tooling..................................................... 548,606 617,722
Other assets........................................................... 303,060 325,198
--------------- ---------------
Total assets.................................................. $ 24,983,591 $ 33,750,616
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt...................................... 6 $ 10,354,499 $ 638,756
Accounts payable....................................................... 1,694,779 5,020,554
Accrued outsourced contracts payable................................... -- 5,903,930
Accrued liabilities.................................................... 448,171 435,896
--------------- ---------------
Total current liabilities..................................... 12,497,449 11,999,136
Long-term debt, net of current portion................................. 6 -- 8,400,333
Accrued lease expense.................................................. 8 675,735 640,690
--------------- ---------------
Total liabilities............................................. 13,173,184 21,040,159
Preferred stock -- no par value,
$100 mandatory redemption value:
Authorized-5,000 shares, Issued and outstanding- no shares............ -- --
Preferred stock -- no par value,
Authorized -- 200,000 shares
Issued and outstanding -- no shares................................... -- --
Common stockholders' equity
Common stock -- no par value,
Authorized -- 9,798,575 shares
Issued and outstanding -- 3,379,609 shares......................... 15,115,466 15,115,466
Retained deficit..................................................... (3,305,059) (2,405,009)
--------------- ---------------
Total common stockholders' equity............................. 11,810,407 12,710,457
--------------- ---------------
Total liabilities and stockholders' equity............................. $ 24,983,591 $ 33,750,616
=============== ===============
See Notes to Financial Statements
16
Riviera Tool Company
Statements of Operations
Year Ended August 31
------------------------------------------------
2001 2002 2003
------------- -------------- --------------
Sales ............................................. $ 12,047,039 $ 14,050,133 $ 34,084,111
Cost of sales ..................................... 15,109,065 14,680,398 30,707,447
------------- ------------- -------------
Gross profit (loss) ............................... (3,062,026) (630,265) 3,376,664
Selling and administrative expenses ............... 1,649,558 1,658,849 1,689,192
------------- ------------- -------------
Income (loss) from operations ..................... (4,711,584) (2,289,114) 1,687,472
Other income (expense):
Interest expense .............................. (725,267) (652,905) (779,074)
Other ......................................... (4,806) 726 (8,348)
Loss on asset disposals ....................... -- (60,264) --
------------- ------------- -------------
Total other expense, net .......................... (730,073) (712,443) (787,422)
------------- ------------- -------------
Income (loss)-- before income tax benefit ......... (5,441,657) (3,001,557) 900,050
------------- ------------- -------------
Income tax benefit ................................ (1,538,000) -- --
------------- ------------- -------------
Net income (loss) available
for common shares ................................ $ (3,903,657) $ (3,001,557) $ 900,050
============= ============= =============
Basic and Diluted earnings (loss)
per common share .................................. $ (1.16) $ (0.89) $ 0.27
============= ============= =============
Basic and Diluted common shares outstanding........ 3,379,609 3,379,609 3,379,609
See Notes to Financial Statements
17
Riviera Tool Company
Statements of Common Stockholders' Equity
Common Stock Retained Total
-------------------------- Earnings Stockholders'
Shares Amount (Deficit) Equity
--------- ------------- -------------- -------------
Balance--September 1, 2000 3,379,609 $ 15,115,466 $ 3,600,155 $ 18,715,621
--------- ------------- ------------- ------------
Net loss........................ -- -- (3,903,657) (3,903,657)
--------- ------------- ------------- ------------
Balance--August 31, 2001 3,379,609 $ 15,115,466 $ (303,502) $ 14,811,964
--------- ------------- ------------- ------------
Net loss........................ -- -- (3,001,557) (3,001,557)
--------- ------------- ------------- ------------
Balance--August 31, 2002 3,379,609 $ 15,115,466 $ (3,305,059) $ 11,810,407
--------- ------------- ------------- ------------
Net income -- -- 900,050 900,050
--------- ------------- ------------- ------------
Balance--August 31, 2003 3,379,609 $ 15,115,466 $ (2,405,009) $ 12,710,457
========= ============= ============= ============
See Notes to Financial Statements
18
Riviera Tool Company
Statements of Cash Flows
Year Ended August 31
----------------------------------------------
2001 2002 2003
------------- -------------- ------------
