UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM10-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, 2015
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 August 3,November 2, 2015, there were 966,132 shares of the registrant’s common stock outstanding.
CHICAGO RIVET & MACHINE CO.
INDEX
| Page | ||||||
PART I. | FINANCIAL INFORMATION (Unaudited) | ||||||
Condensed Consolidated Balance Sheets at | 2-3 | ||||||
4 | |||||||
5 | |||||||
6 | |||||||
7-10 | |||||||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 11-12 | ||||||
13 | |||||||
PART II. | 14-20 |
1
PART I — FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets
JuneSeptember 30, 2015 and December 31, 2014
June 30, 2015 | December 31, 2014 | September 30, 2015 | December 31, 2014 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
Assets | ||||||||||||||||
Current Assets: | ||||||||||||||||
Cash and cash equivalents | $ | 1,602,497 | $ | 231,252 | $ | 1,080,803 | $ | 231,252 | ||||||||
Certificates of deposit | 5,320,000 | 6,058,000 | 6,316,000 | 6,058,000 | ||||||||||||
Accounts receivable, net of allowance of $150,000 | 5,906,646 | 5,669,654 | ||||||||||||||
Accounts receivable, net of allowance of $146,000 and $150,000, respectively | 5,902,138 | 5,669,654 | ||||||||||||||
Inventories, net | 5,010,529 | 5,162,474 | 4,864,052 | 5,162,474 | ||||||||||||
Deferred income taxes | 448,191 | 446,191 | 448,191 | 446,191 | ||||||||||||
Prepaid Income Taxes | — | 173,656 | 17,112 | 173,656 | ||||||||||||
Other current assets | 458,528 | 348,413 | 489,468 | 348,413 | ||||||||||||
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Total current assets | 18,746,391 | 18,089,640 | 19,117,764 | 18,089,640 | ||||||||||||
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Property, Plant and Equipment: | ||||||||||||||||
Land and improvements | 1,270,242 | 1,270,242 | 1,281,982 | 1,270,242 | ||||||||||||
Buildings and improvements | 6,521,533 | 6,494,896 | 6,528,761 | 6,494,896 | ||||||||||||
Production equipment and other | 33,970,272 | 33,190,789 | 33,578,649 | 33,190,789 | ||||||||||||
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41,762,047 | 40,955,927 | 41,389,392 | 40,955,927 | |||||||||||||
Less accumulated depreciation | 30,628,391 | 30,077,932 | 30,135,229 | 30,077,932 | ||||||||||||
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Net property, plant and equipment | 11,133,656 | 10,877,995 | 11,254,163 | 10,877,995 | ||||||||||||
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Total assets | $ | 29,880,047 | $ | 28,967,635 | $ | 30,371,927 | $ | 28,967,635 | ||||||||
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See Notes to the Condensed Consolidated Financial Statements
2
CHICAGO RIVET & MACHINE CO.
