UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended JuneSeptember 30, 2013
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 000-01227
Chicago Rivet & Machine Co.
(Exact Name of Registrant as Specified in Its Charter)
Illinois | 36-0904920 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
901 Frontenac Road, Naperville, Illinois | 60563 | ||
(Address of Principal Executive Offices) | (Zip Code) |
(630) 357-8500
Registrant’s Telephone Number, Including Area Code
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ (Do not check if smaller reporting company) | Smaller reporting company | x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of July 26,November 1, 2013, there were 966,132 shares of the registrant’s common stock outstanding.
Page | ||||||
PART I. | ||||||
Condensed Consolidated Balance Sheets at | 2-3 | |||||
4 | ||||||
5 | ||||||
6 | ||||||
7-9 | ||||||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 10-11 | |||||
12 | ||||||
13-19 |
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets
JuneSeptember 30, 2013 and December 31, 2012
June 30, 2013 | December 31, 2012 | September 30, 2013 | December 31, 2012 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
Assets | ||||||||||||||||
Current Assets: | ||||||||||||||||
Cash and cash equivalents | $ | 876,983 | $ | 392,810 | $ | 914,445 | $ | 392,810 | ||||||||
Certificates of deposit | 5,908,248 | 7,088,000 | 5,958,348 | 7,088,000 | ||||||||||||
Accounts receivable, net of allowance of $150,000 | 5,801,140 | 4,577,932 | ||||||||||||||
Accounts receivable, net of allowance of $153,000 and $150,000, respectively | 6,248,403 | 4,577,932 | ||||||||||||||
Inventories, net | 4,992,252 | 4,936,372 | 4,894,521 | 4,936,372 | ||||||||||||
Deferred income taxes | 433,191 | 416,191 | 435,191 | 416,191 | ||||||||||||
Other current assets | 268,131 | 422,332 | 350,247 | 422,332 | ||||||||||||
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Total current assets | 18,279,945 | 17,833,637 | 18,801,155 | 17,833,637 | ||||||||||||
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Property, Plant and Equipment: | ||||||||||||||||
Land and improvements | 1,238,150 | 1,238,150 | 1,238,150 | 1,238,150 | ||||||||||||
Buildings and improvements | 6,280,657 | 6,244,064 | 6,382,545 | 6,244,064 | ||||||||||||
Production equipment and other | 31,267,957 | 29,495,765 | 31,601,123 | 29,495,765 | ||||||||||||
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38,786,764 | 36,977,979 | 39,221,818 | 36,977,979 | |||||||||||||
Less accumulated depreciation | 29,312,482 | 28,900,113 | 29,233,800 | 28,900,113 | ||||||||||||
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Net property, plant and equipment | 9,474,282 | 8,077,866 | 9,988,018 | 8,077,866 | ||||||||||||
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Total assets | $ | 27,754,227 | $ | 25,911,503 | $ | 28,789,173 | $ | 25,911,503 | ||||||||
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See Notes to the Condensed Consolidated Financial Statements
CHICAGO RIVET & MACHINE CO.
Condensed Consolidated Balance Sheets
JuneSeptember 30, 2013 and December 31, 2012
June 30, 2013 | December 31, 2012 | |||||||||||||||
(Unaudited) | September 30, 2013 | December 31, 2012 | ||||||||||||||
Liabilities and Shareholders’ Equity | (Unaudited) | |||||||||||||||
Current Liabilities: | ||||||||||||||||
Accounts payable | $ | 1,483,596 | $ | 1,003,647 | $ | 1,426,371 | $ | 1,003,647 | ||||||||
Accrued wages and salaries | 755,449 | 409,695 | 965,056 | 409,695 | ||||||||||||
Other accrued expenses | 625,654 | 460,245 | 697,772 | 460,245 | ||||||||||||
Unearned revenue and customer deposits | 197,611 | 84,905 | 210,773 | 84,905 | ||||||||||||
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Total current liabilities | 3,062,310 | 1,958,492 | 3,299,972 | 1,958,492 | ||||||||||||
Deferred income taxes | 889,275 | 952,275 | 1,011,275 | 952,275 | ||||||||||||
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Total liabilities | 3,951,585 | 2,910,767 | 4,311,247 | 2,910,767 | ||||||||||||
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Commitments and contingencies (Note 3) | ||||||||||||||||
Shareholders’ Equity: | ||||||||||||||||
Preferred stock, no par value, 500,000 shares authorized: none outstanding | — | — | — | — | ||||||||||||