Cash Flows from Operating Activities
Net income (loss) ....................................... $ (3,903,657) $ (3,001,557) $ 900,050
Adjustments to reconcile net income (loss) to net cash
from operating activities:
Depreciation and amortization ...................... 1,952,320 1,912,733 1,839,801
Loss on disposal of machinery and equipment ........ -- 60,264
Deferred taxes ..................................... (1,538,000) -- --
Decrease (increase) in assets:
Accounts receivable ............................. 3,602,739 550,355 (4,110,964)
Costs in excess of billings
on contracts in process .................... 4,411,082 165,223 (8,220,320)
Inventories ..................................... (2,302) 58,408 2,010
Perishable tooling .............................. (34,079) 24,216 (69,116)
Federal income tax refundable ................... 673,897 -- --
Prepaid expenses and other current assets ....... 72,881 (87,024) (109,830)
Increase (decrease) in liabilities:
Accounts payable ................................ (512,622) 796,567 3,325,775
Accrued outsourced contracts payable ............ -- -- 5,903,930
Accrued lease expense ........................... 2,336 (16,359) (12,275)
Accrued liabilities ............................. (92,682) 106,164 (35,045)
------------- ------------- -------------
Cash flows from (used in) operating
Activities ................................. 4,631,913 568,990 (585,984)
------------- ------------- -------------
Cash Flows from Investing Activities
(Increase) decrease in other assets .................... 75,000 (167,290) (22,138)
Purchases of property, plant and equipment ............. (653,090) (298,817) (414,211)
------------- ------------- -------------
Net cash used in investing activities .......... (578,090) (466,107) (436,349)
------------- ------------- -------------
Cash Flows from Financing Activities
Net borrowings (repayments) on revolving credit line ... (1,937,229) 3,357,210 (517,640)
Proceeds from issuance of long-term debt ............... -- 470,560 --
Principal payments on long-term debt ................... (1,947,572) (1,875,631) (797,770)
------------- ------------- -------------
Cash flows from (used in) financing activities ...... (3,834,801) 1,952,139 (1,315,410)
------------- ------------- -------------
Net increase (decrease) in cash .......................... 169,022 2,055,022 (2,337,743)
------------- ------------- -------------
Cash -- beginning of year ................................ 113,699 282,721 2,337,743
Cash -- end of year ...................................... $ 282,721 $ 2,337,743 $ --
============= ============= =============
Interest paid ............................................ $ 764,215 $ 581,915 $ 788,496
Income taxes refunded .................................... 731,957 25,000 --
See Notes to Financial Statements
19
Riviera Tool Company
Notes to Financial Statements
NOTE 1 -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS.
Riviera Tool Company (the "Company") designs, develops and manufactures
custom and complex large scale metal stamping die systems used in the
high-speed production of sheet metal stamped parts and assemblies for the
automotive industry. These systems are mainly sold to DaimlerChrysler, Ford
Motor Company, General Motors Corporation, Mercedes-Benz, BMW and their
tier one suppliers of sheet metal stamped parts and assemblies.
USE OF ESTIMATES.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Although
management believes the estimates are reasonable, actual results could
differ from those estimates.
SIGNIFICANT ESTIMATES.
The most significant estimates made by the Company are in the determination
and recognition of revenue on contracts in process. Management's best
estimates of costs to complete are based on costs incurred, engineers' cost
projections, experience with customers or particular die systems and other
analyses. Although management's estimates are not expected to materially
change in the near term, the costs the Company could ultimately incur could
differ from the amounts estimated.
REVENUE RECOGNITION.
The Company recognizes revenue on time and material contracts utilizing the
completed-contract method. Revenue is recognized on all other contracts
utilizing the percentage-of-completion method. Under the completed-contract
method, the contract is considered complete when all costs have been
incurred and the project has been approved by the customer. Under the
percentage-of-completion method estimated contract earnings are based on
total estimated contract profits multiplied by the ratio of labor hours
incurred to total estimated labor hours on the contract. Provisions for
total estimated losses on contracts in process are recognized in the period
such losses are determined. Changes in job performance, conditions and
estimated profitability may result in revisions to costs and income and are
recognized in the period such revisions are determined.
