UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017March 31, 2023
OR
o 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 | ||
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901 Frontenac Road, Naperville, Illinois | 60563 | |
(Address of Principal Executive Offices) | (Zip Code) |
(630) 357-8500
Registrant’s Telephone Number, Including Area Code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $1.00 per share | CVR | NYSE American (Trading privileges only, not registered) |
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 ☒ý No ☐o
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 ☒ý No ☐o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”,filer,” “accelerated filer”filer,” “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filero | Accelerated filer | |||||
Non-accelerated filerý | Smaller reporting company | ☒ | ||||
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ý
As of November 3, 2017,May 5, 2023 there were 966,132 shares of the registrant’s common stock outstanding.
CHICAGO RIVET & MACHINE CO.
INDEX
PART I —– FINANCIAL INFORMATION
Item 1. Financial Statements. |
Condensed Consolidated Balance Sheets
September 30, 2017 and December 31, 2016
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 759,138 | $ | 353,475 | ||||
Certificates of deposit | 7,312,000 | 8,059,000 | ||||||
Accounts receivable - Less allowances of $150,000 | 5,871,092 | 5,323,519 | ||||||
Inventories, net | 5,088,117 | 4,537,693 | ||||||
Prepaid income taxes | — | 56,112 | ||||||
Other current assets | 381,087 | 423,952 | ||||||
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Total current assets | 19,411,434 | 18,753,751 | ||||||
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Property, Plant and Equipment: | ||||||||
Land and improvements | 1,535,434 | 1,424,689 | ||||||
Buildings and improvements | 8,010,023 | 7,333,942 | ||||||
Production equipment and other | 34,410,155 | 34,447,193 | ||||||
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43,955,612 | 43,205,824 | |||||||
Less accumulated depreciation | 31,356,355 | 30,755,266 | ||||||
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Net property, plant and equipment | 12,599,257 | 12,450,558 | ||||||
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Total assets | $ | 32,010,691 | $ | 31,204,309 | ||||
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See Notes to the Condensed Consolidated Financial Statements
CHICAGO RIVET & MACHINE CO. | |||
Condensed Consolidated Balance Sheets | |||
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| March 31, 2023 (Unaudited) |
| December 31, 2022 |
Assets |
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Current Assets: |
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|
Cash and cash equivalents | $ 2,265,723 |
| $ 4,045,101 |
Certificates of deposit | 2,193,000 |
| 2,691,000 |
Accounts receivable - Less allowance of $160,000 | 6,173,074 |
| 4,975,137 |
Inventories, net | 9,998,952 |
| 9,121,230 |
Prepaid income taxes | 672,119 |
| 509,119 |
Other current assets | 420,199 |
| 422,747 |
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Total current assets | 21,723,067 |
| 21,764,334 |
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Property, Plant and Equipment: |
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Land and improvements | 1,510,513 |
| 1,510,513 |
Buildings and improvements | 6,758,266 |
| 6,758,266 |
Production equipment and other | 37,494,180 |
| 37,080,762 |
| 45,762,959 |
| 45,349,541 |
Less accumulated depreciation | 33,793,779 |
| 33,487,748 |
Net property, plant and equipment | 11,969,180 |
| 11,861,793 |
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Total assets | $ 33,692,247 |
| $ 33,626,127 |
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Liabilities and Shareholders' Equity |
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Current Liabilities: |
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Accounts payable | $ 1,621,403 |
| $ 697,235 |
Accrued wages and salaries | 675,078 |
| 462,332 |
Other accrued expenses | 115,734 |
| 327,961 |
Unearned revenue and customer deposits | 183,836 |
| 203,717 |
Total current liabilities | 2,596,051 |
| 1,691,245 |
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Deferred income taxes | 905,084 |
| 948,084 |
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Total liabilities | 3,501,135 |
| 2,639,329 |
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Commitments and contingencies (Note 3) |
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Shareholders' Equity: |
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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 | 32,527,980 |
| 33,323,666 |
Treasury stock, 171,964 shares at cost | (3,922,098) |
| (3,922,098) |
Total shareholders' equity | 30,191,112 |
| 30,986,798 |
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Total liabilities and shareholders' equity | $ 33,692,247 |
| $ 33,626,127 |
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See Notes to the Condensed Consolidated Financial Statements |
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CHICAGO RIVET & MACHINE CO.