Common stock, $1.00 par value, 4,000,000 shares authorized: 1,138,096 shares issued; 966,132 shares outstanding | 1,138,096 | 1,138,096 | 1,138,096 | 1,138,096 | ||||||||||||
Additional paid-in capital | 447,134 | 447,134 | 447,134 | 447,134 | ||||||||||||
Retained earnings | 26,139,510 | 25,337,604 | 26,814,794 | 25,337,604 | ||||||||||||
Treasury stock, 171,964 shares at cost | (3,922,098 | ) | (3,922,098 | ) | (3,922,098 | ) | (3,922,098 | ) | ||||||||
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Total shareholders’ equity | 23,802,642 | 23,000,736 | 24,477,926 | 23,000,736 | ||||||||||||
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Total liabilities and shareholders’ equity | $ | 27,754,227 | $ | 25,911,503 | $ | 28,789,173 | $ | 25,911,503 | ||||||||
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See Notes to the Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Income
For the Three and SixNine Months Ended JuneSeptember 30, 2013 and 2012
(Unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
June 30, | June 30, | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||||||||||
Net sales | $ | 9,327,643 | $ | 8,429,201 | $ | 18,453,379 | $ | 17,629,519 | $ | 9,461,778 | $ | 8,537,639 | $ | 27,915,157 | $ | 26,167,158 | ||||||||||||||||
Cost of goods sold | 7,115,077 | 6,533,152 | 14,230,552 | 13,655,181 | 6,931,307 | 6,612,846 | 21,161,859 | 20,268,027 | ||||||||||||||||||||||||
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Gross profit | 2,212,566 | 1,896,049 | 4,222,827 | 3,974,338 | 2,530,471 | 1,924,793 | 6,753,298 | 5,899,131 | ||||||||||||||||||||||||
Selling and administrative expenses | 1,328,927 | 1,280,038 | 2,680,741 | 2,671,636 | 1,391,902 | 1,263,236 | 4,072,643 | 3,934,872 | ||||||||||||||||||||||||
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Operating profit | 883,639 | 616,011 | 1,542,086 | 1,302,702 | 1,138,569 | 661,557 | 2,680,655 | 1,964,259 | ||||||||||||||||||||||||
Other income and expenses: | ||||||||||||||||||||||||||||||||
Interest income | 7,000 | 7,833 | 15,485 | 16,685 | 7,801 | 8,185 | 23,286 | 24,870 | ||||||||||||||||||||||||
Gain from disposal of equipment | 42,486 | 27,500 | 42,486 | 57,500 | 74,235 | — | 116,721 | 57,500 | ||||||||||||||||||||||||
Other income | 4,088 | 4,088 | 7,688 | 8,279 | 3,600 | 3,600 | 11,288 | 11,879 | ||||||||||||||||||||||||
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Income before income taxes | 937,213 | 655,432 | 1,607,745 | 1,385,166 | 1,224,205 | 673,342 | 2,831,950 | 2,058,508 | ||||||||||||||||||||||||
Provision for income taxes | 299,000 | 215,000 | 516,000 | 451,000 | 404,000 | 210,000 | 920,000 | 661,000 | ||||||||||||||||||||||||
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Net income | $ | 638,213 | $ | 440,432 | $ | 1,091,745 | $ | 934,166 | $ | 820,205 | $ | 463,342 | $ | 1,911,950 | $ | 1,397,508 | ||||||||||||||||
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Average common shares outstanding | 966,132 | 966,132 | 966,132 | 966,132 | 966,132 | 966,132 | 966,132 | 966,132 | ||||||||||||||||||||||||
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Per share data: | ||||||||||||||||||||||||||||||||
Net income per share | $ | 0.66 | $ | 0.46 | $ | 1.13 | $ | 0.97 | $ | 0.85 | $ | 0.48 | $ | 1.98 | $ | 1.45 | ||||||||||||||||
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Cash dividends declared per share | $ | 0.15 | $ | 0.15 | $ | 0.30 | $ | 0.30 | $ | 0.15 | $ | 0.15 | $ | 0.45 | $ | 0.45 | ||||||||||||||||
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See Notes to the Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Retained Earnings
For the SixNine Months Ended JuneSeptember 30, 2013 and 2012
(Unaudited)
2013 | 2012 | 2013 | 2012 | |||||||||||||
Retained earnings at beginning of period | $ | 25,337,604 | $ | 24,461,381 | $ | 25,337,604 | $ | 24,461,381 | ||||||||
Net income for the period | 1,091,745 | 934,166 | 1,911,950 | 1,397,508 | ||||||||||||
Cash dividends declared in the period; $.30 per share in 2013 and 2012 | (289,839 | ) | (289,839 | ) | ||||||||||||
Cash dividends declared in the period; | ||||||||||||||||
$.45 per share in 2013 and 2012 | (434,760 | ) | (434,760 | ) | ||||||||||||