ACCOUNTS RECEIVABLE.
As of August 31, 2002 and 2003, the Company had no reserve for
uncollectible accounts receivable and had $23,659 and $361,144 of unbilled
accounts receivable (completed contracts for which revenue earned exceeds
amounts billed), respectively.
INVENTORIES.
Inventories are recorded at the lower of cost (first-in, first-out method)
or market.
PROPERTY, PLANT AND EQUIPMENT.
Property, plant and equipment are recorded at cost. Depreciation is
computed using the straight-line method over the useful life of the asset
for financial reporting purposes as follows:
20
Riviera Tool Company
Notes to Financial Statements
NOTE 1 -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
PROPERTY, PLANT AND EQUIPMENT - CONTINUED
ASSET USEFUL LIVES
- ----- ------------
- - Leasehold Improvements...................... 7-20
- - Office Furniture and Fixtures............... 3-10
- - Machinery and Equipment..................... 5-20
- - Computer Equipment and Software............. 5-20
- - Transportation Equipment.................... 5-10
Expenditures for maintenance and repairs are charged to expense as
incurred. The Company capitalizes interest cost associated with
construction in process. The amount of capitalized interest was $21,572,
$6,703 and $0 in 2001, 2002 and 2003, respectively.
IMPAIRMENT OF LONG-LIVED ASSETS.
The Company reviews and evaluates long-lived assets for impairment when
events and circumstances indicate that the carrying amount of an asset may
not be recoverable. When the undiscounted future cash flows are not
sufficient to recover an asset's carrying amount, a discounted cash flow
model is utilized to determine the impairment loss to be recorded.
Long-lived assets to be disposed of are reported at the lower of carrying
amount or fair value, less cost to sell.
PERISHABLE TOOLING.
Perishable tools are generally used up over five years, reported at cost as
non-current assets in the balance sheet and amortized evenly over their
useful lives.
INCOME TAXES.
Deferred income tax assets and liabilities are computed for differences
between the financial statement and tax bases of assets and liabilities
that will result in taxable or deductible amounts in the future. Such
deferred income tax asset and liability computations are based upon enacted
tax laws and rates applicable to periods in which the differences are
expected to affect taxable income. Valuation allowances are established
when necessary to reduce deferred tax assets to the amounts expected to be
realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets
and liabilities.
EARNINGS PER SHARE.
Basic earnings per share excludes dilution and is computed by dividing
income available to common stockholders by the weighted-average common
shares outstanding for the period. Diluted earnings per share reflects the
potential dilution that could occur if securities or other contracts to
issue common stock were exercised.
STOCK-BASED COMPENSATION.
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-based Compensation," and as
permitted by this standard, will continue to apply the recognition and
measurement principles prescribed under Accounting Principles Board Opinion
No, 25, "Accounting for Stock Issued to Employees", to its stock-based
compensation (see Note 10). No stock-based compensation cost is reflected
in net income (loss), as all options granted under its plan had an exercise
price equal to the market value of the underlying common stock on the date
of grant. Had the Company applied the fair value recognition principles of
SFAS No. 123, there would be no impact on net income (loss) as of August
31, 2001, 2002 and 2003.
21
Riviera Tool Company
Notes to Financial Statements
NOTE 1 -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
BUSINESS SEGMENT REPORTING.
Based on the nature of its operations and products, the Company considers
its business to be a single operating segment.
NEW ACCOUNTING STANDARDS.
In May 2003, the Financial Accounting Standards Board ("FASB") issued SFAS No.
