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, 2020March 31, 2021

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

(I.R.S. Employer
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

 

 

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  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically, 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  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   Accelerated filer 
Non-accelerated filer   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  ☒

As of November 2, 2020,May 3, 2021, there were 966,132 shares of the registrant’s common stock outstanding.

 

 

 


CHICAGO RIVET & MACHINE CO.

INDEX

 

  Page 

PART I. FINANCIAL INFORMATION (Unaudited)

 

Condensed Consolidated Balance Sheets at September  30, 2020March  31, 2021 and December 31, 20192020

  2-3 

Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30,March 31, 2021 and 2020 and 2019

  4 

Condensed Consolidated Statements of Stockholders’Shareholders’ Equity for the Three and Nine Months Ended September 30,March 31, 2021 and 2020 and 2019

  5 

Condensed Consolidated Statements of Cash Flows for the NineThree Months Ended September 30,March 31, 2021 and 2020 and 2019

  6 

Notes to the Condensed Consolidated Financial Statements

  7-117-10 

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

  12-1311-12 

Risk Factors and Controls and Procedures

  1413 

PART II. OTHER INFORMATION

  1514 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

CHICAGO RIVET & MACHINE CO.

Condensed Consolidated Balance Sheets

September 30, 2020March 31, 2021 and December 31, 20192020

 

  September 30,
2020
   December 31,
2019
 
  March 31,
2021
   December 31,
2020
 
  (Unaudited)       (Unaudited)     

Assets

        

Current Assets:

        

Cash and cash equivalents

  $997,831   $1,429,454   $3,075,766   $2,567,731 

Certificates of deposit

   6,476,000    6,574,000    2,990,000    4,733,000 

Accounts receivable—Less allowances of $160,000 and $140,000, respectively

   5,346,916    4,609,314 

Accounts receivable—Less allowances of $170,000

   6,869,891    5,163,450 

Inventories, net

   4,944,806    4,951,177    6,311,960    5,153,294 

Prepaid income taxes

   188,186    58,186    —      85,940 

Other current assets

   446,554    427,192    384,811    383,772 
  

 

   

 

   

 

   

 

 

Total current assets

   18,400,293    18,049,323    19,632,428    18,087,187 
  

 

   

 

   

 

   

 

 

Property, Plant and Equipment:

        

Land and improvements

   1,636,749    1,636,749    1,636,749    1,636,749 

Buildings and improvements

   8,341,461    8,331,804    8,449,768    8,440,738 

Production equipment and other

   36,685,324    36,408,746    36,344,494    36,333,550 
  

 

   

 

   

 

   

 

 
   46,663,534    46,377,299    46,431,011    46,411,037 

Less accumulated depreciation

   33,628,740    32,703,246    33,509,910    33,260,153 
  

 

   

 

   

 

   

 

 

Net property, plant and equipment

   13,034,794    13,674,053    12,921,101    13,150,884 
  

 

   

 

   

 

   

 

 

Total assets

  $31,435,087   $31,723,376   $32,553,529   $31,238,071 
  

 

   

 

   

 

   

 

 

See Notes to the Condensed Consolidated Financial Statements

CHICAGO RIVET & MACHINE CO.

Condensed Consolidated Balance Sheets

September 30, 2020March 31, 2021 and December 31, 20192020

 

  September 30,
2020
 December 31,
2019
   March 31,
2021
 December 31,
2020
 
  (Unaudited)   

Liabilities and Shareholders’ Equity

   (Unaudited)     

Current Liabilities:

      

Accounts payable

  $898,714  $490,580   $1,135,304  $466,424 

Accrued wages and salaries

   945,133  629,972    686,571  482,008 

Other accrued expenses

   264,424  349,069    317,568  322,968 

Unearned revenue and customer deposits

   117,293  152,644    205,774  249,498 

Federal and state income taxes

   194,560   —   
  

 

  

 

   

 

  

 

 

Total current liabilities

   2,225,564  1,622,265    2,539,777  1,520,898 

Deferred income taxes

   871,084  943,084    980,084  1,011,084 
  

 

  

 

   

 

  

 

 

Total liabilities

   3,096,648  2,565,349    3,519,861  2,531,982 
  

 