Condensed Consolidated Balance Sheets
JuneSeptember 30, 2015 and December 31, 2014
September 30, 2015 | December 31, 2014 | |||||||
(Unaudited) | ||||||||
Liabilities and Shareholders’ Equity | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 1,275,949 | $ | 923,819 | ||||
Accrued wages and salaries | 913,435 | 605,029 | ||||||
Other accrued expenses | 450,997 | 520,723 | ||||||
Unearned revenue and customer deposits | 228,688 | 69,866 | ||||||
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Total current liabilities | 2,869,069 | 2,119,437 | ||||||
Deferred income taxes | 1,069,275 | 1,107,275 | ||||||
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Total liabilities | 3,938,344 | 3,226,712 | ||||||
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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 | ||||||
Additional paid-in capital | 447,134 | 447,134 | ||||||
Retained earnings | 28,770,451 | 28,077,791 | ||||||
Treasury stock, 171,964 shares at cost | (3,922,098 | ) | (3,922,098 | ) | ||||
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| |||||
Total shareholders’ equity | 26,433,583 | 25,740,923 | ||||||
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Total liabilities and shareholders’ equity | $ | 30,371,927 | $ | 28,967,635 | ||||
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June 30, 2015 | December 31, 2014 | |||||||
(Unaudited) | ||||||||
Liabilities and Shareholders' Equity | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 1,173,018 | $ | 923,819 | ||||
Accrued wages and salaries | 889,749 | 605,029 | ||||||
Other accrued expenses | 386,161 | 520,723 | ||||||
Unearned revenue and customer deposits | 174,828 | 69,866 | ||||||
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| |||||
Total current liabilities | 2,623,756 | 2,119,437 | ||||||
Deferred income taxes | 1,071,275 | 1,107,275 | ||||||
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| |||||
Total liabilities | 3,695,031 | 3,226,712 | ||||||
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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 | ||||||
Additional paid-in capital | 447,134 | 447,134 | ||||||
Retained earnings | 28,521,884 | 28,077,791 | ||||||
Treasury stock, 171,964 shares at cost | (3,922,098 | ) | (3,922,098 | ) | ||||
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Total shareholders' equity | 26,185,016 | 25,740,923 | ||||||
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Total liabilities and shareholders' equity | $ | 29,880,047 | $ | 28,967,635 | ||||
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See Notes to the Condensed Consolidated Financial Statements
3
Condensed Consolidated Statements of Income
For the Three and SixNine Months Ended JuneSeptember 30, 2015 and 2014
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||||||
Net sales | $ | 9,206,174 | $ | 9,500,678 | $ | 18,489,965 | $ | 19,451,102 | $ | 9,018,272 | $ | 8,995,825 | $ | 27,508,237 | $ | 28,446,927 | ||||||||||||||||
Cost of goods sold | 6,958,664 | 7,260,171 | 14,148,590 | 14,948,287 | 7,107,714 | 6,910,132 | 21,256,304 | 21,858,419 | ||||||||||||||||||||||||
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Gross profit | 2,247,510 | 2,240,507 | 4,341,375 | 4,502,815 | 1,910,558 | 2,085,693 | 6,251,933 | 6,588,508 | ||||||||||||||||||||||||
Selling and administrative expenses | 1,408,854 | 1,379,886 | 2,834,679 | 2,793,938 | 1,294,140 | 1,326,911 | 4,128,819 | 4,120,849 | ||||||||||||||||||||||||
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Operating profit | 838,656 | 860,621 | 1,506,696 | 1,708,877 | 616,418 | 758,782 | 2,123,114 | 2,467,659 | ||||||||||||||||||||||||
Other income | 10,305 | 10,433 | 20,738 | 20,550 | 12,053 | 9,975 | 32,791 | 30,525 | ||||||||||||||||||||||||
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Income before income taxes | 848,961 | 871,054 | 1,527,434 | 1,729,427 | 628,471 | 768,757 | 2,155,905 | 2,498,184 | ||||||||||||||||||||||||
Provision for income taxes | 278,000 | 302,000 | 494,000 | 592,000 | 206,000 | 228,000 | 700,000 | 820,000 | ||||||||||||||||||||||||
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Net income | $ | 570,961 | $ | 569,054 | $ | 1,033,434 | $ | 1,137,427 | $ | 422,471 | $ | 540,757 | $ | 1,455,905 | $ | 1,678,184 | ||||||||||||||||
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Per share data, basic and diluted: | ||||||||||||||||||||||||||||||||
Net income per share | $ | 0.59 | $ | 0.59 | $ | 1.07 | $ | 1.18 | $ | 0.44 | $ | 0.56 | $ | 1.51 | $ | 1.74 | ||||||||||||||||