150, "Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity." SFAS No. 150 requires certain financial instruments
that embody obligations of the issuer and have characteristics of both
liabilities and equity to be classified as liabilities. Many of these
instruments previously were classified as equity or temporary equity and as
such, SFAS No. 150 represents a significant change in practice in the accounting
for a number of mandatorily redeemable equity instruments and certain equity
derivatives that frequently are used in connection with share repurchase
programs. SFAS No. 150 is effective for all financial instruments created or
modified after May 31, 2003, and to other instruments at the beginning of the
first interim period beginning after June 15, 2003. The adoption of SFAS No. 150
is not expected to have a material effect on the Company's results of
operations, liquidity, or financial condition.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." SFAS No. 148 amends SFAS No. 123,
"Accounting for Stock-Based Compensation" to provide alternative methods of
transition to SFAS No. 123's fair value method of accounting for stock-based
employee compensation; however, it does not amend SFAS No. 123 to require
companies to account for employee stock options using the fair value method. The
statement also requires disclosure of the effects of an entity's accounting
policy with respect to stock-based employee compensation on reported net income
and earnings per share in the summary of significant accounting policies in
annual and interim financial statements. The disclosure provisions of SFAS No.
148 were adopted on August 31, 2003. As allowed by SFAS No. 148, the Company has
not adopted the fair value method of accounting for stock options.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." The Statement supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets to be Disposed of." SFAS No.
144 retains the fundamental provisions of SFAS No. 121 for (a) recognition and
measurement of the impairment of long-lived assets to be held and used and (b)
measurement of long-lived assets to be disposed by sale. SFAS No. 144 is
effective for fiscal years beginning after December 15, 2001. The Company has
determined that its current accounting policy is consistent with SFAS No. 144.
In July 2001, the FASB issued SFAS No. 141, "Business Combinations." SFAS No.
141 requires the purchase method of accounting for all business combinations
initiated after June 30, 2001. The FASB also issued SFAS No. 142, "Goodwill and
Other Intangible Assets." SFAS No. 142 requires, among other things, the
discontinuance of the amortization of goodwill and certain other identified
intangibles. In addition, the statement includes provisions for the reassessment
of the value and useful lives of existing recognized intangibles (including
goodwill), reclassification of certain intangibles both in and out of the
previously reported goodwill and the identification of reporting units for the
purposes of assessing potential future impairments of goodwill and other
intangibles. The Company adopted these standards effective September 1, 2002 and
the adoption did not have a significant impact on the financial statements.
22
Riviera Tool Company
Notes to Financial Statements
NOTE 2 -- SALES TO MAJOR CUSTOMERS
The nature of the Company's business is such that a limited number of customers
comprise a majority of its business in any given year, even though the specific
customers will differ from year to year. The following table summarizes the
Company's sales to those customers, which represent more than 10% of the annual
sales, in the particular year presented, of the Company (in 000's):
AUGUST 31
------------------------------------------------------
2001 % 2002 % 2003 %
---------- --- --------- --- --------- ---
Oxford Automotive....................... $ -- -- $ 1,235 9 $ 19,152 56%
DaimlerChrysler AG...................... 2,588 21 905 6 1,925 6%
General Motors.......................... 3,975 33 8,486 60 450 1%
Autodie International................... 1,871 16 -- -- -- --
Dana Corporation........................ 1,563 13 -- -- -- --
Budd Company............................ 1,135 9 109 1 165 1%
L & W Engineering....................... -- -- 183 1 -- --
Others.................................. 915 8 3,132 23 12,392 36%
---------- --- --------- --- --------- ---
Total Sales........................ $ 12,047 100% $ 14,050 100% $ 34,084 100%
========== === ========= === ========= ===
Outstanding account receivables from three of these customers represented
approximately 80 percent and 78 percent at August 31, 2002 and 2003 of the total
accounts receivable, respectively.
NOTE 3 -- COSTS AND BILLINGS ON CONTRACTS IN PROCESS
Costs and billings on contracts in process are as follows:
AUGUST 31
-------------------------------
2002 2003
============= ==============
Costs incurred on contracts in process under the
percentage-of-completion method............................................ $ 11,248,868 $ 26,836,205
Estimated gross (loss)/profit................................................ (670,000) 3,000,000
------------- --------------
Total................................................................... 10,578,868 29,836,205
Less progress payments received and progress billings to date................ 6,682,206 17,627,539
Plus costs incurred on contracts in process under
the completed contract method............................................... 91,682 --
------------- --------------
Costs in excess of billings on contracts in process.................. $ 3,988,346 $ 12,208,666
============= ==============
Included in estimated gross loss for 2002 and 2003 are contracts with estimated
losses accrued of $973,985 and $532,665, respectively.
