UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM10-Q

(Mark One)

For the quarterly period ended September 30, 2018March 31, 2019

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 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 November 2, 2018,May 6, 2019, 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.

CHICAGO RIVET & MACHINE CO.

Condensed Consolidated Balance Sheets

September 30, 2018March 31, 2019 and December 31, 20172018

See Notes to the Condensed Consolidated Financial Statements

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CHICAGO RIVET & MACHINE CO.

Condensed Consolidated Balance Sheets

September 30, 2018March 31, 2019 and December 31, 20172018

See Notes to the Condensed Consolidated Financial Statements

CHICAGO RIVET & MACHINE CO.

Condensed Consolidated Statements of Income

For the Three and Nine Months Ended September 30,March 31, 2019 and 2018 and 2017

(Unaudited)

See Notes to the Condensed Consolidated Financial Statements

CHICAGO RIVET & MACHINE CO.

Condensed Consolidated Statements of Retained EarningsShareholders’ Equity

For the NineThree Months Ended September 30,March 31, 2019 and 2018 and 2017

(Unaudited)

See Notes to the Condensed Consolidated Financial Statements

CHICAGO RIVET & MACHINE CO.

Condensed Consolidated Statements of Cash Flows

For the NineThree Months Ended September 30,March 31, 2019 and 2018 and 2017

(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 September 30, 2018March 31, 2019 (unaudited) and December 31, 20172018 (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, 2017.2018.

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, 2018ended March 31, 2019 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 will increaseincreases 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 will requirerequires 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 impact ofCompany adopted Topic 842 on January 1, 2019 using the modified retrospective method. Based on the Company’s current lease agreements, adopting this ASU isdid not expected to be significant basedhave a material impact on current lease agreements.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 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. Revenue—On January 1, 2018, the Company adopted ASC Topic 606, “Revenue from Contracts with Customers” using the modified retrospective method. The adoption did not result in the recognition of a cumulative adjustment to beginning retained earnings, nor did it have a material impact on the condensed consolidated financial statements. For the Company, the most significant impact of the new standard is the addition of required disclosures within the notes to the financial statements.

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. 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 September 30, 2018March 31, 2019 and December 31, 20172018 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.

5. The Company’s effective tax rates were 20.9%approximately 22.0% and 32.9%22.4% for the thirdfirst quarter of 2019 and 2018, and 2017, respectively, and 22.4% and 32.6% for the nine months ended September 30, 2018 and 2017, respectively. The lower rate in 2018 is due to the enactment of the Tax Cuts and Jobs Act in December 2017 that reduced the maximum federal corporate tax rate from 35% to 21% beginning in 2018. The effective rate was lower than the U.S. federal statutory rate in 2017 primarily due to the Domestic Production Activities Deduction allowed under Internal Revenue Code Section 199.

The Company’s federal income tax returns for the 2015 2016 and 2017through 2018 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 2015 2016 and 2017through 2018 federal income tax returns will expire on September 15, 2019 2020 and 2021,through 2022, respectively.

The Company’s state income tax returns for the 2015 through 20172018 tax years remain subject to examination by various state authorities with the latest closing period on October 31, 2021.2022. 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.

CHICAGO RIVET & MACHINE CO.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

during the third quarter compared to the seasonally lower fourth quarter of 2017. Partially offsetting this net change was the reduction in cash and certificates of deposit. Capital expenditures for the first three quarters of 2018 were $1.6 million, which primarily consisted of equipment used in production activities. Dividends paid in the first three quarters of 2018 were $0.9 million, including three regular quarterly payments of $0.21 per share and an extra dividend of $0.30 per share paid in the first quarter.2018. The net result of these changes and other cash flow itemsactivity was to leave cash, cash equivalents and certificates of deposit at $7.9$5.7 million as of September 30, 2018March 31, 2019 compared to $9.0$7.8 million atas of the beginning of the 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

We are pleased to report increased salesResults for the first quarter were disappointing, but followed the downturn in automotive activity in the third quarterfirst three months of 2018 and for the current year to date compared to the year earlier periods. Demand for our fastener segment products has benefited from a healthy domestic automotive market and the addition of newnon-automotive customers during the past year. However, significantAdditionally, we have experienced increases in steel prices our primary raw material, in recent monthsand other materials over the past year that have negatively impacted our gross margins and were the primary factor in reporting lower net income in the third quarter this year. Higher raw material prices remain a concern andas further increases are expected in the near-term. Such costsexpected. Since material price increases can be difficult to recovermitigate, we will emphasize cost controls in some of the markets we serveother areas and strive for greater operating efficiencies in an effort to improve operating results as certain customers expect priceswell as pursuing new sales opportunities. In contrast to be held constant over the multi-year life of their parts. Current yearour fastener segment, our assembly equipment salessegment demand and machine order backlog have trailed year earlier amounts primarily due to fewer high-dollar orders inbeen relatively stable. Given the current year rather than an overall decline in demand. As our results continue to be impacted by increases in raw material prices and other costs,challenges we currently face, we will continue our efforts to obtain price relief from customers while working to improve internal operational efficiencies as a means of mitigating such costs. We will also make other adjustments to our activities which we feelbelieve are necessary based on changing market conditions.conditions, 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 Form10-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 with a major customer,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, 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’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.

Date: November 6, 2018

Date: November 6, 2018

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