UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM10-Q

(Mark One)

For the quarterly period ended June 30, 2019March 31, 2020

OR

For the transition period from ____________ to ___________

Commission file number000-01227

Chicago Rivet & Machine Co.

(Exact Name of Registrant as Specified in Its Charter)

(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  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically, every interactive data file required to be submitted pursuant to Rule 405 of RegulationS-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  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”,filer,” “accelerated filer”,filer,” “smaller reporting company” and “emerging growth company” in Rule12b-2 of the Exchange Act. (Check one):

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 Rule12b-2 of the Exchange Act).    Yes  ☐    No  ☒

Securities registered pursuant to Section 12(b) of the Act:

As of August 2, 2019,May 1, 2020, there were 966,132 shares of the registrant’s common stock outstanding.

CHICAGO RIVET & MACHINE CO.

INDEX

Item 1. Financial Statements.

CHICAGO RIVET & MACHINE CO.

Condensed Consolidated Balance Sheets

June 30, 2019March 31, 2020 and December 31, 20182019

See Notes to the Condensed Consolidated Financial Statements

CHICAGO RIVET & MACHINE CO.

Condensed Consolidated Balance Sheets

June 30, 2019March 31, 2020 and December 31, 20182019

See Notes to the Condensed Consolidated Financial Statements

CHICAGO RIVET & MACHINE CO.

Condensed Consolidated Statements of Income

For the Three and Six Months Ended June 30,March 31, 2020 and 2019 and 2018

(Unaudited)

See Notes to the Condensed Consolidated Financial Statements

CHICAGO RIVET & MACHINE CO.

Condensed Consolidated Statements of Shareholders’ Equity

For the Three and Six Months Ended June 30,March 31, 2020 and 2019 and 2018

(Unaudited)

See Notes to the Condensed Consolidated Financial Statements

CHICAGO RIVET & MACHINE CO.

Condensed Consolidated Statements of Cash Flows

For the SixThree Months Ended June 30,March 31, 2020 and 2019 and 2018

(Unaudited)

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 June 30, 2019March 31, 2020 (unaudited) and December 31, 20182019 (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, 2018.2019.

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 andsix-monthmonth period ending June 30, 2019ended March 31, 2020 are not necessarily indicative of the results to be expected for the year.

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”)No. 2016-02, “Leases (Topic 842).” The ASU increases transparency and comparability among entities by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The ASU requires lessees to recognize in the balance sheet a liability to make lease payments (the lease liability) and aright-of-use asset representing its right to use the underlying asset for the lease term. The ASU is effective for annual reporting periods beginning after December 15, 2018 and interim periods within those annual periods. The Company adopted Topic 842 on January 1, 2019 using the modified retrospective method. Based on the Company’s current lease agreements, adopting this ASU did not have a material impact on the Company’s financial 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 concentrationsa 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. 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 secondfirst quarter of 2019,2020, the Company realized $219,700 related tohad no such a contract and $118,300 is the remaining performance obligation under that contract which the Company expects to recognize as revenue in the third quarter.contracts.

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 June 30, 2019March 31, 2020 and December 31, 20182019 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.

The following table presents revenue by segment, further disaggregated byend-market:

The following table presents revenue by segment, further disaggregated by location:

5. The Company’s effective tax rates were approximately 21.0% and 23.1%22.0% for the secondfirst quarter of 2020 and 2019, and 2018, respectively, and 21.6% and 22.7% for the six months ended June 30, 2019 and 2018, respectively.

CHICAGO RIVET & MACHINE CO.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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:

8. Subsequent Events—In March 2020, the World Health Organization characterized the novel coronavirus(“COVID-19”) a pandemic and the President of the United States declared theCOVID-19 outbreak a national emergency. The rapid spread of the virus and the evolving response domestically and internationally to combat it have had an increasingly negative impact on the global economy, including the automotive industry upon which we rely for sales. Beginning in March, most states issued executive orders which temporarily closed businesses deemednon-essential in an effort to prevent the spread of the coronavirus. Similar measures also took place in certain foreign markets we serve. As a result, our operations and the operations of our customers and suppliers have been adversely affected. Since some of our customers are classified as essential businesses and have been able to continue to operate, we have been able to continue our operations, but at a significantly reduced level, in order to service those customers during these shut-down orders. We have taken measures to reduce expenses and conserve capital, given the rapidly changing business environment and heightened degree of uncertainty resulting fromCOVID-19 and its related effects. As we cannot predict the duration or scope of theCOVID-19 pandemic, or its broader impact on the global economy, including the demand for automobiles, it is unknown how long theCOVID-19 restrictions will remain in place or what the impact ofCOVID-19 and its related effects will be on our business, results of operations or financial condition, but the impact could be material and last for an extended period of time.

