UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 10-Q

 

 

(Mark One)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31,June 30, 2016

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 May 2,August 1, 2016, there were 966,132 shares of the registrant’s common stock outstanding.

 

 

 


CHICAGO RIVET & MACHINE CO.

INDEX

 

PART I. 

FINANCIAL INFORMATION (Unaudited)

   Page  

PART I.

FINANCIAL INFORMATION (Unaudited)

Condensed Consolidated Balance Sheets at March 31,June 30, 2016 and December 31, 2015

   2-3  

Condensed Consolidated Statements of Income for the Three and Six Months Ended March 31,June 30, 2016 and 2015

   4  

Condensed Consolidated Statements of Retained Earnings for the ThreeSix Months Ended March 31,June 30, 2016 and 2015

   5  

Condensed Consolidated Statements of Cash Flows for the ThreeSix Months Ended March 31,June 30, 2016 and 2015

   6  

Notes to the Condensed Consolidated Financial Statements

   7-87-10  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

   9-1011-12

Controls and Procedures

13  
PART II. 

Controls and ProceduresOTHER INFORMATION

   11

PART II.

OTHER INFORMATION12-1814-20  

Item 1. Financial Statements.

CHICAGO RIVET & MACHINE CO.

Condensed Consolidated Balance Sheets

March 31,June 30, 2016 and December 31, 2015

 

  March 31,
2016
   December 31,
2015
   June 30,
2016
   December 31,
2015
 
  (Unaudited)       (Unaudited)     

Assets

        

Current Assets:

        

Cash and cash equivalents

  $965,148    $800,894    $907,384    $800,894  

Certificates of deposit

   6,067,000     6,565,000     6,565,000     6,565,000  

Accounts receivable - Less allowances of $150,000

   6,111,917     5,438,332  

Accounts receivable—Less allowances of $150,000

   6,278,622     5,438,332  

Inventories, net

   4,919,704     4,538,212     4,991,208     4,538,212  

Prepaid income taxes

   —       273,112     —       273,112  

Other current assets

   386,448     383,953     319,604     383,953  
  

 

   

 

   

 

   

 

 

Total current assets

   18,450,217     17,999,503     19,061,818     17,999,503  
  

 

   

 

   

 

   

 

 

Property, Plant and Equipment:

        

Land and improvements

   1,281,982     1,281,982     1,424,689     1,281,982  

Buildings and improvements

   7,531,420     7,271,006     7,478,507     7,271,006  

Production equipment and other

   33,378,011     33,295,529     33,613,257     33,295,529  
  

 

   

 

   

 

   

 

 
   42,191,413     41,848,517     42,516,453     41,848,517  

Less accumulated depreciation

   30,192,944     30,150,074     30,488,131     30,150,074  
  

 

   

 

   

 

   

 

 

Net property, plant and equipment

   11,998,469     11,698,443     12,028,322     11,698,443  
  

 

   

 

   

 

   

 

 

Total assets

  $30,448,686    $29,697,946    $31,090,140    $29,697,946  
  

 

   

 

   

 

   

 

 

See Notes to the Condensed Consolidated Financial Statements

CHICAGO RIVET & MACHINE CO.

Condensed Consolidated Balance Sheets

March 31,June 30, 2016 and December 31, 2015

 

  March 31,
2016
 December 31,
2015
   June 30,
2016
 December 31,
2015
 
  (Unaudited)     (Unaudited)   

Liabilities and Shareholders’ Equity

      

Current Liabilities:

      

Accounts payable

  $1,420,080   $768,111    $1,240,204   $768,111  

Accrued wages and salaries

   633,925   611,484     892,712   611,484  

Other accrued expenses

   337,372   465,662     470,217   465,662  

Unearned revenue and customer deposits

   448,189   467,189     263,732   467,189  
  

 

  

 

   

 

  

 

 

Total current liabilities

   2,839,566   2,312,446     2,866,865   2,312,446  

Deferred income taxes

   886,084   894,084     879,084   894,084  
  

 

  

 

   

 

  

 

 

Total liabilities

   3,725,650   3,206,530     3,745,949   3,206,530  
  

 

  

 

 
  

 

  

 

 

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  

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     447,134   447,134  

Retained earnings

   29,059,904   28,828,284     29,681,059   28,828,284  

Treasury stock, 171,964 shares at cost

   (3,922,098 (3,922,098   (3,922,098 (3,922,098
  

 

  

 

   

 

  

 

 

Total shareholders’ equity

   26,723,036   26,491,416     27,344,191   26,491,416  
  

 

  

 

   

 

  

 

 

Total liabilities and shareholders’ equity

  $30,448,686   $29,697,946    $31,090,140   $29,697,946  
  

 

  

 

   

 

  

 

 

See Notes to the Condensed Consolidated Financial Statements

CHICAGO RIVET & MACHINE CO.