Condensed Consolidated Balance Sheets
September 30, 2017 and December 31, 2016
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
(Unaudited) | ||||||||
Liabilities and Shareholders’ Equity | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 1,165,125 | $ | 703,467 | ||||
Accrued wages and salaries | 890,507 | 690,526 | ||||||
Other accrued expenses | 472,912 | 604,174 | ||||||
Unearned revenue and customer deposits | 240,851 | 286,133 | ||||||
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Total current liabilities | 2,769,395 | 2,284,300 | ||||||
Deferred income taxes | 958,084 | 1,028,084 | ||||||
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Total liabilities | 3,727,479 | 3,312,384 | ||||||
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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 | ||||||
Additionalpaid-in capital | 447,134 | 447,134 | ||||||
Retained earnings | 30,620,080 | 30,228,793 | ||||||
Treasury stock, 171,964 shares at cost | (3,922,098 | ) | (3,922,098 | ) | ||||
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Total shareholders’ equity | 28,283,212 | 27,891,925 | ||||||
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Total liabilities and shareholders’ equity | $ | 32,010,691 | $ | 31,204,309 | ||||
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CHICAGO RIVET & MACHINE CO. | |||
Condensed Consolidated Statements of Operations (Unaudited) | |||
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Three Months Ended March 31, 2023 |
| Three Months Ended March 31, 2022 | |
Net sales | $ 8,729,725 |
| $ 9,197,696 |
Cost of goods sold | 8,252,222 |
| 7,341,474 |
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Gross profit | 477,503 |
| 1,856,222 |
Selling and administrative expenses | 1,257,695 |
| 1,295,664 |
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Operating profit (loss) | (780,192) |
| 560,558 |
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Other income | 43,055 |
| 9,755 |
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Income (loss) before income taxes | (737,137) |
| 570,313 |
Provision (benefit) for income taxes | (154,000) |
| 123,000 |
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Net Income (loss) | $ (583,137) |
| $ 447,313 |
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Per share data: |
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Basic net income (loss) per share | $ (0.60) |
| $ 0.46 |
Diluted net income (loss) per share | $ (0.60) |
| $ 0.46 |
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Weighted average common shares outstanding: |
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Basic | 966,132 |
| 966,132 |
Diluted | 966,132 |
| 966,132 |
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Cash dividends declared per share | $ 0.22 |
| $ 0.22 |
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See Notes to the Condensed Consolidated Financial Statements |
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See Notes to the Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Income
For the Three and Nine Months Ended September 30, 2017 and 2016
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net sales | $ | 8,386,756 | $ | 8,854,274 | $ | 27,305,591 | $ | 28,271,399 | ||||||||
Cost of goods sold | 6,632,070 | 6,869,074 | 21,224,986 | 21,248,672 | ||||||||||||
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Gross profit | 1,754,686 | 1,985,200 | 6,080,605 | 7,022,727 | ||||||||||||
Selling and administrative expenses | 1,278,646 | 1,322,064 | 4,205,493 | 4,230,685 | ||||||||||||
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Operating profit | 476,040 | 663,136 | 1,875,112 | 2,792,042 | ||||||||||||
Other income | 24,795 | 16,193 | 68,000 | 45,403 | ||||||||||||
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Income before income taxes | 500,835 | 679,329 | 1,943,112 | 2,837,445 | ||||||||||||
Provision for income taxes | 165,000 | 217,000 | 634,000 | 933,000 | ||||||||||||
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Net income | $ | 335,835 | $ | 462,329 | $ | 1,309,112 | $ | 1,904,445 | ||||||||
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Per share data, basic and diluted: | ||||||||||||||||
Net income per share | $ | 0.35 | $ | 0.48 | $ | 1.36 | $ | 1.97 | ||||||||
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Average common shares outstanding | 966,132 | 966,132 | 966,132 | 966,132 | ||||||||||||
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Cash dividends declared per share | $ | 0.20 | $ | 0.18 | $ | 0.95 | $ | 0.79 | ||||||||
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CHICAGO RIVET & MACHINE CO. | ||||||||
Consolidated Statements of Shareholders’ Equity (Unaudited) | ||||||||
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| Common Stock |
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| Treasury Stock, At Cost |
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Preferred Stock Amount | Shares | Amount | Additional Paid-In Capital | Retained Earnings | Shares | Amount | Total Shareholders’ Equity | |
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Balance, December 31, 2022 | $ 0 | 966,132 | $ 1,138,096 | $ 447,134 | $ 33,323,666 | 171,964 | $ (3,922,098) | $ 30,986,798 |
Net Loss |
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| (583,137) |
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| (583,137) |
Dividends Declared ($0.22 per share) |
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| (212,549) |
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| (212,549) |
Balance, March 31, 2023 | $ 0 | 966,132 | $ 1,138,096 | $ 447,134 | $ 32,527,980 | 171,964 | $ (3,922,098) | $ 30,191,112 |
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Balance, December 31, 2021 | $ 0 | 966,132 | $ 1,138,096 | $ 447,134 | $ 31,306,233 | 171,964 | $ (3,922,098) | $ 28,969,365 |
Net Income |