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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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Cash dividends declared per share | $ | 0.18 | $ | 0.18 | $ | 0.61 | $ | 0.76 | $ | 0.18 | $ | 0.18 | $ | 0.79 | $ | 0.94 | ||||||||||||||||
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See Notes to the Condensed Consolidated Financial Statements
4
Condensed Consolidated Statements of Retained Earnings
For the SixNine Months Ended JuneSeptember 30, 2015 and 2014
(Unaudited)
2015 | 2014 | 2015 | 2014 | |||||||||||||
Retained earnings at beginning of period | $ | 28,077,791 | $ | 27,207,970 | $ | 28,077,791 | $ | 27,207,970 | ||||||||
Net income | 1,033,434 | 1,137,427 | 1,455,905 | 1,678,184 | ||||||||||||
Cash dividends declared in the period; | ||||||||||||||||
$.61 per share in 2015 and $.76 per share in 2014 | (589,341 | ) | (734,260 | ) | ||||||||||||
$.79 per share in 2015 and $.94 per share in 2014 | (763,245 | ) | (908,164 | ) | ||||||||||||
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Retained earnings at end of period | $ | 28,521,884 | $ | 27,611,137 | $ | 28,770,451 | $ | 27,977,990 | ||||||||
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See Notes to the Condensed Consolidated Financial Statements
5
Condensed Consolidated Statements of Cash Flows
For the SixNine Months Ended JuneSeptember 30, 2015 and 2014
(Unaudited)
2015 | 2014 | 2015 | 2014 | |||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net income | $ | 1,033,434 | $ | 1,137,427 | $ | 1,455,905 | $ | 1,678,184 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Depreciation | 627,475 | 618,736 | 943,595 | 932,500 | ||||||||||||
(Gain) loss on disposal of equipment | 3,719 | (18,700 | ) | 17,485 | (17,613 | ) | ||||||||||
Deferred income taxes | (38,000 | ) | (22,000 | ) | (40,000 | ) | (94,000 | ) | ||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable | (236,992 | ) | (683,329 | ) | ||||||||||||
Accounts receivable, net | (232,484 | ) | (450,535 | ) | ||||||||||||
Inventories | 151,945 | (333,437 | ) | 298,422 | (401,963 | ) | ||||||||||
Other current assets | 63,541 | (34,410 | ) | 15,489 | (139,946 | ) | ||||||||||
Accounts payable | 230,949 | 512,700 | 349,057 | 350,207 | ||||||||||||
Accrued wages and salaries | 284,720 | 278,018 | 308,406 | 462,838 | ||||||||||||
Other accrued expenses | (134,562 | ) | (129,411 | ) | (69,726 | ) | (56,565 | ) | ||||||||
Unearned revenue and customer deposits | 104,962 | (71,339 | ) | 158,822 | (35,098 | ) | ||||||||||
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Net cash provided by operating activities | 2,091,191 | 1,254,255 | 3,204,971 | 2,228,009 | ||||||||||||
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Cash flows from investing activities: | ||||||||||||||||
Capital expenditures | (868,605 | ) | (765,051 | ) | (1,339,044 | ) | (1,329,170 | ) | ||||||||
Proceeds from the sale of equipment | — | 18,700 | 4,869 | 18,700 | ||||||||||||
Proceeds from certificates of deposit | 4,813,000 | 1,842,248 | 5,560,000 | 2,639,348 | ||||||||||||
Purchases of certificates of deposit | (4,075,000 | ) | (996,000 | ) | (5,818,000 | ) | (2,241,000 | ) | ||||||||
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Net cash provided by (used in) investing activities | (130,605 | ) | 99,897 | |||||||||||||
Net cash used in investing activities | (1,592,175 | ) | (912,122 | ) | ||||||||||||
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Cash flows from financing activities: | ||||||||||||||||
Cash dividends paid | (589,341 | ) | (734,260 | ) | (763,245 | ) | (908,164 | ) | ||||||||
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Net cash used in financing activities | (589,341 | ) | (734,260 | ) | (763,245 | ) | (908,164 | ) | ||||||||
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Net increase in cash and cash equivalents | 1,371,245 | 619,892 | 849,551 | 407,723 | ||||||||||||
Cash and cash equivalents at beginning of period | 231,252 | 443,608 | 231,252 | 443,608 | ||||||||||||
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Cash and cash equivalents at end of period | $ | 1,602,497 | $ | 1,063,500 | $ | 1,080,803 | $ | 851,331 | ||||||||
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Supplemental schedule of non-cash investing activities: | ||||||||||||||||
Capital expenditures in accounts payable | $ | 18,250 | $ | 35,036 | $ | 3,073 | $ | 19,966 |
See Notes to the Condensed Consolidated Financial Statements
6
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, 2015 (unaudited) and December 31, 2014 (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, 2014.