Condensed Consolidated Statements of Income

For the Three and Six Months Ended March 31,June 30, 2016 and 2015

(Unaudited)

 

  Three Months Ended
June 30,
   Six Months Ended
June 30,
 
  2016   2015   2016   2015   2016   2015 

Net sales

  $9,596,395    $9,283,791    $9,820,730    $9,206,174    $19,417,125    $18,489,965  

Cost of goods sold

   7,167,778     7,189,926     7,211,820     6,958,664     14,379,598     14,148,590  
  

 

   

 

   

 

   

 

   

 

   

 

 

Gross profit

   2,428,617     2,093,865     2,608,910     2,247,510     5,037,527     4,341,375 ��

Selling and administrative expenses

   1,458,719     1,425,825     1,449,902     1,408,854     2,908,621     2,834,679  
  

 

   

 

   

 

   

 

   

 

   

 

 

Operating profit

   969,898     668,040     1,159,008     838,656     2,128,906     1,506,696  

Other income

   13,159     10,433     16,051     10,305     29,210     20,738  
  

 

   

 

   

 

   

 

   

 

   

 

 

Income before income taxes

   983,057     678,473     1,175,059     848,961     2,158,116     1,527,434  

Provision for income taxes

   336,000     216,000     380,000     278,000     716,000     494,000  
  

 

   

 

   

 

   

 

   

 

   

 

 

Net income

  $647,057    $462,473    $795,059    $570,961    $1,442,116    $1,033,434  
  

 

   

 

   

 

   

 

   

 

   

 

 

Per share data, basic and diluted:

            

Net income per share

  $0.67    $0.48    $0.82    $0.59    $1.49    $1.07  
  

 

   

 

   

 

   

 

   

 

   

 

 

Average common shares outstanding

   966,132     966,132     966,132     966,132     966,132     966,132  
  

 

   

 

   

 

   

 

   

 

   

 

 

Cash dividends declared per share

  $0.43    $0.43    $0.18    $0.18    $0.61    $0.61  
  

 

   

 

   

 

   

 

   

 

   

 

 

See Notes to the Condensed Consolidated Financial Statements

CHICAGO RIVET & MACHINE CO.

Condensed Consolidated Statements of Retained Earnings

For the ThreeSix Months Ended March 31,June 30, 2016 and 2015

(Unaudited)

 

  2016 2015   2016 2015 

Retained earnings at beginning of period

  $28,828,284   $28,077,791    $28,828,284   $28,077,791  

Net income

   647,057   462,473     1,442,116   1,033,434  

Cash dividends declared in the period; $.43 per share in 2016 and 2015

   (415,437 (415,437

Cash dividends declared in the period; $.61 per share in 2016 and 2015

   (589,341 (589,341
  

 

  

 

   

 

  

 

 

Retained earnings at end of period

  $29,059,904   $28,124,827    $29,681,059   $28,521,884  
  

 

  

 

   

 

  

 

 

See Notes to the Condensed Consolidated Financial Statements

CHICAGO RIVET & MACHINE CO.