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| 447,313 |
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| 447,313 |
Dividends Declared ($0.22 per share) |
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| (212,549) |
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| (212,549) |
Balance, March 31, 2022 | $ 0 | 966,132 | $ 1,138,096 | $ 447,134 | $ 31,540,997 | 171,964 | $ (3,922,098) | $ 29,204,129 |
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See Notes to the Condensed Consolidated Financial Statements. |
See Notes to the Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Retained Earnings
For the Nine Months Ended September 30, 2017 and 2016
(Unaudited)
2017 | 2016 | |||||||
Retained earnings at beginning of period | $ | 30,228,793 | $ | 28,828,284 | ||||
Net income | 1,309,112 | 1,904,445 | ||||||
Cash dividends declared in the period; $.95 per share in 2017 and $.79 in 2016 | (917,825 | ) | (763,245 | ) | ||||
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Retained earnings at end of period | $ | 30,620,080 | $ | 29,969,484 | ||||
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CHICAGO RIVET & MACHINE CO. | |||
Condensed Consolidated Statements of Cash Flows (Unaudited) | |||
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| Three Months Ended March 31, 2023 |
| Three Months Ended March 31, 2022 |
Cash flows from operating activities: |
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Net Income (loss) | $ (583,137) |
| $ 447,313 |
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
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Depreciation | 306,032 |
| 320,424 |
Deferred income taxes | (43,000) |
| (24,000) |
Changes in operating assets and liabilities: |
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Accounts receivable | (1,197,937) |
| (990,427) |
Inventories | (877,722) |
| (1,093,460) |
Other current assets | (160,452) |
| (37,522) |
Accounts payable | 924,168 |
| 754,192 |
Accrued wages and salaries | 212,746 |
| 197,065 |
Other accrued expenses | (212,227) |
| 53,411 |
Unearned revenue and customer deposits | (19,881) |
| (15,390) |
Net cash used in operating activities | (1,651,410) |
| (388,394) |
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Cash flows from investing activities: |
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Capital expenditures | (413,419) |
| (120,594) |
Proceeds from certificates of deposit | 498,000 |
| 0 |
Net cash provided by (used in) investing activities | 84,581 |
| (120,594) |
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Cash flows from financing activities: |
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Cash dividends paid | (212,549) |
| (212,549) |
Net cash used in financing activities | (212,549) |
| (212,549) |
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Net decrease in cash and cash equivalents | (1,779,378) |
| (721,537) |
Cash and cash equivalents at beginning of period | 4,045,101 |
| 2,036,954 |
Cash and cash equivalents at end of period | $ 2,265,723 |
| $ 1,315,417 |
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See Notes to the Condensed Consolidated Financial Statements |
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See Notes to the Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2017 and 2016
(Unaudited)
2017 | 2016 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 1,309,112 | $ | 1,904,445 | ||||
Adjustments to reconcile net income to net cash | ||||||||
provided by operating activities: | ||||||||
Depreciation | 922,347 | 919,392 | ||||||
Gain on disposal of equipment | (1,700 | ) | (1,782 | ) | ||||
Deferred income taxes | (70,000 | ) | 100,000 | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (547,573 | ) | (457,954 | ) | ||||
Inventories | (550,424 | ) | (266,082 | ) | ||||
Other current assets and prepaid income taxes | 98,977 | 183,385 | ||||||
Accounts payable | 460,171 | 354,223 | ||||||
Accrued wages and salaries | 199,981 | 335,212 | ||||||
Other accrued expenses | (131,262 | ) | 11,179 | |||||
Unearned revenue and customer deposits | (45,282 | ) | (194,796 | ) | ||||
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Net cash provided by operating activities | 1,644,347 | 2,887,222 | ||||||
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Cash flows from investing activities: | ||||||||
Capital expenditures | (1,069,559 | ) | (1,782,886 | ) | ||||
Proceeds from the sale of equipment | 1,700 | 3,122 | ||||||
Proceeds from certificates of deposit | 5,320,000 | 4,731,000 | ||||||
Purchases of certificates of deposit | (4,573,000 | ) | (4,980,000 | ) | ||||
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Net cash used in investing activities | (320,859 | ) | (2,028,764 | ) | ||||
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Cash flows from financing activities: | ||||||||
Cash dividends paid | (917,825 | ) | (763,245 | ) | ||||
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Net cash used in financing activities | (917,825 | ) | (763,245 | ) | ||||
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Net increase in cash and cash equivalents | 405,663 | 95,213 | ||||||
Cash and cash equivalents at beginning of period | 353,475 | 800,894 | ||||||
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Cash and cash equivalents at end of period | $ | 759,138 | $ | 896,107 | ||||
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Supplemental schedule ofnon-cash investing activities: Capital expenditures in accounts payable | $ | 1,487 | $ | — |
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 September 30, 2017March 31, 2023 (unaudited) and December 31, 20162022 (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 Form10-K for the year ended December 31, 2016.2022.
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 nine-monthmonth period ending September 30, 2017ended March 31, 2023 are not necessarily indicative of the results to be expected for the year.