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, 2015 are not necessarily indicative of the results to be expected for the year.
Certain items in 2014 have been reclassified to conform to the presentation in 2015. These changes have no effect on net income or the financial position of the Company.
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 has entered into a contract to expand the fastener segment facility in Madison Heights, Michigan in order to provide additional capacity and improve workflow throughin the plant. The base contract amount is $1,502,500 and construction will begin inbegan during the third quarter.
5. The Company’s effective tax rates were approximately 32.7%32.8% and 34.7%29.7% for the secondthird quarter of 2015 and 2014, respectively, and 32.3%32.5% and 34.2%32.8% for the sixnine months ended JuneSeptember 30, 2015 and 2014, respectively. Rates were lower than the U.S. federal statutory rate in 2015 primarily due to the Domestic Production Activities Deduction allowed under Internal Revenue Code Section 199.
The Company’s federal income tax returns for the 2011 through2012, 2013 and 2014 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 2011 through2012, 2013 and 2014 federal income tax returns will expire on September 15, 2015 through2016, 2017 and 2018, respectively.
The Company’s state income tax returns for the 20112012 through 2014 tax years remain subject to examination by various state authorities with the latest closing period on October 31, 2018. 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.
7
CHICAGO RIVET & MACHINE CO.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
6. 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, 2015 | December 31, 2014 | September 30, 2015 | December 31, 2014 | |||||||||||||
Raw material | $ | 2,053,477 | $ | 2,154,572 | $ | 2,018,773 | $ | 2,154,572 | ||||||||
Work-in-process | 1,659,654 | 1,664,899 | 1,690,510 | 1,664,899 | ||||||||||||
Finished goods | 1,914,398 | 1,961,003 | 1,771,769 | 1,961,003 | ||||||||||||
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Inventory, gross | 5,627,529 | 5,780,474 | 5,481,052 | 5,780,474 | ||||||||||||
Valuation reserves | 617,000 | 618,000 | 617,000 | 618,000 | ||||||||||||
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Inventory, net | $ | 5,010,529 | $ | 5,162,474 | $ | 4,864,052 | $ | 5,162,474 | ||||||||
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8
CHICAGO RIVET & MACHINE CO.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)STATEMENTS
(Unaudited)
7. 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 | |||||||||||||
Three Months Ended June 30, 2015: | ||||||||||||||||
Net sales | $ | 8,276,263 | $ | 929,911 | $ | — | $ | 9,206,174 | ||||||||
Depreciation | 275,612 | 20,097 | 19,121 | 314,830 | ||||||||||||
Segment operating profit | 1,129,353 | 293,002 | — | 1,422,355 | ||||||||||||
Selling and administrative expenses | — | — | (579,611 | ) | (579,611 | ) | ||||||||||
Interest income | — | — | 6,217 | 6,217 | ||||||||||||
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Income before income taxes | $ | 848,961 | ||||||||||||||
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Capital expenditures | 108,726 | 344,367 | 20,078 | 473,171 | ||||||||||||
Segment assets: | ||||||||||||||||
Accounts receivable, net | 5,546,859 | 359,787 | — | 5,906,646 | ||||||||||||
Inventories, net | 4,148,131 | 862,398 | — | 5,010,529 | ||||||||||||
Property, plant and equipment, net | 9,175,077 | 1,471,665 | 486,914 | 11,133,656 | ||||||||||||
Other assets | — | — | 7,829,216 | 7,829,216 | ||||||||||||
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$ | 29,880,047 | |||||||||||||||