Condensed Consolidated Statements of Cash Flows

For the ThreeSix Months Ended March 31,June 30, 2016 and 2015

(Unaudited)

 

  2016 2015   2016 2015 

Cash flows from operating activities:

      

Net income

  $647,057   $462,473    $1,442,116   $1,033,434  

Adjustments to reconcile net income to net cash provided by operating activities:

     

Depreciation

   299,355   312,645     607,477   627,475  

(Gain) loss on disposal of equipment

   (1,022 1,088  

Loss on disposal of equipment

   318   3,719  

Deferred income taxes

   (8,000 (24,000   (15,000 (38,000

Changes in operating assets and liabilities:

      

Accounts receivable

   (673,585 (597,655   (840,290 (236,992

Inventories

   (381,492 126,926     (452,996 151,945  

Other current assets

   270,617   97,985     337,461   63,541  

Accounts payable

   649,419   316,075     469,508   230,949  

Accrued wages and salaries

   22,441   196,379     281,228   284,720  

Other accrued expenses

   (128,290 (242,674   4,555   (134,562

Unearned revenue and customer deposits

   (19,000 114,852     (203,457 104,962  
  

 

  

 

   

 

  

 

 

Net cash provided by operating activities

   677,500   764,094     1,630,920   2,091,191  
  

 

  

 

   

 

  

 

 

Cash flows from investing activities:

      

Capital expenditures

   (596,831 (371,216   (936,111 (868,605

Proceeds from the sale of equipment

   1,022    —       1,022    —    

Proceeds from certificates of deposit

   1,494,000   1,843,000     2,988,000   4,813,000  

Purchases of certificates of deposit

   (996,000 (1,594,000   (2,988,000 (4,075,000
  

 

  

 

   

 

  

 

 

Net cash used in investing activities

   (97,809 (122,216   (935,089 (130,605
  

 

  

 

   

 

  

 

 

Cash flows from financing activities:

      

Cash dividends paid

   (415,437 (415,437   (589,341 (589,341
  

 

  

 

   

 

  

 

 

Net cash used in financing activities

   (415,437 (415,437   (589,341 (589,341
  

 

  

 

   

 

  

 

 

Net increase in cash and cash equivalents

   164,254   226,441     106,490   1,371,245  

Cash and cash equivalents at beginning of period

   800,894   231,252     800,894   231,252  
  

 

  

 

   

 

  

 

 

Cash and cash equivalents at end of period

  $965,148   $457,693    $907,384   $1,602,497  
  

 

  

 

   

 

  

 

 

Supplemental schedule of non-cash investing activities:

      

Capital expenditures in accounts payable

  $2,550   $42,468    $2,585   $18,250  

See Notes to the Condensed Consolidated Financial Statements

CHICAGO RIVET & MACHINE CO.

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 March 31,June 30, 2016 (unaudited) and December 31, 2015 (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, 2015.

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 monthand six-month period ended March 31,ending June 30, 2016 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 34.2%32.3% and 31.8%32.7% for the firstsecond quarter of 2016 and 2015, respectively, and 33.2% and 32.3% for the six months ended June 30, 2016 and 2015, respectively. The rate wasRates 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.

In November 2015, the Financial Accounting Standards Board issued Accounting Standards Update No. 2015-17 “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”) to simplify the presentation of deferred income taxes. Under this update, all deferred income tax assets and liabilities, along with any related valuation allowance, are required to be classified as noncurrent on the balance sheet. Effective January 1, 2016, the Company early adopted ASU No. 2015-17 and retrospectively reclassified $425,191 of current deferred income tax assets to long-term deferred income tax liability on the December 31, 2015 consolidated balance sheet.

The Company’s federal income tax returns for the 2012 through 2015 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 2012 through 2015 federal income tax returns will expire on September 15, 2016 through 2019, respectively.

The Company’s state income tax returns for the 2012 through 2015 tax years remain subject to examination by various state authorities with the latest closing period on October 31, 2019. The Company is 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, 2016   December 31, 2015 

Raw material

  $2,034,329    $1,923,932  

Work-in-process

   1,976,821     1,606,389  

Finished goods

   1,539,058     1,584,891  
  

 

 

   

 

 

 

Inventory, gross

   5,550,208     5,115,212  

Valuation reserves

   (559,000   (577,000
  

 

 

   

 

 

 

Inventory, net

  $4,991,208    $4,538,212  
  

 

 

   

 

 

 

   March 31, 2016   December 31, 2015 

Raw material

  $1,782,163    $1,923,932  

Work-in-process

   1,792,635     1,606,389  

Finished goods

   1,920,906     1,584,891  
  

 

 

   

 

 

 

Inventory, gross

   5,495,704     5,115,212  

Valuation reserves

   (576,000   (577,000
  

 

 