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards UpdateNo. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASU2014-09”) which is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. In MayJune 2016, the FASB issued ASU2016-12, “Revenue from Contracts with Customers No. 2016-13, Financial Instruments - Credit Losses (Topic 606)326): Narrow-ScopeMeasurement of Credit Losses on Financial Instruments and in November 2018 issued an amendment, ASU 2018-19, Codification Improvements and Practical Expedients” (“to Topic 326, Financial Instruments – Credit Losses. ASU2016-12”), which updated ASU2014-09. ASU2016-12 clarifies 2016-13 amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain coretypes of financial instruments, including trade receivables. This may result in the earlier recognition principles including collectability, sales tax presentation, noncash consideration, contract modifications and completed contracts at transition and disclosures no longer required if the full retrospective transition method is adopted.of allowances for losses. ASU2014-09 2016-13 and ASU2016-12 are 2018-19 should be applied on either a prospective transition or modified-retrospective approach depending on the subtopic. ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2017 and2022, including interim periods within those reporting periods, and are to be applied using either the modified retrospective or full retrospective transition methods,fiscal years, with early adoption permitted. The Company is reviewing its revenue sources and contracts withinadopted this ASU on January 1, 2023, using the scopemodified retrospective approach. The adoption did not result in the recognition of the ASU and based on its preliminary evaluationa cumulative adjustment to date, does not anticipate this standard willbeginning retained earnings, nor did it have a material impact on itsthe condensed consolidated financial statements except for the expanded disclosure requirements. The Company does not plan to early adopt the ASU and has not yet determined the transition method.statements.
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. The Company has established an allowance for accounts that may become uncollectible in the future. This estimated allowance is based in part on management's evaluation of the financial condition of the customer and historical experience. The Company monitors its accounts receivable and charges to expense an amount equal to its estimate of potential credit losses. The Company considers a number of factors in determining its estimates, including the length of time its trade accounts receivable are past due, the Company's previous loss history and the customer's current ability to pay its obligation. The Company also considers current economic conditions, the economic outlook and industry-specific factors in its evaluation. Accounts receivable balances are charged off against the allowance when it is determined that the receivable will not be recovered.
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’sCompany's financial position.
4. Revenue—The Company operates in the fastener industry and is in the business of manufacturing and selling rivets, cold-formed fasteners and parts, screw machine products, automatic rivet setting machines and parts and tools for such machines. Revenue is recognized when control of the promised goods or services is transferred to our customers, generally upon shipment of goods or completion of services, in an amount that reflects the consideration we expect to receive in exchange for those goods or services. For certain assembly equipment segment transactions, revenue is recognized based on progress toward completion of the performance obligation using a labor-based measure. Labor incurred and specific material costs are compared to milestone payments per sales contract. Based on our experience, this method most accurately reflects the transfer of goods under such contracts. During the first quarter of 2023, the Company did not realize any revenue related to such contracts. As of March 31, 2023, there are no such contracts outstanding.
Sales taxes we may collect concurrent with revenue producing activities are excluded from revenue. Revenue is recognized net of certain sales adjustments to arrive at net sales as reported on the statement of income. These adjustments primarily relate to customer returns and allowances. The Company records a liability and reduction in sales for estimated product returns based upon historical experience. If we determine that our obligation under warranty claims is probable and subject to reasonable determination, an estimate of that liability is recorded as an offset against revenue at that time. As of March 31, 2023 and December 31, 2022 reserves for warranty claims were not material. Cash received by the Company prior to shipment is recorded as unearned revenue.
Shipping and handling fees billed to customers are recognized in net sales, and related costs as cost of sales, when incurred.
Sales commissions are expensed when incurred because the amortization period is less than one year. These costs are recorded within selling and administrative expenses in the statement of income.
The following table presents revenue by segment, further disaggregated by end-market:
| Fastener | Assembly Equipment | Consolidated |
Three Months Ended March 31, 2023: |
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Automotive | $ 5,006,190 | $ 44,878 | $ 5,051,068 |
Non-automotive | 2,850,623 | 828,034 | 3,678,657 |
Total net sales | $ 7,856,813 | $ 872,912 | $ 8,729,725 |
|
|
|
|
Three Months Ended March 31, 2022: |
|
|
|
Automotive | $ 4,904,183 | $ 41,463 | $ 4,945,646 |
Non-automotive | 3,249,650 | 1,002,400 | 4,252,050 |
Total net sales | $ 8,153,833 | $ 1,043,863 | $ 9,197,696 |
|
|
|
|
The following table presents revenue by segment, further disaggregated by location:
| Fastener | Assembly Equipment | Consolidated |
Three Months Ended March 31, 2023: |
|
|
|
United States | $ 6,391,747 | $ 786,571 | $ 7,178,318 |
Foreign | 1,465,066 | 86,341 | 1,551,407 |
Total net sales | $ 7,856,813 | $ 872,912 | $ 8,729,725 |
|
|
|
|
Three Months Ended March 31, 2022: |
|
|
|
United States | $ 6,760,129 | $ 1,004,151 | $ 7,764,280 |
Foreign | 1,393,704 | 39,712 | 1,433,416 |
Total net sales | $ 8,153,833 | $ 1,043,863 | $ 9,197,696 |
|
|
|
|
5. The Company’s effective tax rates were 32.9%approximately (20.9)% and 31.9%21.6% for the thirdfirst quarter of 20172023 and 2016, respectively, and 32.6% and 32.9% for the nine months ended September 30, 2017 and 2016,2022, 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 2014, 2015 and 20162019 through 2022 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 2014, 2015 and 20162019 through 2022 federal income tax returns will expire on September 15, 2018, 2019 and 2020,2023 through 2026, respectively.