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Three Months Ended June 30, 2014: | ||||||||||||||||
Net sales | $ | 8,764,594 | $ | 736,084 | $ | — | $ | 9,500,678 | ||||||||
Depreciation | 279,156 | 16,066 | 18,188 | 313,410 | ||||||||||||
Segment operating profit | 1,218,161 | 170,358 | — | 1,388,519 | ||||||||||||
Selling and administrative expenses | — | — | (523,810 | ) | (523,810 | ) | ||||||||||
Interest income | — | — | 6,345 | 6,345 | ||||||||||||
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Income before income taxes | $ | 871,054 | ||||||||||||||
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Capital expenditures | 218,717 | 21,540 | 9,212 | 249,469 | ||||||||||||
Segment assets: | ||||||||||||||||
Accounts receivable, net | 5,856,458 | 337,641 | — | 6,194,099 | ||||||||||||
Inventories, net | 4,427,259 | 786,966 | — | 5,214,225 | ||||||||||||
Property, plant and equipment, net | 8,946,522 | 1,126,541 | 517,408 | 10,590,471 | ||||||||||||
Other assets | — | — | 7,187,722 | 7,187,722 | ||||||||||||
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$ | 29,186,517 | |||||||||||||||
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Fastener | Assembly Equipment | Other | Consolidated | |||||||||||||
Three Months Ended September 30, 2015: | ||||||||||||||||
Net sales | $ | 8,153,422 | $ | 864,850 | $ | — | $ | 9,018,272 | ||||||||
Depreciation | 276,252 | 20,097 | 19,771 | 316,120 | ||||||||||||
Segment operating profit | 893,862 | 237,849 | — | 1,131,711 | ||||||||||||
Selling and administrative expenses | — | — | (509,169 | ) | (509,169 | ) | ||||||||||
Interest income | — | — | 5,929 | 5,929 | ||||||||||||
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Income before income taxes | $ | 628,471 | ||||||||||||||
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Capital expenditures | 360,898 | 49,119 | 45,245 | 455,262 | ||||||||||||
Segment assets: | ||||||||||||||||
Accounts receivable, net | 5,536,738 | 365,400 | — | 5,902,138 | ||||||||||||
Inventories, net | 3,959,195 | 904,857 | — | 4,864,052 | ||||||||||||
Property, plant and equipment, net | 9,259,723 | 1,482,052 | 512,388 | 11,254,163 | ||||||||||||
Other assets | 8,351,574 | 8,351,574 | ||||||||||||||
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$ | 30,371,927 | |||||||||||||||
|
| |||||||||||||||
Three Months Ended September 30, 2014: | ||||||||||||||||
Net sales | $ | 8,295,936 | $ | 699,889 | $ | — | $ | 8,995,825 | ||||||||
Depreciation | 279,258 | 16,066 | 18,440 | 313,764 | ||||||||||||
Segment operating profit | 1,110,078 | 157,153 | — | 1,267,231 | ||||||||||||
Selling and administrative expenses | — | — | (504,849 | ) | (504,849 | ) | ||||||||||
Interest income | — | — | 6,375 | 6,375 | ||||||||||||
|
| |||||||||||||||
Income before income taxes | $ | 768,757 | ||||||||||||||
|
| |||||||||||||||
Capital expenditures | 532,879 | — | 16,170 | 549,049 | ||||||||||||
Segment assets: | ||||||||||||||||
Accounts receivable, net | 5,615,498 | 345,807 | — | 5,961,305 | ||||||||||||
Inventories, net | 4,479,552 | 803,199 | — | 5,282,751 | ||||||||||||
Property, plant and equipment, net | 9,199,056 | 1,110,475 | 515,138 | 10,824,669 | ||||||||||||
Other assets | 7,543,989 | 7,543,989 | ||||||||||||||
|
| |||||||||||||||
$ | 29,612,714 | |||||||||||||||
|
|
9
CHICAGO RIVET & MACHINE CO.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)STATEMENTS
(Unaudited)
Fastener | Assembly Equipment | Other | Consolidated | Fastener | Assembly Equipment | Other | Consolidated | |||||||||||||||||||||||||