NOTE 4-- INVENTORIES
Inventories consist of the following:
AUGUST 31
---------------------------
2002 2003
------------ -----------
Raw material stock....................................................... $ 146,303 $ 131,929
Small tools and supplies................................................. 104,266 116,630
------------ -----------
Total........................................................... $ 250,569 $ 248,559
============ ===========
23
Riviera Tool Company
Notes to Financial Statements
NOTE 5 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
AUGUST 31
-------------------------------
2002 2003
-------------- -------------
Leasehold improvements................................................ $ 1,367,908 $ 1,367,908
Office furniture and fixtures......................................... 157,868 164,417
Machinery and equipment............................................... 22,353,184 22,369,833
Computer equipment and software....................................... 2,119,363 2,351,580
Transportation equipment.............................................. 61,919 61,919
Construction in process............................................... 1,399 160,195
-------------- -------------
Total cost......................................................... 26,061,641 26,475,852
Accumulated depreciation and amortization............................. 11,589,762 13,429,563
-------------- -------------
Property, plant and equipment, net................................. $ 14,471,879 $ 13,046,289
============== =============
Depreciation & amortization expense..................................... $ 1,912,733 $ 1,839,801
============== =============
NOTE 6 -- LONG-TERM DEBT
The Company's long-term debt, which is subject to certain covenants discussed
below, consists of the following:
AUGUST 31,
------------------------------
2002 2003
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 up to $10 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, 2004, and bears interest, payable monthly, at
1.0% above the bank's prime rate (as of August 31, 2003, an effective rate of
5.0%)................................................................................. $ -- $ 5,982,360
Credit line paid & 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 August 31, 2003, an
effective rate of 5.25%), due December 1, 2004........................................ -- 1,766,667
Subordinated note payable to bank, payable in monthly installments of $31,000,
including interest at 11%, due January 1, 2008........................................ -- 1,290,062
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
Equipment line of credit, paid on December 23, 2002................................... 1,826,740 --
------------ ---------------
Total debt................................................................. 10,354,499 9,039,089
------------ ---------------
Less current portion of long-term debt..................................... 10,354,499 638,756
------------ ---------------
Long-term debt -- Net...................................................... $ -- $ 8,400,333
============ ===============
24
Riviera Tool Company
Notes to Financial Statements
NOTE 6 -- LONG-TERM DEBT- CONTINUED
Minimum scheduled principal payments on long-term debt to maturity as of August
31, 2003, are as follows:
2004..................................................... $ 638,756
2005..................................................... 7,616,332
2006..................................................... 298,949
2007..................................................... 334,339
2008..................................................... 150,713
-------------
Total................................ $ 9,039,089
=============
On November 24, 2003, the Company amended its loan agreement with its primary
lender. Under such agreement the existing financing was extended to December 1,
2004 and the Revolving Line of Credit was increased from $7.5 million to $10.0
million.
Under the new loan agreement, the Company is required to maintain certain levels
of Tangible Effective Net Worth, Debt to Tangible Net Worth and Debt Service
Coverage. At August 31, 2003, the Company was in compliance with these new
covenants.
Under the loan agreement and new loan agreement the Company provided its senior
lender with certain individuals who provided personal guarantees as additional
collateral. The Company incurred $205,000 for debt issuance and guarantees on
November 24, 2003 associated with the new loan agreement. These costs will be
amortized over the term of the financing. The Company also incurred
approximately $306,500 in debt issuance and guarantee fee costs in 2003. During
fiscal 2003, the Company amortized approximately $230,000 of such costs. The
estimated fair value of the Company's notes payable and long-term debt
approximates its carrying amount. The weighted average interest rates for fiscal
2001, 2002 and 2003 were 7.4%, 6.7% and 6.5%, respectively.