The Company’s state income tax returns for the 20142019 through 20162022 tax years remain subject to examination by various state authorities with the latest closing period on October 31, 2020.2026. The Company is not currently not under examination by any state authority for income tax purposes and no statutes for state income tax filings have been extended.
5.6. Inventories are stated at the lower of cost or net realizable value, cost being determined by thefirst-in,first-out method.
A summary of inventories is as follows:
September 30, 2017 | December 31, 2016 | March 31, 2023 |
| December 31, 2022 | |||||||
Raw material | $ | 2,024,739 | $ | 1,675,143 | $ 4,609,907 |
| $ 4,460,071 | ||||
Work-in-process | 1,621,373 | 1,684,321 | 3,147,846 |
| 2,747,427 | ||||||
Finished goods | 1,953,005 | 1,740,229 | 2,862,199 |
| 2,534,732 | ||||||
|
| ||||||||||
Inventory, gross | 5,599,117 | 5,099,693 | |||||||||
Inventories, gross | 10,619,952 |
| 9,742,230 | ||||||||
Valuation reserves | (511,000 | ) | (562,000 | ) | (621,000) |
| (621,000) | ||||
|
| ||||||||||
Inventory, net | $ | 5,088,117 | $ | 4,537,693 | |||||||
|
| ||||||||||
Inventories, net | $ 9,998,952 |
| $ 9,121,230 |
CHICAGO RIVET & MACHINE CO.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
6.7. Segment Information—The Company operates in two business segments as determined by its products. The fastener segment includes rivets, cold-formed fasteners and parts 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 March 31, 2023: |
| |||||||||||||||||||
Net sales | $ 7,856,813 | $ 872,912 | 0 | $ 8,729,725 | ||||||||||||||||
|
| |||||||||||||||||||
Depreciation | 272,636 | 30,732 | 2,664 | 306,032 | ||||||||||||||||
|
| |||||||||||||||||||
Segment operating profit (loss) | (428,501) | 189,315 | 0 | (239,186) | ||||||||||||||||
Selling and administrative expenses | 0 | (538,537) | ||||||||||||||||||
Interest income | 0 | 40,586 | 40,586 | |||||||||||||||||
Loss before income taxes |
| $ (737,137) | ||||||||||||||||||
|
|
| ||||||||||||||||||
Capital expenditures | 336,066 | 0 | 77,353 | 413,419 | ||||||||||||||||
|
| |||||||||||||||||||
Segment assets: |
| |||||||||||||||||||
Accounts receivable, net | 5,857,565 | 315,509 | 0 | 6,173,074 | ||||||||||||||||
Inventories, net | 8,566,031 | 1,432,921 | 0 | 9,998,952 | ||||||||||||||||
Property, plant and equipment, net | 9,625,759 | 1,272,765 | 1,070,656 | 11,969,180 | ||||||||||||||||
Other assets | 0 | 5,551,041 | 5,551,041 | |||||||||||||||||
| $ 33,692,247 | |||||||||||||||||||
Fastener | Equipment | Other | Consolidated |
|
| |||||||||||||||
Three Months Ended September 30, 2017: | ||||||||||||||||||||
Three Months Ended March 31, 2022: |
| |||||||||||||||||||
Net sales | $ | 7,486,193 | $ | 900,563 | $ | — | $ | 8,386,756 | $ 8,153,833 | $ 1,043,863 | 0 | $ 9,197,696 | ||||||||
| ||||||||||||||||||||
Depreciation | 275,820 | 24,390 | 8,970 | 309,180 | 281,841 | 33,363 | 5,220 | 320,424 | ||||||||||||
| ||||||||||||||||||||
Segment operating profit | 768,247 | 317,602 | — | 1,085,849 | 835,507 | 232,279 | 0 | 1,067,786 | ||||||||||||
Selling and administrative expenses | — | — | (603,809 | ) | (603,809 | ) | 0 | (499,328) | ||||||||||||
Interest income | — | — | 18,795 | 18,795 | 0 | 1,755 | 1,755 | |||||||||||||
| ||||||||||||||||||||
Income before income taxes | $ | 500,835 |
| $ 570,213 | ||||||||||||||||
|
|
| ||||||||||||||||||
Capital expenditures | 263,563 | 8,325 | — | 271,888 | 112,864 | 0 | 7,730 | 120,594 | ||||||||||||
| ||||||||||||||||||||
Segment assets: |
| |||||||||||||||||||
Accounts receivable, net | 5,576,022 | 295,070 | — | 5,871,092 | 6,151,706 | 486,705 | 0 | 6,638,411 | ||||||||||||
Inventories, net | 4,134,219 | 953,898 | — | 5,088,117 | 8,299,454 | 1,313,786 | 0 | 9,613,240 | ||||||||||||