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Retained earnings at end of period | $ | 26,139,510 | $ | 25,105,708 | $ | 26,814,794 | $ | 25,424,129 | ||||||||
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See Notes to the Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Cash Flows
For the SixNine Months Ended JuneSeptember 30, 2013 and 2012
(Unaudited)
2013 | 2012 | 2013 | 2012 | |||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net income | $ | 1,091,745 | $ | 934,166 | $ | 1,911,950 | $ | 1,397,508 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Depreciation | 530,819 | 492,286 | 801,689 | 743,650 | ||||||||||||
Gain on disposal of equipment | (42,486 | ) | (57,500 | ) | (116,721 | ) | (57,500 | ) | ||||||||
Deferred income taxes | (80,000 | ) | (26,000 | ) | 40,000 | (21,000 | ) | |||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable, net | (1,223,208 | ) | (1,022,466 | ) | (1,670,471 | ) | (1,054,767 | ) | ||||||||
Inventories, net | (55,880 | ) | (15,438 | ) | 41,851 | (2,721 | ) | |||||||||
Other current assets | 154,201 | 102,359 | 72,085 | (18,162 | ) | |||||||||||
Accounts payable | 280,255 | 300,212 | 413,512 | 261,013 | ||||||||||||
Accrued wages and salaries | 345,754 | 319,373 | 555,361 | 472,762 | ||||||||||||
Other accrued expenses | 165,409 | (54,324 | ) | 237,527 | 40,982 | |||||||||||
Unearned revenue and customer deposits | 112,706 | (102,490 | ) | 125,868 | (26,030 | ) | ||||||||||
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Net cash provided by operating activities | 1,279,315 | 870,178 | 2,412,651 | 1,735,735 | ||||||||||||
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Cash flows from investing activities: | ||||||||||||||||
Capital expenditures | (1,775,255 | ) | (432,848 | ) | (2,751,108 | ) | (580,032 | ) | ||||||||
Proceeds from the sale of equipment | 90,200 | 57,500 | 165,200 | 57,500 | ||||||||||||
Proceeds from certificates of deposit | 4,765,000 | 2,244,000 | 5,363,000 | 4,200,000 | ||||||||||||
Purchases of certificates of deposit | (3,585,248 | ) | (2,551,000 | ) | (4,233,348 | ) | (4,376,282 | ) | ||||||||
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Net cash used in investing activities | (505,303 | ) | (682,348 | ) | (1,456,256 | ) | (698,814 | ) | ||||||||
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Cash flows from financing activities: | ||||||||||||||||
Cash dividends paid | (289,839 | ) | (289,839 | ) | (434,760 | ) | (434,760 | ) | ||||||||
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Net cash used in financing activities | (289,839 | ) | (289,839 | ) | (434,760 | ) | (434,760 | ) | ||||||||
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Net increase (decrease) in cash and cash equivalents | 484,173 | (102,009 | ) | |||||||||||||
Net increase in cash and cash equivalents | 521,635 | 602,161 | ||||||||||||||
Cash and cash equivalents at beginning of period | 392,810 | 704,345 | 392,810 | 704,345 | ||||||||||||
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Cash and cash equivalents at end of period | $ | 876,983 | $ | 602,336 | $ | 914,445 | $ | 1,306,506 | ||||||||
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Supplemental schedule of non-cash investing activities: | ||||||||||||||||
Capital expenditures in accounts payable | $ | 199,694 | $ | 80,558 | $ | 9,212 | $ | — | ||||||||
See Notes to the Condensed Consolidated Financial Statements
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of the Company, the accompanying unaudited interim financial statements contain all adjustments necessary to present fairly the financial position of the Company as of JuneSeptember 30, 2013 (unaudited) and December 31, 2012 (audited) and the results of operations and changes in cash flows for the indicated periods. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted from these unaudited financial statements in accordance with applicable rules. Please refer to the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.
The preparation of financial statements in conformity with generally accepted accounting principles 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. The results of operations for the three and six-monthnine-month period ending JuneSeptember 30, 2013 are not necessarily indicative of the results to be expected for the year.