NOTE 7 -- FEDERAL INCOME TAXES
The provision for federal income taxes is as follows:
AUGUST 31
------------------------------------
2001 2002 2003
------------ -------- ---------
Current expense.......................................... $ -- $ -- $ --
Deferred expense (benefit)............................... (1,538,000) -- --
------------ -------- ---------
Income tax expense (benefit)............... $ (1,538,000) $ -- $ --
============ ======== =========
The difference between the federal statutory tax rate and the Company's
effective rate was:
AUGUST 31
----------------------------
2001 2002 2003
------- -------- ------
Federal statutory tax rate..................................... (34.0%) (34.0%) 34.0%
Effect of valuation allowance.................................. 5.8% 34.0% (36.0%)
Other items.................................................... -- -- 2.0%
----- ----- ------
Effective tax rate................................... (28.2%) -- --
===== ===== ======
The details of the net deferred tax liability are as follows:
AUGUST 31
-------------------------------
2002 2003
------------ --------------
Deferred tax liabilities:
Depreciation................................................. $ (3,128,313) $ (3,148,943)
------------ --------------
Deferred tax assets:
Alternative minimum tax credit carryforward.................. 155,150 164,000
Accrued lease expense........................................ 229,750 217,835
Deferred compensation and other items........................ 57,555 78,208
Net operating loss carryforward.............................. 3,986,858 3,691,900
------------ --------------
25
Total deferred tax assets........................ 4,429,313 4,153,943
------------ --------------
Valuation allowance recognized for deferred tax assets......... (1,301,000) (1,003,000)
------------ --------------
Net deferred tax liability....................... $ -- $ --
============ ==============
The net operating loss carryforward arising in fiscal 2001 and 2002 will expire,
if unused, in fiscal 2021 and 2022, respectively.
26
Riviera Tool Company
Notes to Financial Statements
NOTE 8 -- OPERATING LEASES
On June 26, 2003, the Company renegotiated its operating lease for its
manufacturing and office facilities. The new noncancellable lease begins
November 1, 2003 and expires on October 31, 2018. The agreement provides for
annual lease payments plus an escalation of approximately $.14 per square foot
for the lease term. The Company has an option to renew this lease for an
additional 10-year term at a rate based upon the then prevailing market rates
for similar-type properties.
Generally accepted accounting principles require that rent expense related to
this type of lease be recognized ratably over the term of the lease. The
difference between the rent payments made and the amount of expense recognized
has been recorded as accrued lease expense (a liability). For the year ended
August 31, 2001, the lease expense exceeded cash payments made by $2,335. For
the years ended August 31, 2002 and 2003 the cash payments made exceeded the
lease expense by $16,359 and $35,045.
The Company has various operating leases, including the noncancellable operating
lease noted above, for facilities that expire during the next 15 years. Rent
expense under these leases for the years ended August 31, 2001, 2002 and 2003
amounted to $1,053,118, $1,075,186 and $1,120,250, respectively.
The following is a schedule of future minimum rent payments required under
operating leases that have initial or remaining noncancellable lease terms in
excess of one year as of August 31, 2003.
LEASE
PAYMENTS
-------------
2004..................................... $ 1,009,605
2005..................................... 981,298
2006..................................... 988,411
2007..................................... 1,013,135
2008..................................... 1,039,332
2009 and after........................... 12,151,444
-------------
Total minimum payments required...... $ 17,183,225
=============
NOTE 9 -- RETIREMENT PLANS
The Company has a profit-sharing plan that covers substantially all employees.
The plan includes a 401(k) deferred-compensation option. The plan, as
established, allows for discretionary contributions as determined annually by
the Company's Board of Directors. No discretionary contribution was made for the
years-ended August 31, 2001, 2002, and 2003. The Company also matches and
contributes up to 15 percent of the employees' contributions, up to 2% of an
employee's annual wage. Effective January 1, 2002, the Company, until further
notice, suspended its matching share of the employees contribution. The
Company's matching contributions to the plan for the years ended August 31,
2001, 2002 and 2003, amounted to $74,759, $31,324 and $0, respectively.
NOTE 10 -- STOCK OPTION PLANS
The Company's 1996 Stock Option Plan (the "Option Plan") was adopted by the
Board of Directors and approved by the stockholders on October 31, 1996. Under
the Option Plan, 250,000 shares of Common Stock were reserved for issuance and
are intended to qualify as incentive stock options under the Internal Revenue
Code of 1986, as amended. Stock options granted to Company personnel under the
option plan are at exercise prices equal to the market value of the stock on the
date of grant. The options vest one year from the date of option grant and the
recipients must be employed by the Company at the time of exercise.