  

 

   

 

  

 

 

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    1,138,096  1,138,096 

Additional paid-in capital

   447,134  447,134    447,134  447,134 

Retained earnings

   30,675,307  31,494,895    31,370,536  31,042,957 

Treasury stock, 171,964 shares at cost

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

 

  

 

   

 

  

 

 

Total shareholders’ equity

   28,338,439  29,158,027    29,033,668  28,706,089 
  

 

  

 

   

 

  

 

 

Total liabilities and shareholders’ equity

  $31,435,087  $31,723,376   $32,553,529  $31,238,071 
  

 

  

 

   

 

  

 

 

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, 2021 and 2020 and 2019

(Unaudited)

 

  Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
  2020   2019   2020 2019   2021   2020 

Net sales

  $7,645,259   $8,188,905   $19,325,234  $25,686,034   $9,304,949   $7,576,455 

Cost of goods sold

   6,004,766    6,539,138    16,304,164  20,826,534    7,270,512    6,266,028 
  

 

   

 

   

 

  

 

   

 

   

 

 

Gross profit

   1,640,493    1,649,767    3,021,070  4,859,500    2,034,437    1,310,427 

Selling and administrative expenses

   1,258,995    1,282,149    3,758,752  3,931,510    1,362,201    1,285,334 
  

 

   

 

   

 

  

 

   

 

   

 

 

Operating profit (loss)

   381,498    367,618    (737,682 927,990 

Operating profit

   672,236    25,093 

Other income

   32,637    47,179    122,869  145,208    17,892    46,475 
  

 

   

 

   

 

  

 

   

 

   

 

 

Income (loss) before income taxes

   414,135    414,797    (614,813 1,073,198 

Provision (benefit) for income taxes

   105,000    99,000    (201,000 241,000 

Income before income taxes

   690,128    71,568 

Provision for income taxes

   150,000    15,000 
  

 

   

 

   

 

  

 

   

 

   

 

 

Net income (loss)

  $309,135   $315,797   $(413,813 $832,198 

Net income

  $540,128   $56,568 
  

 

   

 

   

 

  

 

   

 

   

 

 

Per share data, basic and diluted:

           

Net income (loss) per share

  $0.32   $0.32   $(0.43 $0.86 

Net income per share

  $0.56   $0.06 
  

 

   

 

   

 

  

 

   

 

   

 

 

Average common shares outstanding

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

 

   

 

   

 

  

 

   

 

   

 

 

Cash dividends declared per share

  $0.10   $0.22   $0.42  $0.96   $0.22   $0.22 
  

 

   

 

   

 

  

 

   

 

   

 

 

See Notes to the Condensed Consolidated Financial Statements

CHICAGO RIVET & MACHINE CO.

Condensed Consolidated Statements of Shareholders’ Equity

For the Three and Nine Months Ended September 30,March 31, 2021 and 2020 and 2019

(Unaudited)

 

   Preferred   Common Stock   Additional
Paid-
   Retained
Earnings
  Treasury Stock, at Cost    
   Stock   Shares   Amount   in Capital  Shares   Amount  Total 

Balance, December 31, 2019

  $—      966,132   $1,138,096   $447,134   $31,494,895   171,964   $(3,922,098 $29,158,027 

Net income

          $56,568     $56,568 

Dividends declared ($0.22 per share)

          $(212,549    $(212,549
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

Balance, March 31, 2020

  $—      966,132   $1,138,096   $447,134   $31,338,914   171,964   $(3,922,098 $29,002,046 

Net loss

          $(779,516    $(779,516

Dividends declared ($0.10 per share)

          $(96,612    $(96,612
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

Balance, June 30, 2020

  $—      966,132   $1,138,096   $447,134   $30,462,786   171,964   $(3,922,098 $28,125,918 

Net income

          $309,135     $309,135 

Dividends declared ($0.10 per share)

          $(96,614    $(96,614

Balance, September 30, 2020

  $—      966,132   $1,138,096   $447,134   $30,675,307   171,964   $(3,922,098 $28,338,439 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

Balance, December 31, 2018

  $—      966,132   $1,138,096   $447,134   $32,096,617   171,964   $(3,922,098 $29,759,749 