   

 

 

 

Inventory, net

  $4,919,704    $4,538,212  
  

 

 

   

 

 

 

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 fasteners 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 March 31, 2016:

       

Three Months Ended June 30, 2016:

        

Net sales

  $8,447,329    $1,149,066    $—     $9,596,395    $8,858,036    $962,694    $—      $9,820,730  

Depreciation

   260,823     21,582     16,950   299,355     268,450     22,032     17,640     308,122  

Segment operating profit

   1,226,361     433,199     —     1,659,560     1,487,070     345,575     —       1,832,645  

Selling and administrative expenses

   —       —       (685,262 (685,262   —       —       (667,149   (667,149

Interest income

   —       —       8,759   8,759     —       —       9,563     9,563  
       

 

         

 

 

Income before income taxes

       $983,057          $1,175,059  
       

 

         

 

 

Capital expenditures

   409,785     181,368     8,228   599,381     298,237     7,180     33,898     339,315  

Segment assets:

               

Accounts receivable, net

   5,701,331     410,586     —     6,111,917     5,979,118     299,504     —       6,278,622  

Inventories, net

   3,951,985     967,719     —     4,919,704     3,976,986     1,014,222     —       4,991,208  

Property, plant and equipment, net

   9,858,184     1,628,796     511,489   11,998,469     9,887,971     1,613,944     526,407     12,028,322  

Other assets

   —       —       7,418,596   7,418,596     —       —       7,791,988     7,791,988  
       

 

         

 

 
       $30,448,686          $31,090,140  
       

 

         

 

 

Three Months Ended March 31, 2015:

       

Three Months Ended June 30, 2015:

        

Net sales

  $8,400,497    $883,294    $—     $9,283,791    $8,276,263    $929,911    $—      $9,206,174  

Depreciation

   273,752     20,097     18,796   312,645     275,612     20,097     19,121     314,830  

Segment operating profit

   1,018,047     244,589     —     1,262,636     1,129,353     293,002     —       1,422,355  

Selling and administrative expenses

   —       —       (590,996 (590,996   —       —       (579,611   (579,611

Interest income

   —       —       6,833   6,833     —       —       6,217     6,217  
       

 

         

 

 

Income before income taxes

       $678,473          $848,961  
       

 

         

 

 

Capital expenditures

   350,817     54,775     8,092   413,684     108,726     344,367     20,078     473,171  

Segment assets:

               

Accounts receivable, net

   5,815,951     451,358     —     6,267,309     5,546,859     359,787     —       5,906,646  

Inventories, net

   4,187,776     847,772     —     5,035,548     4,148,131     862,398     —       5,010,529  

Property, plant and equipment, net

   9,344,594     1,147,395     485,957   10,977,946     9,175,077     1,471,665     486,914     11,133,656  

Other assets

   —       —       6,690,777   6,690,777     —       —       7,829,216     7,829,216  
       

 

         

 

 
       $28,971,580          $29,880,047  
       

 

         

 

 

CHICAGO RIVET & MACHINE CO.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

   Fastener   Assembly
Equipment
   Other   Consolidated 

Six Months Ended June 30, 2016:

        

Net sales

  $17,305,365    $2,111,760    $—      $19,417,125  

Depreciation

   529,273     43,614     34,590     607,477  

Segment operating profit

   2,713,431     778,774     —       3,492,205  

Selling and administrative expenses

   —       —       (1,352,411   (1,352,411

Interest income

   —       —       18,322     18,322  
        

 

 

 

Income before income taxes

        $2,158,116  
        

 

 

 

Capital expenditures

   708,022     188,548     42,126     938,696  

Six Months Ended June 30, 2015:

        

Net sales

  $16,676,760    $1,813,205    $—      $18,489,965  

Depreciation

   549,364     40,194     37,917     627,475  

Segment operating profit

   2,147,400     537,591     —       2,684,991  

Selling and administrative expenses

   —       —       (1,170,607   (1,170,607

Interest income

   —       —       13,050     13,050  
        

 

 

 

Income before income taxes

        $1,527,434  
        

 

 

 

Capital expenditures

   459,543     399,142     28,170     886,855  

CHICAGO RIVET & MACHINE CO.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Results of Operations