Six Months Ended June 30, 2015: | ||||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2015: | ||||||||||||||||||||||||||||||||
Net sales | $ | 16,676,760 | $ | 1,813,205 | $ | — | $ | 18,489,965 | $ | 24,830,182 | $ | 2,678,055 | $ | — | $ | 27,508,237 | ||||||||||||||||
Depreciation | 549,364 | 40,194 | 37,917 | 627,475 | 825,616 | 60,291 | 57,688 | 943,595 | ||||||||||||||||||||||||
Segment operating profit | 2,147,400 | 537,591 | — | 2,684,991 | 3,041,262 | 775,440 | — | 3,816,702 | ||||||||||||||||||||||||
Selling and administrative expenses | — | — | (1,170,607 | ) | (1,170,607 | ) | — | — | (1,679,776 | ) | (1,679,776 | ) | ||||||||||||||||||||
Interest income | — | — | 13,050 | 13,050 | — | — | 18,979 | 18,979 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Income before income taxes | $ | 1,527,434 | $ | 2,155,905 | ||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Capital expenditures | 459,543 | 399,142 | 28,170 | 886,855 | 820,441 | 448,261 | 73,415 | 1,342,117 | ||||||||||||||||||||||||
Six Months Ended June 30, 2014: | ||||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2014: | ||||||||||||||||||||||||||||||||
Net sales | $ | 17,852,329 | $ | 1,598,773 | $ | — | $ | 19,451,102 | $ | 26,148,265 | $ | 2,298,662 | $ | — | $ | 28,446,927 | ||||||||||||||||
Depreciation | 550,354 | 32,132 | 36,250 | 618,736 | 829,612 | 48,198 | 54,690 | 932,500 | ||||||||||||||||||||||||
Segment operating profit | 2,397,152 | 401,397 | — | 2,798,549 | 3,507,230 | 558,550 | — | 4,065,780 | ||||||||||||||||||||||||
Selling and administrative expenses | — | — | (1,081,984 | ) | (1,081,984 | ) | — | — | (1,586,833 | ) | (1,586,833 | ) | ||||||||||||||||||||
Interest income | — | — | 12,862 | 12,862 | — | — | 19,237 | 19,237 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Income before income taxes | $ | 1,729,427 | $ | 2,498,184 | ||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Capital expenditures | 769,335 | 21,540 | 9,212 | 800,087 | 1,302,214 | 21,540 | 25,382 | 1,349,136 |
10
CHICAGO RIVET & MACHINE CO.
Item 2. Management’s2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Results of Operations
RevenuesNet sales in the third quarter were $9,018,272 this year, compared to $8,995,825 in the third quarter of 2014, a 0.2% increase. As of September 30, 2015, year to date sales totaled $27,508,237 compared to $28,446,927, for the second quarter of 2015 were $9,206,174 compared to $9,500,678 in the second quarterfirst three quarters of 2014, a decline of $294,504, or 3.1%. Despite the lower sales, net income for the second quarter of 2015 was relatively unchanged from the previous year due to favorable raw material prices, reductions in certain production expenses and an increase in higher margin assembly equipment sales. Net income for the second quarter of 2015 was $570,961, or $0.59 per share, compared with $569,054, or $0.59 per share, in the second quarter of 2014. For the first half of 2015, net sales totaled $18,489,965 compared to $19,451,102 in the first half of 2014, a decline of $961,137, or 4.9%3.3%. Net income for the third quarter was $422,471, or $0.44 per share, compared with $540,757, or $0.56 per share, in the third quarter of 2014. Net income for the first halfthree quarters of 2015 was $1,033,434,$1,455,905, or $1.07$1.51 per share, compared to $1,137,427,with $1,678,184, or $1.18$1.74 per share, reported in 2014. Contributing to the first half of 2014.
Fastener segment revenuesless profitable results for the secondthird quarter of 2015and the current year to date were $8,276,263, a decline of $488,331, or 5.6%, compared to $8,764,594 reportedlower fastener segment sales and increases in certain overhead costs.