2. The Company extends credit on the basis of terms that are customary within our markets to various companies doing business primarily in the automotive industry. The Company has a concentration of credit risk primarily within the automotive industry and in the Midwestern United States.
3. The Company is, from time to time, involved in litigation, including environmental claims and contract disputes, in the normal course of business. While it is not possible at this time to establish the ultimate amount of liability with respect to contingent liabilities, including those related to legal proceedings, management is of the opinion that the aggregate amount of any such liabilities, for which provision has not been made, will not have a material adverse effect on the Company’s financial position.
4. The Company’s effective tax rates were approximately 31.9%33.0% and 32.8%31.2% for the secondthird quarter of 2013 and 2012, respectively, and 32.1%32.5% and 32.6%32.1% for the sixnine months ended JuneSeptember 30, 2013 and 2012, respectively. Rates were lower than the U.S. federal statutory rate primarily due to the Domestic Production Activities Deduction allowed under Internal Revenue Code Section 199.
The Company’s federal income tax returns for the 2010, 2011 and 2012 tax years are subject to examination by the Internal Revenue Service (“IRS”). While it may be possible that a reduction could occur with respect to the Company’s unrecognized tax benefits as an outcome of an IRS examination, management does not anticipate any adjustments that would result in a material change to the results of operations or financial condition of the Company. No statutes have been extended on any of the Company’s federal income tax filings. The statute of limitations on the Company’s 2010, 2011 and 2012 federal income tax returns will expire on September 15, 2014, 2015 and 2016, respectively.
The Company’s state income tax returns for the 2010 through 2012 tax years remain subject to examination by various state authorities with the latest closing period on October 31, 2016. The Company is currently not currently under examination by any state authority for income tax purposes and no statutes for state income tax filings have been extended.
5. Inventories are stated at the lower of cost or net realizable value, cost being determined by the first-in, first-out method. A summary of inventories is as follows:
June 30, 2013 | December 31, 2012 | September 30, 2013 | December 31, 2012 | |||||||||||||
Raw material | $ | 1,929,681 | $ | 2,009,691 | $ | 1,835,909 | $ | 2,009,691 | ||||||||
Work-in-process | 2,101,618 | 1,869,830 | 2,135,314 | 1,869,830 | ||||||||||||
Finished goods | 1,562,953 | 1,606,851 | 1,555,298 | 1,606,851 | ||||||||||||
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Inventory, gross | 5,594,252 | 5,486,372 | 5,526,521 | 5,486,372 | ||||||||||||
Valuation reserves | 602,000 | 550,000 | 632,000 | 550,000 | ||||||||||||
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Inventory, net | $ | 4,992,252 | $ | 4,936,372 | $ | 4,894,521 | $ | 4,936,372 | ||||||||
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CHICAGO RIVET & MACHINE CO.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
6. Segment Information—The Company operates in two business segments as determined by its products. The fastener segment includes rivets, cold-formed fastenersparts, rivets and screw machine products. The assembly equipment segment includes automatic rivet setting machines and parts and tools for such machines. Information by segment is as follows:
Fastener | Assembly Equipment | Other | Consolidated | Fastener | Assembly Equipment | Other | Consolidated | |||||||||||||||||||||||||
Three Months Ended June 30, 2013: | ||||||||||||||||||||||||||||||||
Three Months Ended September 30, 2013: | ||||||||||||||||||||||||||||||||
Net sales | $ | 8,463,688 | $ | 863,955 | $ | — | $ | 9,327,643 | $ | 8,631,105 | $ | 830,673 | $ | — | $ | 9,461,778 | ||||||||||||||||