Net income

          $286,842     $286,842 

Dividends declared ($0.52 per share)

          $(502,389    $(502,389
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

Balance, March 31, 2019

  $—      966,132   $1,138,096   $447,134   $31,881,070   171,964   $(3,922,098 $29,544,202 

Net income

          $229,559     $229,559 

Dividends declared ($0.22 per share)

          $(212,549    $(212,549
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

Balance, June 30, 2019

  $—      966,132   $1,138,096   $447,134   $31,898,080   171,964   $(3,922,098 $29,561,212 

Net income

          $315,797     $315,797 

Dividends declared ($0.22 per share)

          $(212,549    $(212,549
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

Balance, September 30, 2019

  $—      966,132   $1,138,096   $447,134   $32,001,328   171,964   $(3,922,098 $29,664,460 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 
  Preferred Stock  Common Stock  

Additional

Paid-

  Retained  Less Treasury Stock, at Cost    
 Shares  Amount  Shares  Amount  in Capital  Earnings  Shares  Amount  Total 

Balance, December 31, 2020

  —    $—     966,132  $1,138,096  $447,134  $31,042,957   171,964  $(3,922,098 $28,706,089 

Net Income

      $540,128    $540,128 

Dividends Declared ($0.22 per share)

      $(212,549   $(212,549
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, March 31, 2021

  —    $—     966,132  $1,138,096  $447,134  $31,370,536   171,964  $(3,922,098 $29,033,668 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, December 31, 2019

  —    $—     966,132  $1,138,096  $447,134  $31,494,895   171,964  $(3,922,098 $29,158,027 

Net Income

      $56,568    $56,568 

Dividends Declared ($0.22 per share)

      $(212,549   $(212,549
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, March 31, 2020

  —    $—     966,132  $1,138,096  $447,134  $31,338,914   171,964  $(3,922,098 $29,002,046 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

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, 2021 and 2020 and 2019

(Unaudited)

 

  2020 2019   2021 2020 

Cash flows from operating activities:

      

Net income (loss)

  $(413,813 $832,198 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

   

Net income

  $540,128  $56,568 

Adjustments to reconcile net income to net cash used in operating activities:

   

Depreciation

   1,014,916  1,029,998    330,165  337,356 

Gain on disposal of equipment

   —    (5,000

Loss on disposal of equipment

   16,081   —   

Deferred income taxes

   (72,000 134,000    (31,000 (24,000

Changes in operating assets and liabilities:

      

Accounts receivable

   (737,602 (84,715   (1,706,441 (894,369

Inventories

   6,371  624,058    (1,158,666 (227,204

Other current assets and prepaid income taxes

   (149,362 (320,611

Other current assets

   84,901  (225

Accounts payable

   408,134  (72,255   668,880  437,728 

Accrued wages and salaries

   315,161  160,519    204,563  (15,892

Other accrued expenses

   (84,645 (171,741   189,160  (115,663

Unearned revenue and customer deposits

   (35,351 (125,529   (43,724 (44,338
  

 

  

 

   

 

  

 

 

Net cash provided by operating activities

   251,809  2,000,922 

Net cash used in operating activities

   (905,953 (490,039
  

 

  

 

   

 

  

 

 

Cash flows from investing activities:

      

Capital expenditures

   (375,657 (1,562,784   (116,463 (166,667

Proceeds from the sale of equipment

   —    5,000 

Proceeds from certificates of deposit

   4,831,000  5,569,000    1,743,000  2,241,000 

Purchases of certificates of deposit

   (4,733,000 (4,582,000   —    (1,743,000
  

 

  

 

   

 

  

 

 

Net cash used in investing activities

   (277,657 (570,784

Net cash provided by investing activities

   1,626,537  331,333 
  

 

  

 

   

 

  

 

 

Cash flows from financing activities:

      

Cash dividends paid

   (405,775 (927,487   (212,549 (212,549
  

 

  

 

   

 

  

 

 

Net cash used in financing activities

   (405,775 (927,487   (212,549 (212,549
  

 

  

 

   

 

  

 

 

Net (decrease) increase in cash and cash equivalents

   (431,623 502,651 

Net increase (decrease) in cash and cash equivalents

   508,035  (371,255

Cash and cash equivalents at beginning of period

   1,429,454  706,873    2,567,731  1,429,454 
  

 

  

 

   

 

  

 

 

Cash and cash equivalents at end of period

  $997,831  $1,209,524   $3,075,766  $1,058,199 
  

 

  

 

   

 

  

 

 

Supplemental schedule of non-cash investing activities:

   

Capital expenditures in accounts payable

  $—    $1,330 

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, 2020March 31, 2021 (unaudited) and December 31, 20192020 (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, 2019.2020.