27
Riviera Tool Company
Notes to Financial Statements
NOTE 10 -- STOCK OPTION PLANS - CONTINUED
The Company's 1998 Key Employee Stock Option Plan (the "Key Option Plan") was
adopted by the Board of Directors and approved by the stockholders on December
16, 1998. Under the Key Option Plan, 200,000 shares of Common Stock were
reserved for issuance and do not qualify as incentive stock options under the
Internal Revenue Code of 1986, as amended. Stock options granted to Company
personnel and Directors under the option plan are at exercise prices equal to
the market value of the stock on the date of grant. The options vest one year
from the date of option grant and recipients must be employed by the Company at
the time of exercise.
As permitted by SFAS No. 123, "Accounting for Stock-based Compensation," the
Company continues to apply the provisions of Accounting Principles Board Opinion
No. 25 which recognizes compensation expense under the intrinsic value method.
The compensation cost, estimated under the fair value-based method defined in
SFAS No. 123, was not significant.
A summary of the status of the Option Plan and Key Option Plan during the years'
presented is as follows (no stock options were granted previous to fiscal 1999
under the 1996 Stock Option Plan and the 1998 Key Employee Stock Option Plan):
Weighted Average
Shares Exercise Price
------- ----------------
1996 STOCK OPTION PLAN, AS AMENDED
Outstanding at end of year, August 31, 1999 45,000 $6.625
======= ======
Fiscal Year Ended August 31, 2000
Stock options granted............................................... 75,000 $ 3.75
------- ------
Outstanding at end of year, August 31, 2000 120,000 $ 4.82
======= ======
Fiscal Year Ended August 31, 2001
Stock options granted............................................... -- --
------- ------
Outstanding at end of year, August 31, 2001 120,000 $ 4.82
======= ======
Fiscal Year Ended August 31, 2002
Stock options granted............................................... -- --
------- ------
Outstanding at end of year, August 31, 2002 120,000 $ 4.82
======= ======
Stock options granted............................................... -- --
------- ------
Outstanding at end of year, August 31, 2003 120,000 $ 4.82
======= ======
1998 KEY EMPLOYEE STOCK OPTION PLAN
Outstanding at end of year, August 31, 1999 54,000 $6.625
------- ------
Fiscal Year Ended August 31, 2000
Stock options granted............................................... 53,000 $ 3.75
------- ------
Outstanding at end of year, August 31, 2000 107,000 $ 5.20
------- ------
Fiscal Year Ended August 31, 2001
Stock options granted............................................... -- --
Stock options forfeited............................................. (5,000) $6.625
Stock options forfeited............................................. (5,000) $ 3.75
------- ------
Outstanding at end of year, August 31, 2001 97,000 $ 5.20
------- ------
Fiscal Year Ended August 31, 2002
Stock options granted............................................... -- --
------- ------
Outstanding at end of year, August 31, 2002 97,000 $ 5.20
------- ------
Fiscal Year Ended August 31, 2003
Stock options granted............................................... -- --
Stock options forfeited............................................. (2,000) $ 3.75
Stock options forfeited............................................. (2,000) $6.625
------- ------
Outstanding at end of year, August 31, 2003 93,000 $ 5.20
------- ------
28
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
ITEM 9A. 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. While the Chief Executive and Chief Financial Officers of
the Company believe that the Company's existing disclosure controls and
procedures have been effective to accomplish its objectives, the Chief Executive
and Chief Financial Officers of the Company intend to examine, refine, and
formalize our disclosure controls and procedures and monitor ongoing
developments.
Notwithstanding the foregoing, there can be no assurance that the
Company's disclosure controls and procedures will detect or uncover all failures
of persons within the Company and its consolidated subsidiaries to disclose
material information otherwise required to be set forth in the Company's
periodic reports.