Depreciation | 231,989 | 14,050 | 19,199 | 265,238 | 237,621 | 14,050 | 19,199 | 270,870 | ||||||||||||||||||||||||
Segment profit | 1,165,813 | 237,510 | — | 1,403,323 | 1,453,799 | 228,013 | — | 1,681,812 | ||||||||||||||||||||||||
Selling and administrative expenses | — | — | (515,596 | ) | (515,596 | ) | — | — | (539,643 | ) | (539,643 | ) | ||||||||||||||||||||
Gain from the disposal of equipment | — | — | 42,486 | 42,486 | — | — | 74,235 | 74,235 | ||||||||||||||||||||||||
Interest income | — | — | 7,000 | 7,000 | — | — | 7,801 | 7,801 | ||||||||||||||||||||||||
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Income before income taxes | $ | 937,213 | $ | 1,224,205 | ||||||||||||||||||||||||||||
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Capital expenditures | 1,862,043 | 30,316 | — | 1,892,359 | 518,150 | — | 267,221 | 785,371 | ||||||||||||||||||||||||
Segment assets: | ||||||||||||||||||||||||||||||||
Accounts receivable, net | 5,449,624 | 351,516 | — | 5,801,140 | 5,873,916 | 374,487 | — | 6,248,403 | ||||||||||||||||||||||||
Inventories, net | 4,204,473 | 787,779 | — | 4,992,252 | 3,994,869 | 899,652 | — | 4,894,521 | ||||||||||||||||||||||||
Property, plant and equipment, net | 7,762,120 | 1,138,081 | 574,081 | 9,474,282 | 8,309,105 | 1,124,031 | 554,882 | 9,988,018 | ||||||||||||||||||||||||
Other assets | — | — | 7,486,553 | 7,486,553 | — | — | 7,658,231 | 7,658,231 | ||||||||||||||||||||||||
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$ | 27,754,227 | $ | 28,789,173 | |||||||||||||||||||||||||||||
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Three Months Ended June 30, 2012: | ||||||||||||||||||||||||||||||||
Three Months Ended September 30, 2012: | ||||||||||||||||||||||||||||||||
Net sales | $ | 7,605,981 | $ | 823,220 | $ | — | $ | 8,429,201 | $ | 7,841,672 | $ | 695,967 | $ | — | $ | 8,537,639 | ||||||||||||||||
Depreciation | 216,207 | 14,125 | 17,958 | 248,290 | 216,732 | 14,725 | 19,907 | 251,364 | ||||||||||||||||||||||||
Segment profit | 882,371 | 231,433 | — | 1,113,804 | 1,024,865 | 144,816 | — | 1,169,681 | ||||||||||||||||||||||||
Selling and administrative expenses | — | — | (493,705 | ) | (493,705 | ) | — | — | (504,524 | ) | (504,524 | ) | ||||||||||||||||||||
Gain from the disposal of equipment | — | — | 27,500 | 27,500 | ||||||||||||||||||||||||||||
Interest income | — | — | 7,833 | 7,833 | — | — | 8,185 | 8,185 | ||||||||||||||||||||||||
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Income before income taxes | $ | 655,432 | $ | 673,342 | ||||||||||||||||||||||||||||
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Capital expenditures | 269,281 | 68,203 | 39,157 | 376,641 | 66,626 | — | — | 66,626 | ||||||||||||||||||||||||
Segment assets: | ||||||||||||||||||||||||||||||||
Accounts receivable, net | 5,055,675 | 365,217 | — | 5,420,892 | 5,061,072 | 392,121 | — | 5,453,193 | ||||||||||||||||||||||||
Inventories, net | 4,430,149 | 797,329 | — | 5,227,478 | 4,392,211 | 822,550 | — | 5,214,761 | ||||||||||||||||||||||||
Property, plant and equipment, net | 6,131,318 | 1,137,267 | 648,060 | 7,916,645 | 5,981,212 | 1,122,542 | 628,153 | 7,731,907 | ||||||||||||||||||||||||
Other assets | — | — | 7,453,905 | 7,453,905 | — | — | 8,150,878 | 8,150,878 | ||||||||||||||||||||||||
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$ | 26,018,920 | $ | 26,550,739 | |||||||||||||||||||||||||||||
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CHICAGO RIVET & MACHINE CO.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Fastener | Assembly Equipment | Other | Consolidated | Fastener | Assembly Equipment | Other | Consolidated | |||||||||||||||||||||||||
Six Months Ended June 30, 2013: | ||||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2013: | ||||||||||||||||||||||||||||||||