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, 2020ended March 31, 2021 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. 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 2020,the first quarter of 2021, the Company has had norealized $235,210 related to such contracts.contracts and $120,879 is the remaining performance obligation under such contracts which the Company expects to recognize as revenue in the second quarter.

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, 2020March 31, 2021 and December 31, 20192020 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:

 

      Assembly       Fastener   Assembly
Equipment
   Consolidated 
  Fastener   Equipment   Consolidated 

Three Months Ended September 30, 2020:

      

Three Months Ended March 31, 2021:

      

Automotive

   4,660,451    34,687    4,695,138    5,059,469    32,973    5,092,442 

Non-automotive

   2,363,965    586,156    2,950,121    3,089,209    1,123,298    4,212,507 
  

 

   

 

   

 

   

 

   

 

   

 

 

Total net sales

   7,024,416    620,843    7,645,259    8,148,678    1,156,271    9,304,949 
  

 

   

 

   

 

   

 

   

 

   

 

 

Three Months Ended September 30, 2019:

      

Three Months Ended March 31, 2020:

      

Automotive

   4,698,298    61,298    4,759,596    4,413,737    33,459    4,447,196 

Non-automotive

   2,608,597    820,712    3,429,309    2,323,660    805,599    3,129,259 
  

 

   

 

   

 

   

 

   

 

   

 

 

Total net sales

   7,306,895    882,010    8,188,905    6,737,397    839,058    7,576,455 
  

 

   

 

   

 

   

 

   

 

   

 

 

Nine Months Ended September 30, 2020:

      

Automotive

   10,653,621    107,476    10,761,097 

Non-automotive

   6,621,934    1,942,203    8,564,137 
  

 

   

 

   

 

 

Total net sales

   17,275,555    2,049,679    19,325,234 
  

 

   

 

   

 

 

Nine Months Ended September 30, 2019:

      

Automotive

   14,296,552    166,713    14,463,265 

Non-automotive

   8,406,167    2,816,602    11,222,769 
  

 

   

 

   

 

 

Total net sales

   22,702,719    2,983,315    25,686,034 
  

 

   

 

   

 

 

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

 

       Assembly     
   Fastener   Equipment   Consolidated 

Three Months Ended September 30, 2020:

      

United States

   5,909,756    603,858    6,513,614 

Foreign

   1,114,660    16,985    1,131,645 
  

 

 

   

 

 

   

 

 

 

Total net sales

   7,024,416    620,843    7,645,259 
  

 

 

   

 

 

   

 

 

 

Three Months Ended September 30, 2019:

      

United States

   6,252,110    823,137    7,075,247 

Foreign

   1,054,785    58,873    1,113,658 
  

 

 

   

 

 

   

 

 

 

Total net sales

   7,306,895    882,010    8,188,905 
  

 

 

   

 

 

   

 

 

 

Nine Months Ended September 30, 2020:

      

United States

   14,721,327    1,891,485    16,612,812 

Foreign

   2,554,228    158,194    2,712,422 
  

 

 

   

 

 

   

 

 

 

Total net sales

   17,275,555    2,049,679    19,325,234 
  

 

 

   

 

 

   

 

 

 

Nine Months Ended September 30, 2019:

      

United States

   19,443,934    2,731,126    22,175,060 

Foreign

   3,258,785    252,189    3,510,974 
  

 

 

   

 

 

   

 

 

 

Total net sales

   22,702,719    2,983,315    25,686,034 
  

 

 

   

 

 

   

 

 

 

   Fastener   Assembly
Equipment
   Consolidated 

Three Months Ended March 31, 2021:

      

United States

   6,437,852    1,130,360    7,568,212 

Foreign

   1,710,826    25,911    1,736,737 
  

 

 

   

 

 

   

 

 

 

Total net sales

   8,148,678    1,156,271    9,304,949 
  

 

 

   

 

 

   

 

 

 

Three Months Ended March 31, 2020:

      

United States

   5,740,925    748,486    6,489,411 

Foreign

   996,472    90,572    1,087,044 
  

 

 

   

 

 

   

 

 

 

Total net sales

   6,737,397    839,058    7,576,455 
  

 

 

   

 

 

   

 

 

 

5. The Company’s effective tax rates were approximately 25.4%21.7% and 23.9%21.0% for the thirdfirst quarter of 2021 and 2020, and 2019, respectively. The Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020. The CARES Act allows for the carryback of any net operating loss arising in a tax year beginning after December 31, 2017 and before January 1, 2021, to each of the five tax years preceding the tax year in which the loss arises. As a result, the Company’s effective tax rate was approximately (32.7)% for the nine months ended September 30, 2020 compared to 22.5% for the nine months ended September 30, 2019.

The Company’s federal income tax returns for the 2017 2018 and 2019through 2020 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 2017 2018 and 2019through 2020 federal income tax returns will expire on September 15, 2021 2022 and 2023,through 2024, respectively.

The Company’s state income tax returns for the 2017 through 20192020 tax years remain subject to examination by various state authorities with the latest closing period on October 31, 2023.2024. 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.

6. Inventories are stated at the lower of cost or net realizable value, cost being determined by the first-in, first-out method. A summary of inventories is as follows:

 

  September 30, 2020   December 31, 2019   March 31, 2021   December 31, 2020 

Raw material

  $  2,067,234   $2,337,278   $  2,734,512   $2,245,709 

Work-in-process

   1,500,319    1,201,099    2,081,169    1,410,868 

Finished goods

   1,913,253    1,869,800    2,095,279    2,096,717 
  

 

   

 

   

 

   

 

 

Inventories, gross

   5,480,806    5,408,177    6,910,960    5,753,294 

Valuation reserves

   (536,000   (457,000   (599,000   (600,000
  

 

   

 

   

 

   

 

 

Inventories, net

  $  4,944,806   $4,951,177   $  6,311,960   $5,153,294 
  

 

   

 

   

 

   

 

 

7. Segment Information—The Company operates in two business segments as determined by its products. The fastener segment includes cold-formed 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:

 

      Assembly           Fastener   Assembly
Equipment
   Other   Consolidated 
  Fastener   Equipment   Other   Consolidated 

Three Months Ended September 30, 2020:

        

Three Months Ended March 31, 2021:

        

Net sales

  $7,024,416   $620,843   $—     $7,645,259   $8,148,678   $1,156,271   $—     $9,304,949 

Depreciation

   297,533    32,869    8,377    338,779    291,183    33,533    5,449    330,165 

Segment operating profit

   783,234    103,759    —      886,993    927,158    296,700    —      1,223,858 

Selling and administrative expenses

   —      —      (493,370   (493,370   —      —      (543,772   (543,772

Interest income

   —      —      20,512    20,512    —      —      10,042    10,042 
        

 

         

 

 

Income before income taxes

        $414,135         $690,128 
        

 

         

 

 

Capital expenditures

   28,165    —      92,140    120,305    104,524    —      11,939    116,463 

Segment assets:

                

Accounts receivable, net

   5,059,552    287,364    —      5,346,916    6,222,588    647,303    —      6,869,891 

Inventories, net

   3,880,189    1,064,617    —      4,944,806    5,055,332    1,256,628    —      6,311,960 

Property, plant and equipment, net

   10,381,970    1,588,157    1,064,667    13,034,794    10,276,980    1,535,329    1,108,792    12,921,101 

Other assets

   —      —      8,108,571    8,108,571    —      —      6,450,577    6,450,577 
        

 

         

 

 
        $31,435,087         $32,553,529 
        

 

         

 

 

Three Months Ended September 30, 2019:

        

Three Months Ended March 31, 2020:

        