CHICAGO RIVET & MACHINE CO.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Results of Operations SummaryCOVID-19

Overall resultsWe are closely monitoring the impact of theCOVID-19 pandemic on all aspects of our operations. Results for the secondfirst quarter were disappointing, primarily duenegatively impacted by the widening spread ofCOVID-19 and the resultant measures taken by governments domestically and internationally to combat this threat. During the softening demandfirst quarter, various states issued executive orders which temporarily closed businesses deemednon-essential as the coronavirus outbreak spread. Similar measures also took place in certain foreign markets we serve. As a result, our operations and the fastener segment, which followedoperations of our customers and suppliers have been adversely affected. Since some of our customers are classified as essential businesses and have been able to continue to operate, we have been able to continue our operations, but at a significantly reduced level, in order to service those customers during these shut-down orders. To ensure the safety of our own employees during this unprecedented crisis, we have reduced personnel in our facilities in order to practice social distancing protocols and are following other safety practices recommended by the Centers for Disease Control. As we cannot predict the duration or scope of theCOVID-19 pandemic, or its broader impact on the global downturneconomy, including the demand for automobiles, it is unknown how long theCOVID-19 restrictions will remain in automotive activity duringplace or what the first six monthsimpact ofCOVID-19 and its related effects will be on our business, results of operations or financial condition, but the year. Additionally, increases in steel pricesimpact could be material and other materials over the past year have negatively impacted our fastener segment gross margins and remain a concern as ongoing trade disputes persist. Since material price increases can be difficult to mitigate, we will emphasize cost controls in other areas and strivelast for greater operating efficiencies in an effort to improve operating results while pursuing new sales opportunities. In contrast to the fastener segment, our assembly equipment segment demand and machine order backlog remain relatively stable. Given the challenges we currently face, we will continue to make adjustments to our activities based on changing market conditions, while maintaining an emphasis on quality and reliabilityextended period of service that our customers demand.time.

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 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 theCOVID-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 with 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 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 1A. Risk Factors

There have been no material changes in risk factors from those previously disclosed in our Annual Report on Form10-K for the fiscal year ended December 31, 2019, other than the addition of the following risk factor regarding the recent coronavirus outbreak:

The recent coronavirus outbreak is having, and is expected to have, an adverse effect on us.

In March 2020, the World Health Organization characterized the novel coronavirus(“COVID-19”) a pandemic and the President of the United States declared theCOVID-19 outbreak a national emergency. The rapid spread of the virus and the evolving response domestically and internationally to combat it have had an increasingly negative impact on the global economy, including the automotive industry upon which we rely for sales. During the first quarter, various states issued executive orders which temporarily closed businesses deemednon-essential as the coronavirus outbreak spread. Similar measures also took place in certain foreign markets we serve. As a result, our operations and the operations of our customers and suppliers have been adversely affected. Since some of our customers are classified as essential businesses and have been able to continue to operate, we have been able to continue our operations, but at a significantly reduced level. As we cannot predict the duration or scope of theCOVID-19 pandemic or its broader impact on the global economy, including the demand for automobiles, it is unknown how longCOVID-19 related restrictions will remain in place or what the impact ofCOVID-19 and its related effects will be on our business, results of operations or financial condition, but the impact could be material and last for an extended period of time.

Additionally, the impacts described above and other impacts of theCOVID-19 pandemic and responses to it may substantially increase the risk to us from other risks described in our Annual Report on Form10-K for the fiscal year ended December 31, 2019.

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 Rules13a-15(e) and15d-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 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

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.

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