Net sales | $ | 16,766,432 | $ | 1,686,947 | $ | — | $ | 18,453,379 | $ | 25,397,537 | $ | 2,517,620 | $ | — | $ | 27,915,157 | ||||||||||||||||
Depreciation | 464,468 | 28,100 | 38,251 | 530,819 | 702,089 | 42,150 | 57,450 | 801,689 | ||||||||||||||||||||||||
Segment profit | 2,161,977 | 449,926 | — | 2,611,903 | 3,615,776 | 677,939 | — | 4,293,715 | ||||||||||||||||||||||||
Selling and administrative expenses | — | — | (1,062,129 | ) | (1,062,129 | ) | — | — | (1,601,772 | ) | (1,601,772 | ) | ||||||||||||||||||||
Gain from the disposal of equipment | — | — | 42,486 | 42,486 | — | — | 116,721 | 116,721 | ||||||||||||||||||||||||
Interest income | — | — | 15,485 | 15,485 | — | — | 23,286 | 23,286 | ||||||||||||||||||||||||
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Income before income taxes | $ | 1,607,745 | $ | 2,831,950 | ||||||||||||||||||||||||||||
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Capital expenditures | 1,911,022 | 59,863 | 4,064 | 1,974,949 | 2,429,172 | 59,863 | 271,285 | 2,760,320 | ||||||||||||||||||||||||
Six Months Ended June 30, 2012: | ||||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2012: | ||||||||||||||||||||||||||||||||
Net sales | $ | 15,940,101 | $ | 1,689,418 | $ | — | $ | 17,629,519 | $ | 23,781,773 | $ | 2,385,385 | $ | — | $ | 26,167,158 | ||||||||||||||||
Depreciation | 428,121 | 28,250 | 35,915 | 492,286 | 644,853 | 42,975 | 55,822 | 743,650 | ||||||||||||||||||||||||
Segment profit | 1,932,807 | 432,765 | — | 2,365,572 | 2,957,672 | 577,581 | — | 3,535,253 | ||||||||||||||||||||||||
Selling and administrative expenses | — | — | (1,054,591 | ) | (1,054,591 | ) | — | — | (1,559,115 | ) | (1,559,115 | ) | ||||||||||||||||||||
Gain from the disposal of equipment | — | — | 57,500 | 57,500 | — | — | 57,500 | 57,500 | ||||||||||||||||||||||||
Interest income | — | — | 16,685 | 16,685 | — | — | 24,870 | 24,870 | ||||||||||||||||||||||||
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Income before income taxes | $ | 1,385,166 | $ | 2,058,508 | ||||||||||||||||||||||||||||
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Capital expenditures | 406,046 | 68,203 | 39,157 | 513,406 | 472,672 | 68,203 | 39,157 | 580,032 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
RevenuesResults for the secondthird quarter of 2013, as well as those of the current year to date, reflect strong growth in sales and net income compared to year earlier periods. Net sales in the third quarter were $9,461,778 this year, an increase of $924,139, or 10.8%, compared with the third quarter of 2012. As of September 30, 2013, year to date sales totaled $27,915,157, an improvement of $1,747,999, or 6.7%, compared with the first three quarters of 2012. The increase in revenue helped to improve net income for the third quarter to $820,205, or $0.85 per share, compared with $463,342, or $0.48 per share, in the third quarter of 2012. Net income for the current year to date, reflect continuedwhich has benefited from the revenue growth compared to the year earlier periods. Net sales for the second quarter of 2013 were $9,327,643, an increase of $898,442, or 10.7%, compared with the year earlier quarter. Forachieved during the first half of 2013, net sales totaled $18,453,379, an improvement of $823,860,three quarters as well as ongoing efficiency initiatives, was $1,911,950, or 4.7%, compared with the first half of 2012. The increase in sales is primarily due to our efforts to increase sales to automotive customers, that are currently benefiting from an increase in U.S. automotive production, in an otherwise slow economy. Net income for the second quarter of 2013 was $638,213, or $0.66$1.98 per share, compared with $440,432,$1,397,508, or $0.46 per share, in the second quarter of 2012. The increase was primarily due to higher sales and improved margins. Net income for the first half of 2013 increased to $1,091,745, or $1.13 per share, compared with $934,166, or $0.97$1.45 per share, reported in 2012.