PART III
ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT
Information with respect to Directors, Executive Officers, Beneficial
Owners and the Company's Code of Ethics may be found under the captions
"Directors and Executive Officers" and "Section 16(A) Beneficial Ownership
Reporting Compliance" in the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held December 17, 2003 (the "Proxy Statement") and such
information is incorporated herein by reference.
The Company, on November 3, 2003, adopted a Code of Ethics that applies
to all directors, officers and employees, including its Principal Executive
Officer, and its principal financial officer and controller or principal
accounting officer, or persons performing similar functions. A copy of the
Company's Code of Ethics is filed with this report.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to Directors and Executive Officers
Compensation may be found under the captions "Compensation of Directors and
Executive Officers" in the Company's Proxy Statement and such information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
Information with respect to Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters may be found under the
captions "Executive Compensation," and "Director Compensation" in the Company's
Proxy Statement and such information is incorporated herein by reference.
29
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to Certain Relationships and Related
Transactions is contained under the captions "Executive Compensation,"
"Ownership of Company Stock," and "Compensation Committee Interlocks and Insider
Participation" in the Company's Proxy Statement and such information is
incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information with respect to Principal Accounting Fees and Services is
contained under the caption "Principal Accounting Fees and Services" in the
Company's Proxy Statement and such information is incorporated herein by
reference.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K.
(a) The following documents are filed as a part of this report:
1. Financial Statements - The Consolidated Financial Statements
of Riviera Tool Company in Item 8 hereof are filed as part of
this Annual Report on Form 10-K.
2. Exhibits
10(ee) Company Code of Ethics adopted November 3, 2003
10(ff) First Amendment to Line of Credit and Term Note Agreement
between Registrant and Comerica Bank, dated November 24,
2003.
21 Subsidiaries - None
31.1 Written Statement of the Chief Executive Officer Pursuant
to 18 U.S.C. Section 1350 Sec. 302
31.2 Written Statement of the Chief Financial Officer Pursuant
to 18 U.S.C. Section 1350 Sec. 302
32.1 Written Statement of the Chief Executive Officer Pursuant
to 18 U.S.C. Section 1350 Sec. 906
32.2 Written Statement of the Chief Financial Officer Pursuant
to 18 U.S.C. Section 1350 Sec. 906
(b) Reports on Form 8-K- No Reports were filed on Form 8-K in the last
quarter of the Fiscal Year ended August 31, 2003.
None.
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) 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.
Dated: December 1, 2003 RIVIERA TOOL COMPANY
By: /s/ Kenneth K. Rieth
--------------------
Kenneth K. Rieth, Principal
Executive Officer
and
By: /s/ Peter C. Canepa
-------------------
Peter C. Canepa, Principal Financial
and Accounting Officer
30
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on the 1st day of December, 2003, by the
following persons on behalf of the Company and in the capacities indicated.
Each Director of the Company whose signature appears below hereby
appoints Kenneth K. Rieth and Peter C. Canepa, and each of them individually, as
his attorney-in-fact to sign in his name and on his behalf as a Director of the
Company, and to file with the Commission any and all amendments to this report
on Form 10-K to the same extent and with the same effect as if done personally.
/s/ Leonard H. Wood /s/ Kenneth K. Rieth
- ------------------- --------------------
Leonard H. Wood, Director Kenneth K. Rieth, Director
/s/ Thomas H. Highley /s/ Jay S. Baron
- ---------------------- ----------------
Thomas H. Highley, Director Jay S. Baron, Director
31
10-K EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
10(ee) Company Code of Ethics adopted November 3, 2003
10(ff) First Amendment to Line of Credit and Term Note Agreement
between Registrant and Comerica Bank, dated November 24,
2003.
21 Subsidiaries - None
31.1 Written Statement of the Chief Executive Officer Pursuant
to 18 U.S.C. Section 1350 Sec. 302
31.2 Written Statement of the Chief Financial Officer Pursuant
to 18 U.S.C. Section 1350 Sec. 302
32.1 Written Statement of the Chief Executive Officer Pursuant
to 18 U.S.C. Section 1350 Sec. 906
32.2 Written Statement of the Chief Financial Officer Pursuant
to 18 U.S.C. Section 1350 Sec. 906