In the secondthird quarter, of 2014. For the first six months of 2015, fastener segment revenues were $16,676,760, compared to $17,852,329$8,153,422, down $142,514, or 1.7%, from $8,295,936 in the year earlier quarter. For the first halfthree quarters of 2014, a decline of $1,175,569,the year, fastener segment revenues have declined $1,318,083, or 6.6%.5.0%, to $24,830,182 from $26,148,265 in 2014. Sales to the China location of a certain automotive customer improved to levels comparable to 2014slowed dramatically during the secondthird quarter after being downand declined approximately $269,000 in$288,000 compared to the first quarter, but demand from certain other automotive customers remained below thatyear earlier quarter. On a year to date basis, the decline accounted for approximately $592,000 of the prior year. Due in part to a $49,000 reduction in tooling expense and a $69,000 reduction in production supplies expense, as well as favorable raw material prices during the quarter, the declinenet decrease in fastener segment sales in the current year. Fastener segment gross margins caused bymargin was $1,600,848 in the third quarter compared to $1,857,682 in the third quarter of 2014, as lower sales was limited to $118,254 during the second quarter. For the first half of 2015, tooling expense has been reduced $172,000 and production supplies expense has been reduced $130,000 compared to the first half of 2014. Additionally, natural gas expense has declined $67,000, primarilyincreases in payroll and employee insurance negatively impacted margins in the first quarter, from the elevated level of 2014, partially offsetting the decline in sales and resulting in a $296,656 reduction inquarter. Fastener segment gross margin for the first halfthree quarters of 2015.2015 was $5,255,390 compared to $5,808,879 in 2014, a reduction of $553,489, or 9.5%. While we were able to achieve savings of $168,000 in tooling and $98,000 related to supplies, production payroll costs, including a $65,000 increase in employee insurance, did not fall in proportion to the lower sales.
Assembly equipment segment revenues were $929,911$864,850 in the secondthird quarter of 2015, an increase of $193,827,$164,961, or 26.3%23.6%, compared to the secondthird quarter of 2014, when revenues were $736,084.$699,889. The increase in secondthird quarter sales was primarily the result of an increase in the number and average price of machines shipped compared to the secondthird quarter of 2014 as well as improved sales2014. Sales of tools and parts.parts also improved during the quarter compared to the year earlier period. For the first halfthree quarters of the year, assembly equipment sales increased $214,432,were $2,678,055, an increase of $379,393, or 13.4%16.5%, to $1,813,205 compared to $1,598,773$2,298,662 reported for the first halfthree quarters of 2014. The increase in sales in the secondthird quarter and the first halfnine months of the year resulted in an improvement in segment margins of $125,257$98,700 and $135,216,$216,914, respectively.
Selling and administrative expenses for the secondthird quarter of 2015 were $1,408,854, an increase$1,294,140, a decline of $28,968,$32,771, or 2.1%2.5%, compared withto the year earlier quarter total of $1,379,886. Approximately $20,000 of$1,326,911. The decrease is due in part to a $19,000 reduction in consulting expense in the increase wasquarter, related to ISO/TS 16949:2009 quality certification efforts in 2014, and an $18,000 decline in profit sharing expense related to lower profitability in the current year quarter. Additionally, payroll and payroll related expenses.expenses declined $25,000 during the quarter compared to last year. The remaining netlargest item to partially offset these declines was a $17,000 increase related to smaller individual items.computer system upgrades during the quarter. For the first six monthsthree quarters of the year,2015, selling and administrative expenses were $4,128,819 compared to $4,120,849 for the same period of 2014, an increase of $7,970, or 0.2%. Year to date, consulting expenses have increased $40,741, or 1.5%, from $2,793,938 in 2014, to $2,834,679 in 2015. Payroll and related expenses account for approximately $30,000 of the increase during the first half of 2015. The most significant item of reduction isdeclined $27,000 while profit sharing expense whichhas declined $40,000. Partially offsetting these declines is down $22,000 compareda $38,000 increase in maintenance and supplies primarily related to the first half of last year,computer system upgrades and an $18,000 increase in employee insurance expense due to lower profits. Repairs and maintenance increased $14,000 in the first halfhigher rates. The remaining net difference is comprised of the year, due to nonrecurring building maintenance, and othervarious smaller items made up the remaining net increase.of change. While the overall current year increase has been modest, selling and administrative expenses as a percentage of net sales for the first halfnine months of 2015 increased to 15.3%15.0%, from 14.4%14.5% in 2014, due to the net decline in sales.