FastenerDuring the third quarter, fastener segment revenues forimproved to $8,631,105 from $7,841,672 in the secondyear earlier quarter, an increase of 2013 improved 11.3%$789,433, or 10.1%. For the first three quarters of the year, fastener segment revenues have increased $1,615,764, or 6.8%, to $8,463,688,$25,397,537 from $7,605,981 reported$23,781,773 in the second quarter of 2012. This marks the fourteenth quarter of sales exceeding the previous year quarter out of the last fifteen. With the majority of such revenues derived from the automotive industry, the segment has benefited from increased North American production and sales of autos and trucks during the current year. ForProduction costs were positively impacted by favorable raw material prices in the third quarter this year compared to a year earlier. Additionally, we achieved savings of approximately $47,000 related to production tooling, after incurring higher expenses for the first six months of thetwo quarters this year fastener segment revenues were $16,766,432, an increase of $826,331, or 5.2%, compared to the first half of 2012. The increase in fastener segmenttheir year earlier periods. These savings, combined with higher sales, during the second quarter resulted in improved margins, offsetting a $146,000 increase in tooling costs that was primarily related to the introduction of new parts into production. Additionally, lower prices for certain raw material contributed to improved results, while cost control efforts were successful in keeping other cost of sales items little changed as a percentage of net sales. The net result of these factors was an increase in fastener segment gross marginsmargin of approximately $317,000 during$2,228,251 for the quarter. This reverses a $79,000 reduction inthird quarter of 2013 compared to $1,708,174 for the third quarter of 2012. The fastener segment margins incurredgross margin for the first three quarters of 2013 improved to $5,835,469 from $5,077,261 in 2012, primarily due to higher sales in the first quarter when sales growth was absent to offset increased tooling expenses related to new parts production.current year, as well as favorable raw material prices in the current year.
AssemblyRevenues within the assembly equipment segment revenues were $863,955$830,673 in the secondthird quarter of 2013, an increase of $40,735,$134,706, or 4.9%19.4%, compared to the secondthird quarter of 2012, when revenues were $823,220. Second quarter sales increased 5%$695,967. Current year to date revenues of $2,517,620 represents an increase of $132,235, or 5.5%, compared to the first quarter of 2013 and offsets most of the decline experienced in$2,385,385 reported for the first quarter compared to the year earlier period. Year to datethree quarters of 2012. The increase in assembly equipment sales is primarily related to a greater number of $1,686,947 are only fractionally lower than amachines being shipped during the third quarter and year earlier at June 30.to date. The increase in secondthird quarter and year to date sales over the first quarter of this year, while keeping manufacturing costs comparable,has resulted in an improvement in segment margins of approximately $23,000 in$86,000 for the quarter, compared to the first quarter of 2013, and left$96,000 year to date, margins approximately $10,000 ahead of the first half of 2012.compared to last year.
Selling and administrative expenses for the secondthird quarter of 2013 were $1,328,927,$1,391,902, an increase of $48,889,$128,666, or 3.8%10.2%, compared with the year earlier quarter. The increase is primarily due to a $26,000 increase in profit sharing expense as a result of improved operating results. Additionally, commissions increased approximately $19,000 compared to the year earlier quarter total of $1,263,236. The increase is primarily due a $71,000 increase in profit sharing expense related to greater profitability, and a $29,000 increase in commissions, due to the higher sales in the current year. For the first six monthsthree quarters of the year, selling and administrative expenses have increased a modest $9,105,$137,771, or 3.5%, from $2,671,636$3,934,872 in 2012 to $2,680,741$4,072,643 in 2013. While profitProfit sharing expense has increased by $89,000 for the year due to improved profitability and commission expensecommissions have increased a combined $55,000 on aapproximately $66,000 due to the higher sales. Payroll related expenses have declined approximately $46,000 due to headcount reductions since last year, to date basis, these increases have largely been offset by reductions in other items inwhile the current year, primarily related to payroll.remaining net increase includes various smaller items. Selling and administrative expenses as a percentage of net sales for the first halfthree quarters of 2013 declined to 14.5%,14.6% from 15.2%15% in 2012.
Other income in the third quarter was approximately $74,000 higher than the third quarter of 2012 and has increased approximately $57,000 on a year to date basis, due to gains on the sale of certain equipment formerly used in the fastener segment, brought on by the investment in new equipment.
Working capital at Juneas of September 30, 2013 amounted to $15.2$15.5 million, a decline of approximately $.7$.4 million from the beginning of the year. The decline is primarily due to the $1.5$2.2 million increase in capital expenditures in the first halfthree quarters of 2013 compared to the first halfsame period of 2012. Total capital expenditures for the current year are nearly $2approximately $2.8 million, with $1.5$2.4 million related to investments in cold heading equipment, concentrated in equipment that will increase our capabilities as well as capacity. Another factor impacting the change in working capital is the increase of $1.2$1.7 million in accounts receivable, related to the higher sales during the quarter, compared to the seasonally lower sales late in the fourth quarter of 2012. This increase is partially offset by separate increasesan increase of approximately $.5$.4 million in accounts payable and $.8 million in accrued expenses, which reflect the greater level of activity that is typical for this time of year compared to the end of the prior year. The net result of these changes and other cash flow items on cash, cash equivalents and certificates of deposit was a $.7$.6 million reduction in such total balances from the beginning of the year, to $6.8$6.9 million. Management believes that current cash, cash equivalents and operating cash flow will provide adequate working capital for the foreseeable future.