Property, plant and equipment, net | 10,409,913 | 1,613,245 | 576,099 | 12,599,257 | 9,613,347 | 1,400,542 | 1,260,145 | 12,274,034 | ||||||||||||
Other assets | — | — | 8,452,225 | 8,452,225 | 0 | 4,440,615 | 4,440,615 | |||||||||||||
|
| $ 32,966,300 | ||||||||||||||||||
$ | 32,010,691 |
| ||||||||||||||||||
| ||||||||||||||||||||
Three Months Ended September 30, 2016: | ||||||||||||||||||||
Net sales | $ | 8,089,800 | $ | 764,474 | $ | — | $ | 8,854,274 | ||||||||||||
Depreciation | 272,212 | 22,063 | 17,640 | 311,915 | ||||||||||||||||
Segment operating profit | 1,031,736 | 233,758 | — | 1,265,494 | ||||||||||||||||
Selling and administrative expenses | — | — | (596,358 | ) | (596,358 | ) | ||||||||||||||
Interest income | — | — | 10,193 | 10,193 | ||||||||||||||||
| ||||||||||||||||||||
Income before income taxes | $ | 679,329 | ||||||||||||||||||
| ||||||||||||||||||||
Capital expenditures | 842,048 | 2,142 | — | 844,190 | ||||||||||||||||
Segment assets: | ||||||||||||||||||||
Accounts receivable, net | 5,611,689 | 284,597 | — | 5,896,286 | ||||||||||||||||
Inventories, net | 3,766,136 | 1,038,158 | — | 4,804,294 | ||||||||||||||||
Property, plant and equipment, net | 10,457,807 | 1,594,023 | 508,767 | 12,560,597 | ||||||||||||||||
Other assets | — | — | 8,183,787 | 8,183,787 | ||||||||||||||||
| ||||||||||||||||||||
$ | 31,444,964 | |||||||||||||||||||
|
CHICAGO RIVET & MACHINE CO.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Assembly | ||||||||||||||||
Fastener | Equipment | Other | Consolidated | |||||||||||||
Nine Months Ended September 30, 2017: | ||||||||||||||||
Net sales | $ | 24,319,725 | $ | 2,985,866 | $ | — | $ | 27,305,591 | ||||||||
Depreciation | 822,267 | 73,170 | 26,910 | 922,347 | ||||||||||||
Segment operating profit | 2,716,020 | 1,089,089 | — | 3,805,109 | ||||||||||||
Selling and administrative expenses | — | — | (1,911,509 | ) | (1,911,509 | ) | ||||||||||
Interest income | — | — | 49,512 | 49,512 | ||||||||||||
|
| |||||||||||||||
Income before income taxes | $ | 1,943,112 | ||||||||||||||
|
| |||||||||||||||
Capital expenditures | 949,333 | 121,713 | — | 1,071,046 | ||||||||||||
Nine Months Ended September 30, 2016: | ||||||||||||||||
Net sales | $ | 25,395,165 | $ | 2,876,234 | $ | — | $ | 28,271,399 | ||||||||
Depreciation | 801,485 | 65,677 | 52,230 | 919,392 | ||||||||||||
Segment operating profit | 3,745,167 | 1,012,532 | — | 4,757,699 | ||||||||||||
Selling and administrative expenses | — | — | (1,948,769 | ) | (1,948,769 | ) | ||||||||||
Interest income | — | — | 28,515 | 28,515 | ||||||||||||
|
| |||||||||||||||
Income before income taxes | $ | 2,837,445 | ||||||||||||||
|
| |||||||||||||||
Capital expenditures | 1,550,070 | 190,690 | 42,126 | 1,782,886 |
CHICAGO RIVET & MACHINE CO.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Results of Operations
Net sales for the first quarter of 2023 were $8,729,725 compared to $9,197,696 in the third quarter were $8,386,756 this year compared to $8,854,274 in the thirdfirst quarter of 2016,2022, a decline of $467,518,$467,971, or 5.3%5.1%. AsBoth the fastener segment and the assembly equipment segment incurred lower sales in the current year quarter. The lower sales combined with higher operating costs in the current year resulted in a net loss of September 30, 2017, year to date sales totaled $27,305,591 compared to $28,271,399, for the first three quarters of 2016, a decline of $965,808,$(583,137), or 3.4%. Net income for the third quarter of 2017 was $335,835, or $0.35$(0.60) per share, compared with $462,329,to $447,313, or $0.48$0.46 per share, in the thirdfirst quarter of 2016. Net income for2022. During the first three quartersquarter, a regular quarterly dividend of 2017 was $1,309,112, or $1.36$0.22 per share compared with $1,904,445, or $1.97 per share, reported in 2016.was paid.