Net sales

  $7,306,895   $882,010   $—     $8,188,905   $6,737,397   $839,058   $—     $7,576,455 

Depreciation

   305,082    32,507    9,742    347,331    296,110    32,869    8,377    337,356 

Segment operating profit

   605,503    336,320    —      941,823    404,018    184,571    —      588,589 

Selling and administrative expenses

   —      —      (563,705   (563,705   —      —      (550,896   (550,896

Interest income

   —      —      36,679    36,679    —      —      33,875    33,875 
        

 

         

 

 

Income before income taxes

        $414,797         $71,568 
        

 

         

 

 

Capital expenditures

   267,179    2,576    —      269,755    167,997    —      —      167,997 

Segment assets:

                

Accounts receivable, net

   5,174,674    439,348    —      5,614,022    5,106,941    396,742    —      5,503,683 

Inventories, net

   4,294,760    1,181,573    —      5,476,333    4,195,183    983,198    —      5,178,381 

Property, plant and equipment, net

   11,126,165    1,715,513    949,254    13,790,932    10,919,327    1,653,895    931,472    13,504,694 

Other assets

   —      —      8,195,043    8,195,043    —      —      7,619,802    7,619,802 
        

 

         

 

 
        $33,076,330         $31,806,560 
        

 

         

 

 

       Assembly         
   Fastener   Equipment   Other   Consolidated 

Nine Months Ended September 30, 2020:

        

Net sales

  $17,275,555   $2,049,679   $—     $19,325,234 

Depreciation

   891,177    98,607    25,132    1,014,916 

Segment operating profit

   533,742    319,340    —      853,082 

Selling and administrative expenses

   —      —      (1,547,606   (1,547,606

Interest income

   —      —      79,711    79,711 
        

 

 

 

Income (loss) before income taxes

        $(614,813
        

 

 

 

Capital expenditures

   225,707    —      149,950    375,657 

Nine Months Ended September 30, 2019:

        

Net sales

  $22,702,719   $2,983,315   $—     $25,686,034 

Depreciation

   907,887    92,884    29,227    1,029,998 

Segment operating profit

   1,681,703    988,196    —      2,669,899 

Selling and administrative expenses

   —      —      (1,705,159   (1,705,159

Interest income

   —      —      108,458    108,458 
        

 

 

 

Income before income taxes

        $1,073,198 
        

 

 

 

Capital expenditures

   1,307,859    228,900    26,025    1,562,784 

8. COVID-19—In March 2020, the World Health Organization characterized the novel coronavirus (“COVID-19”) a pandemic and the President of the United States declared the COVID-19 outbreak a national emergency. The rapid spread of the virus and the evolving response domestically and internationally to combat it havehas had a significant negative impact on the global economy, including the automotive industry upon which we rely for sales. Beginning in March 2020, most states issued executive orders which temporarily closed businesses deemed non-essential in an effort to preventlimit the spread of the coronavirus. Similar measures also took place in foreign markets we serve. As a result, our operations and the operations of our customers and suppliers have beenwere adversely affected. Since some of our customers are classified as essential businesses and were allowed to continue to operate during this period, we were able to continue our operations, but at a significantly reduced level, in order to service those customers. Our automotive customers were particularly affected, as much of the sectorindustry was idled for an extended period of time during the second quarter of 2020 due to employee safety concerns. While most shut-down orders were lifted late in the secondthat quarter, various work-related restrictions remainremained in place.place and the economic fallout lingers. Due to the rapidly changing business environment and heightened degree of uncertainty resulting from COVID-19, we have takentook measures to reduce expenses and conserve capital during this period, including reduced work schedules, delayed capital expenditures and a reduction in dividend payments. We have seenIn the second half of 2020, we experienced improved demand sinceas government-imposed restrictions were relaxed. However, the timing and sustainability of any broad economic recovery is uncertain and will likely be tied to the course of the pandemic. As we cannot predict the duration or scope of the COVID-19 pandemic, or its broader impact on the global economy, including the demand for automobiles, it is unknown how long COVID-19 restrictions will remain in place or what the impact of COVID-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.