Other Income
Other income in the secondthird quarter of 2015 was $10,305,$12,053, compared to $10,433$9,975 in the secondthird quarter of 2014. Other income for the first halfthree quarters of 2015 was $20,738,$32,791, compared to $20,550$30,525 in the first sixnine months of 2014. Other income consists primarily of interest income on certificates of deposit.
Income Tax Expense
The Company’s effective tax rates were approximately 32.7%32.8% and 34.7%29.7% for the secondthird quarter of 2015 and 2014, respectively, and 32.3%32.5% and 34.2%32.8% for the sixnine months ended JuneSeptember 30, 2015 and 2014, respectively. Rates were lower than the U.S. federal statutory rate in 2015 primarily due to the Domestic Production Activities Deduction allowed under Internal Revenue Code Section 199.
11
Liquidity and Capital Resources
Working capital at Juneas of September 30, 2015 amounted to $16.1$16.2 million, an increase of approximately $.2$.3 million from the beginning of the year. The most significant change in the individual working capital components since the beginning of the year was the net increase in cash, cash equivalents and certificates of deposits. Capital expenditures for the first halfthree quarters of 2015 were $.9$1.3 million, which primarily consisted of approximately $387,000 for equipment used in production activities.our fastener segment operations, $407,000 for equipment used in our assembly equipment segment, $336,000 for the building expansion at H & L Tool and the remainder for various building and computer system upgrades. Dividends paid in the first twothree quarters were $.6$.8 million, including twothree regular quarterly payments of $.18 per share and an extra dividend of $.25 per share paid in the first quarter. The net result of these changes and other cash flow items on cash, cash equivalents and certificates of deposit was a $.6to increase such balances by $1.1 million, increase in such total balances from the beginning of the year, to $6.9$7.4 million. Management believes that current cash, cash equivalents and operating cash flow will provide adequate coverage for working capital for the next twelve months.months and the Madison Heights, Michigan expansion.
Results of Operations Summary
Sales in the secondthird quarter were mixed, with the increase in assembly equipment sales more thanbeing largely offset by lower fastener segment sales. Fastener segment demand remained uneven during the secondthird quarter, but improved order activity for machines resulted in strong assembly equipment sales compared to last year. Conditions in the automotive market, upon which we rely for the majority of our revenues, remain favorable, even though foreign shipments, especially to China, trail last year. We have made adjustments to our operations in response to changing demand and will continue to emphasize cost controls wherever possible. Cost savings achieved during the second quarter resulted in net income that was relatively unchanged from the second quarter of 2014, at $.59 per share, despite the lower sales. Although the domestic economy did not perform as well as projected in the first half of 2015, ourOur financial condition remains sound and has allowed us to continue to make investments in our operations in an effort to remain competitive and report positive operating results.
Forward-Looking Statements
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.
12
CHICAGO RIVET & MACHINE CO.
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.
13
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 |
14
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: November 6, 2015
/s/ John A. Morrissey | ||||||
John A. Morrissey | ||||||
Chairman of the Board of Directors and Chief Executive Officer | ||||||
(Principal Executive Officer) |
Date: November 6, 2015
/s/ Michael J. Bourg | ||||||
Michael J. Bourg | ||||||
President, Chief Operating Officer and Treasurer | ||||||
(Principal Financial Officer) |
15
CHICAGO RIVET & MACHINE CO.
EXHIBITS
INDEX TO EXHIBITS
Exhibit Number | Page | Page | ||||||||
31 | Rule 13a-14(a) or 15d-14(a) Certifications | 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 | 17 | 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 | ||||||
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 | 18 | Certification Pursuant to Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | 18 | ||||||
32 | Section 1350 Certifications | 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 | 19 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | 19 | ||||||
32.2 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | 20 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | 20 | ||||||
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, 2015 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. | 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 September 30, 2015 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. |
16