Fastener segment revenues were $7,486,193$7,856,813 in the thirdfirst quarter of 20172023 compared to $8,089,800$8,153,833 in the year earlierfirst quarter of 2022, a decline of $603,607,$297,020, or 7.5%. For the first three quarters of 2017, fastener segment revenues were $24,319,725 compared to $25,395,165 in 2016, a decline of $1,075,440, or 4.2%3.6%. The automotive sector is the primary market for our fastener segment products and the sales declines in the third quarter and year to date primarily relate to reduced sales to certain large automotive customers. North American light-vehicle production has fallen more than 3%customers were $5,006,190 in the first nine months of 2017quarter this year compared to $4,904,183 in the first quarter of 2022, an increase of $102,007, or 2.1%. However, fastener segment sales to non-automotive customers, including those in the construction and electronics industries, were $2,850,623 in the first quarter of this year earlier period, contributingcompared to $3,249,650 in the salesfirst quarter of 2022, a decline among our automotive customers. Additionally, we have experienced higher material prices throughout the year, which combined with the decline in sales, has resulted in lowerof $399,027 or 12.3%. Fastener segment gross margins were $251,624 in the current year. For the thirdfirst quarter the fastener segment gross margin was $1,457,421of 2023 compared to $1,768,625$1,558,909 in the year earlierfirst quarter of 2022, a decline of $311,204. For the first nine months of the year, the gross margin was $5,044,905 compared$1,307,285. In addition to $6,070,222higher costs, we incurred production inefficiencies that resulted in the same period of 2016, a decline of $1,025,317.higher labor costs and expediting expenses related to persistent staffing challenges.
Assembly equipment segment revenues were $900,563$872,912 in the thirdfirst quarter of 2017, an increase2023 compared to $1,043,863 in the first quarter of $136,089,2022, a decline of $170,951, or 17.8%,16.4%. Machine sales increased during the quarter but were offset by lower replacement parts and tooling sales compared to the third quarter of 2016 when revenues were $764,474.prior year quarter. The increasedecline in third quarter sales was primarily due to higher dollar value machines being shipped compared to the sales mix in the third quarter of 2016. This contributed to an $80,690 increasea $71,434 decline in assembly equipment segment gross margin, from $297,313 in the quarter,2022 to $297,265, from $216,575$225,879 in last year’s third quarter. For the first nine months of the year, assembly equipment segment sales were $2,985,866, an increase of $109,632, or 3.8%, compared to $2,876,234 reported for the first nine months of 2016. The strong third quarter sales reversed a decline in year to date sales that existed at the conclusion of the first half of the year and contributed to an increase in segment gross margin. Assembly equipment segment gross margin for the first nine months of 2017 was $1,035,700 compared to $952,505 in the same period of 2016, an increase of $83,195.2023.
Selling and administrative expenses forduring the thirdfirst quarter of 20172023 were $1,278,646$1,257,695 compared to $1,295,664 recorded in the year earlierfirst quarter total of $1,322,064,2022, a reductiondecrease of $43,418,$37,969, or 3.3%2.9%. The largest components of the decline were payroll expense, which declined $27,000 due to headcount reductions, andWhile we had reduced profit sharing, expense which declined $11,000 due to lower operating profitcommissions and director fees in the current year.year, these reductions were partially offset by higher outside consulting and rental expenses. Selling and administrative expenses for the first three quarters of 2017 were $4,205,493 compared to $4,230,685 for the same period of 2016, a reduction of $25,192, or 0.6%. Profit sharing expense has declined $98,000 on a year to date basis due to lower operating profit and payroll expense has declined $87,000 due to reduced headcount. Largely offsetting these reductions was approximately $167,000 in expenses related to the implementation of a new ERP system at one of our locations. Selling and administrative expenses as a percentage14.4% of net sales forin the first nine monthsquarter of 2017 was 15.4%2023 compared to 15.0% for14.1% in the first nine monthsquarter of 2016.2022.
Other Income
Other income in the thirdfirst quarter of 20172023 was $24,795$43,055 compared to $16,193$9,755 in the thirdfirst quarter of 2016.2022. Other income for the first three quarters of 2017 was $68,000 compared to $45,403 in the same period of 2016. Other income consistsis primarily comprised of interest income on certificates of deposit.which increased during the current year due to higher interest rates and greater invested balances.