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

Results of Operations

Net sales for the thirdfirst quarter of 2021 were $9,304,949 compared to $7,576,455 in the first quarter of 2020, were $7,645,259 compared to $8,188,905an increase of $1,728,494, or 22.8%. The increase was the result of greater demand in both our fastener segment and our assembly equipment segment as the third quarter of 2019, a decline of $543,646, or 6.6%. As of September 30, 2020, year to date sales totaled $19,325,234 compared to $25,686,034,outlook for the first three quarters of 2019, a decline of $6,360,800, or 24.8%. While third quarter sales haveglobal economy improved 86.3% compared toand the preceding quarter, demand from our customers continuespost-pandemic recovery appears to be negatively impacted by the COVID-19 pandemic. Netunderway. The increase in sales resulted in net income for the third quarter of 2020 was $309,135,$540,128, or $0.32 per share, compared to $315,797, or $0.32$0.56 per share, in the thirdfirst quarter of 2019. Net lossthis year compared to $56,568, or $0.06 per share, in the first quarter of 2020. Improved operating conditions in the current year allowed for the first three quartersrestoration of 2020 was $413,813, or $0.43the regular quarterly dividend to $0.22 per share compared with net incomeafter being reduced at the onset of $832,198, or $0.86 per share, reportedthe pandemic in 2019.2020.

Fastener segment revenues were $7,024,416$8,148,678 in the thirdfirst quarter of 2021 compared to $6,737,397 in the first quarter of 2020, compared to $7,306,895 in the year earlier quarter, a declinean increase of $282,479,$1,411,281, or 3.9%20.9%. The automotive sector is the primary market for our fastener segment products and much of that sector was idled for an extended period of time during the second quarter due to the COVID-19 pandemic. The resumption of operations in the automotive sector led to an increase in sales to our automotive customers of $3,082,963, or 195.4%, during the third quarter compared to the preceding quarter. Sales to our non-automotive customers, where COVID-related shut downs were not as widespread, also improved in the third quarter, increasing $427,711, or 22.1%, compared to the second quarter. For the first three quarters of 2020, fastener segment revenues were $17,275,555 compared to $22,702,719 in 2019, a decline of $5,427,164, or 23.9%. Sales to automotive customers have declined $3,642,931,were $5,059,469 in the first quarter this year compared to $4,413,737 in the first quarter of 2020, an increase of $645,732, or 25.5%, year14.6%. This compares favorably to date whilethe first quarter increase in U.S. light-vehicle sales of 11.8%. Fastener segment sales to non-automotive customers have declined $1,784,233, or 21.2%,were $3,089,209 in the first quarter of this year compared to $2,323,660 in the previous year.first quarter of 2020, an increase of $765,549 or 32.9%. The year to date decline is primarily relatedspread of the coronavirus pandemic late in the first quarter of 2020 was the primary factor in the lower sales reported that quarter as nearly all the markets we serve were negatively impacted. The increase in sales in the first quarter of 2021 was the primary factor contributing to the COVID-19 pandemic and the resultant economic recession. The rebound in fastener segment demand in the third quarter combined with cost savings measures taken earlier in the year resulted in an improvement$564,678 increase in fastener segment gross margins to $1,656,629 from $1,091,951 in the first quarter of $165,6082020. While the improvement in gross margins was significant, we have experienced price increases in various manufacturing costs, including steel, our primary raw material, which has increased approximately 11% compared to the thirdfirst quarter of 2019. Year2020. Labor costs, which have been held down due to date, gross margins have declined $1,326,837 comparedthe pandemic, are also expected to last year as reductionsincrease in all major categories of manufacturing costs were not able to offset the dramatic decline in sales brought about by the pandemic.near-term.

Assembly equipment segment revenues were $620,843$1,156,271 in the thirdfirst quarter of 2021 compared to $839,058 in the first quarter of 2020, compared to $882,010an increase of $317,213, or 37.8%. The increase in sales in the third quarter of 2019, a decline of $261,167, or 29.6%. For the first nine months of 2020, assembly equipment segment sales were $2,049,679 compared to $2,983,315 for the same period in 2019, a decline of $933,636, or 31.3%. The decline in sales during the third quarter and thecurrent year to date wasis primarily due to an increase in the broad effectsnumber and average selling price of machines sold in the COVID-19 pandemic, but also duecurrent year as well as improved tool sales. The increase in net sales contributed to the inclusion of certain high-dollar value machine ordersa $159,332 increase in 2019. The reduction in revenue was the primary cause of the decline in assembly equipment segment gross marginsmargin from $218,476 in 2020 to $160,841$377,808 in the third quarter of 2020 from $335,723 in the third quarter of 2019. For the first three quarters of the year, gross margins were $489,630 compared to $1,001,223 in 2019, a decline of $511,593.2021.