Revenues for the firstsecond quarter of 2016 were $9,596,395$9,820,730, an increase of $614,556, or 6.7%, compared to $9,283,791 inthe second quarter of 2015, and an increase of $224,335, or 2.3%, compared to the first quarter of 2015, an increase2016. Net income for the second quarter of $312,604,2016 was $795,059, or 3.4%. The increase is primarily attributable to strong machine sales and improved demand from automotive customers in China. A more profitable sales mix and favorable raw material prices resulted in improved gross margins$0.82 per share, compared to a year earlier. Net income was$570,961, or $0.59 per share, in the second quarter of 2015 and $647,057, or $0.67 per share, in the first quarter of this year2016. For the first half of 2016, net sales totaled $19,417,125 compared to $462,473, or $0.48 per share,$18,489,965 in the first quarterhalf of 2015. In addition to a regular quarterly dividend2015, an increase of $0.18$927,160, or 5.0%. Net income for the first half of 2016 was $1,442,116, or $1.49 per share, an extra dividend of $0.25compared to $1,033,434, or $1.07 per share, was paidreported in the first half of 2015, an increase of 39.5%. The increase in net income during the second quarter based onand year to date is primarily attributable to higher sales in both operating segments, a more profitable sales mix and favorable raw material prices compared to the positive results achieved in 2015.year earlier periods.

Fastener segment revenues were $8,447,329$8,858,036 in the firstsecond quarter of 2016, an increase of $46,832,$581,773, or 0.6%7.0%, from $8,400,497compared to $8,276,263 reported in the second quarter of 2015 and a 4.9% increase over the first quarter of 2015.2016. For the first six months of 2016, fastener segment revenues were $17,305,365, compared to $16,676,760 in the first half of 2015, an increase of $628,605, or 3.8%. The increase in sales reflectsexceeded the modest growthpercentage increase in North AmericanU.S. vehicle sales in the first half of 2016. The automotive sector is the primary market for our fastener segment products. Other than the increase in sales during the first quarter of 2016 and reduced demand for certain non-automotive parts. Overall, fastener segment overhead in the first quarter was consistent with thecurrent year, earlier quarter, however, favorable raw material prices resultedwas the most significant factor resulting in improved gross margins incompared to the current year.year earlier periods. The net impact of these factors was to increase fastener segment gross margin by $244,506.$402,550 in the second quarter of 2016 compared to the second quarter of 2015 and to increase gross margin by $647,056 in the first half of 2016 compared to the first half of 2015.

Assembly equipment segment revenues were $1,149,066$962,694 in the firstsecond quarter of 2016, an increase of $32,783, or 3.5%, compared to $883,294 in the firstsecond quarter of 2015, when revenues were $929,911. For the first half of the year, assembly equipment sales were $2,111,760, an increase of $265,772,$298,555, or 30.1%.16.5%, from $1,813,205 reported for the first half of 2015. The increase in revenuesales during the second quarter and first six months of the year was primarily due to an increase in the number of machines shippedshipped. However, tools and parts sales have declined during the current year, contributing to lower gross margin of $41,150 in the second quarter of 2016 compared to the second quarter of 2015. Gross margins for the first half of 2016 exceed the first six months of 2015 by $49,096, primarily due to the strength of machine sales in the current year quarter compared to last year. The increase in revenue during the quarter, while keeping manufacturing costs comparable to the same period last year, resulted in an improvement in segment margins of $90,246 in the first quarter of 2016. As of the end of the first quarter, the machine order backlog has improved over that of a year earlier.

Selling and administrative expenses duringfor the firstsecond quarter of 2016 were $1,458,719,$1,449,902, an increase of $32,894,$41,048, or 2.3%2.9%, compared to $1,425,825 recorded inwith the firstyear earlier quarter total of 2015.$1,408,854. An increase in profit sharing expense, due to improved operating results, was primarily responsibleaccounts for $33,000 of the change. Comparedchange, with the remainder of the net increase related to net sales,smaller individual items. For the first six months of the year, selling and administrative expenses declinedhave increased $73,942, or 2.6%, to 15.2%$2,908,621 from $2,834,679 in 2015. Profit sharing expense has increased $73,000 in the current year compared to the first quarterhalf of 2015, due to the improvement in operating profit. Selling and administrative expenses as a percentage of net sales for the first half of 2016 are relatively unchanged from 15.4% in the first quarter of 2015.a year earlier at 15.3%.