Income Tax Expense
The Company’s effective tax rates were 32.9%approximately (20.9)% and 31.9%21.6% for the thirdfirst quarter of 20172023 and 2016, respectively, and 32.6% and 32.9% for the nine months ended September 30, 2017 and 2016,2022, 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.
Liquidity and Capital Resources
Working capital was $19,127,016 as of September 30, 2016 amountedMarch 31, 2023 compared to $16.6 million, an increase of approximately $0.2 million from the beginning of the year. The most significant changes in the individual working capital components since$20,073,089 at the beginning of the year, werea decline of $946,073. During the quarter, accounts receivable increased by $1,197,937, due to the greater sales activity during the quarter compared to the fourth quarter of 2022, and inventory increased by $877,722, primarily due to higher costs and some production bottlenecks that resulted in delayed shipments. Partially offsetting these changes was an increase in accounts payable which have increased $0.5 million, $0.6 million and $0.5 million, respectively dueof $924,168 related to the greater level of operating activity compared to the seasonally lower fourth quarter of 2016. Partially offsetting this net change was the reduction in cash and certificates of deposit. Capital expenditures forduring the first three quartersquarter. Other items reducing working capital in the first quarter were capital expenditures of 2017 were $1.1 million,$413,419, which consisted primarily consisted of equipment used in fastener production activities. Dividendsactivities, and dividends paid in the first three quarters of 2017 were $0.9 million, including three regular quarterly payments of $0.20 per share and an extra dividend of $0.35 per share paid in the first quarter.$212,549. The net result of these changes and other cash flow items onactivity was to leave cash, cash equivalents and certificates of deposit was a $0.3 million decline in such total balances fromat $4,458,723 as of March 31, 2023 compared to $6,736,101 as of the beginning of the year, to $8.1 million.year. 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
Following several years of growth, domestic automotive sales, not unexpectedly, declined during
Results in the first eight months of 2017 before spiking in September in the aftermath of hurricanes Harvey and Irma. Fastener segment results in 2017 have fallen short of those reported in 2016, primarily due to lower sales to automotive sector customers. The need to replace vehicles damaged or destroyed in the storms could boost demandquarter were negatively impacted by numerous factors. Demand from our automotive customers duringwas relatively steady, as that sector continues to recover from the fourth quarter, although generalpandemic, but we experienced continued softening in demand from non-automotive customers amid an uncertain economic future. The tight labor market has made maintaining an optimal workforce difficult and inflation remains historically high. These conditions are expected to be relatively unchanged comparedpersist in the near-term. We are reviewing and seeking to adjust our pricing in light of higher operating costs related to the first three quarters of 2017. Equipment segment results improvedcurrent economic and labor market environment and have made investments in the first three quarters of 2017, but may fall short of last year in the fourth quarter dueequipment to particularly strong sales last year that included a certain large order. The computer system conversion at one ofimprove operating efficiency. We will also continue to adjust our locations, which accounted for significant expenses during the first three quarters of 2017, was completed during the third quarter, eliminating the most significant increase in selling and administrative expenses incurred this year. While our results overall have not matched the excellent performance of 2016, our financial condition remains strong and should enable us to pursueactivities based on changing market conditions, while pursuing opportunities to profitably grow revenuesdevelop new customer relationships and improve net incomebuild on existing ones in all the future.markets we serve.
Forward-Looking Statements
This discussion contains certain “forward-looking statements”"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”"Risk Factors" in our Annual Report on Form10-K and in the other filings we make with the United States Securities and Exchange Commission. These factors, include among other things: risk related to the COVID-19 pandemic and its related adverse effects, 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 twowith major customers, risks related to export sales, the price and availability of raw materials, supply chain disruptions, labor relations issues, losses related to product liability, warranty and recall claims, costs relating to environmental laws and regulations, information systems disruptions, 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’sCompany's management, with the participation of the Company’s Chief Executive OfficerCompany's principal executive and President, Chief Operating Officer and Treasurer (the Company’s principal financial officer),officer, has evaluated the effectiveness of the Company’sCompany's disclosure controls and procedures (as such term is defined in Rules13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”"Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive OfficerCompany's principal executive and President, Chief Operating Officer and Treasurer haveprincipal financial officer has concluded that, as of the end of such period, the Company’sCompany'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’sCompany's internal control over financial reporting (as such term is defined in Rules13a-15(f) and15d-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 —-- OTHER INFORMATION
Item 6. Exhibits
Exhibit | ||
31 | ||
32 | ||
101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data |
SIGNATURES
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) | ||||||
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15
Date: May 8, 2023
/s/ Michael J. Bourg
Michael J. Bourg
President, Chief Operating Officer and Treasurer
(Principal Executive Officer and Principal Financial Officer)
13