We are pleased to report higher salesimproved operating results for both the third quarter and net income for the second quarter andcurrent year to date compared to the year earlier periods. Our strong performance in 2013 hasHigher sales and operating margins, have resulted in a 16.9% improvement36.8% increase in net income for the first halfnine months of thethis year compared to the first halfsame period of 2012. Our earningsWhile the growth in the overall U.S. economy has been modest in recent years, the strength of the domestic automotive market has provided opportunities for growth that we have successfully pursued. Additionally, our positive results in recent years and strong balance sheet have allowed us to
make significant investments in our operations this year which we expect to contribute positively to operating results in the future. With the domestic automotive market continuing to be one of the more healthy sectors of an otherwise slow-growing U.S. economy, weWe will strive to continue to deliver positivepursue opportunities to profitably grow our revenues and improve our operating results, fromwhile maintaining the high level of product quality and reliability of service our activities in that area while also pursuing other actions that would be favorable to our operations.customers demand.
This discussion contains certain “forward-looking statements” which are inherently subject to risks and uncertainties that may cause actual events to differ materially from those discussed herein. Factors which may cause such differences in events include, those disclosed under “Risk Factors” in our Annual Report on Form 10-K and in the other filings we make with the United States Securities and Exchange Commission. These factors, include among other things: conditions in the domestic automotive industry, upon which we rely for sales revenue, the intense competition in our markets, the concentration of our sales to two major customers, the price and availability of raw materials, labor relations issues, losses related to product liability, warranty and recall claims, costs relating to environmental laws and regulations, the loss of the services of our key employees and difficulties in achieving expected cost savings. Many of these factors are beyond our ability to control or predict. Readers are cautioned not to place undue reliance on these forward-looking statements. We undertake no obligation to publish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Item 4. Controls and Procedures.
(a) Disclosure Controls and Procedures. The Company’s management, with the participation of the Company’s Chief Executive Officer and President, Chief Operating Officer and Treasurer (the Company’s principal financial officer), has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and President, Chief Operating Officer and Treasurer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act.
(b) Internal Control Over Financial Reporting. There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 6. Exhibits
31 | Rule 13a-14(a) or 15d-14(a) Certifications | |
31.1 | Certification Pursuant to Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certification Pursuant to Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32 | Section 1350 Certifications | |
32.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101 | Interactive Data File. Includes the following financial and related information from Chicago Rivet & Machine Co.’s Quarterly Report on Form 10-Q for the quarter ended |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CHICAGO RIVET & MACHINE CO. | ||||||||
(Registrant) | ||||||||
Date: | ||||||||
/s/ John A. Morrissey | ||||||||
John A. Morrissey | ||||||||
Chairman of the Board of Directors and Chief Executive Officer | ||||||||
(Principal Executive Officer) |
Date: November 8, 2013 | /s/ Michael J. Bourg | |||||||
Michael J. Bourg | ||||||||
President, Chief Operating Officer and Treasurer | ||||||||
(Principal Financial Officer) |
CHICAGO RIVET & MACHINE CO.
EXHIBITS
INDEX TO EXHIBITS
Exhibit Number | Page | |||||
31 | Rule 13a-14(a) or 15d-14(a) Certifications | |||||
31.1 | Certification Pursuant to Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | 16 | ||||
31.2 | Certification Pursuant to Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | 17 | ||||
32 | Section 1350 Certifications | |||||
32.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | 18 | ||||
32.2 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | 19 | ||||
101 | Interactive Data File. Includes the following financial and related information from Chicago Rivet & Machine Co.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 formatted in Extensible Business Reporting Language (XBRL): (1) Condensed Consolidated Balance Sheets, (2) Condensed Consolidated Statements of Operations, (3) Condensed Consolidated Statements of Retained Earnings, (4) Condensed Consolidated Statements of Cash Flows, and (5) Notes to Condensed Consolidated Financial Statements.* |
Exhibit Number | Page | |||
31 | Rule 13a-14(a) or 15d-14(a) Certifications | |||
31.1 | Certification Pursuant to Rule | |||
31.2 | Certification Pursuant to Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the | |||
32 | Section 1350 Certifications | |||
32.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||
32.2 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||
101 | Interactive Data File. Includes the following financial and |
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