Other Income

Other income in the firstsecond quarter of 2016 was $13,159,$16,051, compared to $10,433$10,305 in the second quarter of 2015. Other income for the first half of 2016 was $29,210, compared to $20,738 in the first quartersix months of 2015. The increase isOther income consists primarily related to an increase inof interest income on certificates of deposit.

Income Tax Expense

The Company’s effective tax rates were approximately 34.2%32.3% and 31.8%32.7% for the firstsecond quarter of 2016 and 2015, respectively, and 33.2% and 32.3% for the six months ended June 30, 2016 and 2015, respectively. The 2015 rate wasRates were lower than the U.S. federal statutory rate primarily due to the Domestic Production Activities Deduction allowed under Internal Revenue Code Section 199.

Liquidity and Capital Resources

Working capital at June 30, 2016 amounted to $15.6$16.2 million, as of March 31, 2016, a decreasean increase of approximately $0.1$.5 million from the beginning of the current year. The largest component of the net change in the first quarter was accounts receivable, which increased by $0.7$0.8 million due to greater sales activity during the quarter compared to the seasonally lower fourth quarter of 2015. Offsetting this change was an increase of $0.6$0.5 million in accounts payable, which relates to the greater level of activity in the quarter, and a reduction in prepaid income taxes of $0.3 million since the beginning of the year. Capital expenditures for the first half of 2016 were $.9 million, which primarily consisted of equipment used in production activities. Dividends paid in the first two quarters were $.6 million, including two 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 was to leaveon cash, cash equivalents and certificates of deposit at $7was a $.1 million at March 31, 2016 compared to $7.4 million as ofincrease in such total balances from the beginning of the year.year, to $7.5 million. Management believes that current cash, cash equivalents and operating cash flow will provide adequate working capital for the next twelve months.

Results of Operations Summary

We are pleased to report improvement in both sales and net income in the second quarter and first quarter. Demandhalf of 2016. The automotive sector, upon which we rely for the majority of our fastener segment productssales, remains stablehealthy, but the pace of growth in that market in first half of 2016 was less than in recent years and is supported by a healthy domestic automotive market. Althoughmay have plateaued. Additionally, the fastener

segment benefitedbenefits derived from lower material prices during the first quarter of 2016, we have experienced some increases early in the second quarter that arecan reverse quickly and would be difficult to mitigate. Our assembly equipment segment should benefithas benefited from strong demand for machines in the near-term from a machine order backlog which exceedsrecent quarters, however, that of one year ago. Our financial condition remains sound anddemand has allowed us to investabated somewhat in recent months. During 2016 we have invested approximately $0.6$0.9 million in equipment and facilities improvements during the first quarter. Wewhich we feel such investments are necessary towill help us remain competitive and allow us to pursue opportunities to profitably grow our revenues and improve our bottom line. We will continue to make adjustments to our activities which we feel are necessary based on conditions in our markets, while maintaining an emphasis on quality and reliability of service our customers demand.

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, risks related to export sales, 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.

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.

PART II – II—OTHER INFORMATION

Item 6. Exhibits

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 March 31,June 30, 2016 formatted in Extensible Business Reporting Language (XBRL): (1) Condensed Consolidated Balance Sheets, (2) Condensed Consolidated Statements of Income, (3) Condensed Consolidated Statements of Retained Earnings, (4) Condensed Consolidated Statements of Cash Flows, and (5) Notes to Condensed Consolidated Financial Statements.

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)

(Registrant)
Date: MayAugust 5, 2016  
  

/s/

John A. Morrissey

  John A. Morrissey
  

Chairman of the Board of Directors
and Chief Executive Officer
(Principal Executive Officer)

Date: August 5, 2016
  (Principal Executive Officer)
Date: May 5, 2016/s/ 

/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

      

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   15    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   16    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   17    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   18    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 March 31, 2016 formatted in Extensible Business Reporting Language (XBRL): (1) Condensed Consolidated Balance Sheets, (2) Condensed Consolidated Statements of Income, (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 June 30, 2016 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.  

 

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