Selling and administrative expenses forduring the thirdfirst quarter of 2021 were $1,362,201 compared to $1,285,334 recorded in the first quarter of 2020, were $1,258,995 compared to $1,282,149 in the year earlier quarter, a declinean increase of $23,154,$76,867, or 1.8%6.0%. The net declineincrease was primarily due to a reduction$57,000 increase in profit sharing and compensation expenses of $24,000 and $14,000, respectively. These reductions were partially offset by an increase in consulting expensesexpense related to an ERP system upgrade. Sellingimproved operating profit in the current year quarter and administrative expenses for the first three quarters of 2020 were $3,758,752 compared to $3,931,510 for the same period of 2019, a reduction of $172,758, or 4.4%. While consulting expenses have increased $61,000 year to date related to an ERP system upgrade, this was more than offset by a $120,000 reduction$15,000 increase in sales commissions due to lowergreater sales and a $54,000 reduction in compensation expense and other smaller expense reductions.the current year. Selling and administrative expenses as a percentagewere 14.6% and 17.0% of net sales forin the first nine monthsquarter of 2021 and 2020, was 19.4% compared to 15.3% for the first nine months of 2019.respectively.

Other Income

Other income in the thirdfirst quarter of 20202021 was $32,637$17,892 compared to $47,179$46,475 in the thirdfirst quarter of 2019. Other income for the first three quarters of 2020 was $122,869 compared2020. The decrease is primarily related to $145,208a reduction in the same period of 2019. Other income consists primarily of interest income on certificates of deposit. The decreases were primarilydeposit due to lower interest rates in the current year compared to the year earlier periods.year.

Income Tax Expense

The Company’s effective tax rates were approximately 25.4%21.7% and 23.9%21.0% for the thirdfirst quarter of 2021 and 2020, and 2019, respectively. The Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020. The CARES Act allows for the carryback of any net operating loss arising in a tax year beginning after December 31, 2017 and before January 1, 2021, to each of the five tax years preceding the tax year in which the loss arises. As a result, the Company’s effective tax rate was approximately (32.7)% for the nine months ended September 30, 2020 compared to 22.5% for the nine months ended September 30, 2019.

Liquidity and Capital Resources

Working capital improved to $17,092,651 as of September 30, 2020 was $16.2 million, a decrease of $0.3 million fromMarch 31, 2021 compared to $16,566,289 at the beginning of the year. In an effort to conserve capital duringDuring the quarter, accounts receivable increased by $1,706,441, due to the pandemic,greater sales activity during the quarterly dividend was reduced from $0.22 per sharequarter compared to $0.10 per sharethe fourth quarter of 2020, and inventory increased by $1,158,666 as material purchases were accelerated in advance of higher prices. Partially offsetting these changes were increases in accounts payable and accrued expenses related to the greater level of operating activity during the first quarter. Other items impacting working capital in the secondfirst quarter andwere capital expenditures have been reduced to $375,657 for the first nine months of 2020 from $1,562,784$116,463, which consisted primarily of equipment used in the same periodfastener production activities, and dividends paid of 2019. These actions have helped to offset the decline in capital caused by the year to date operating loss.$212,549. The net result of these changes and other cash flow itemsactivity was to

leave cash, cash equivalents and certificates of deposit at $7.5 million$6,065,766 as of September 30, 2020March 31, 2021 compared to $8 million at$7,300,731 as 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

Our resultsResults in the thirdfirst quarter improved dramatically compared to the secondfirst quarter as the harsh restrictions enacted globally to combat the spread of 2020, when the COVID-19 pandemic were relaxed and world-wide economies began their recoveries. However,the resultant widespread shut-downs started to push the global economy into recession. While the pandemic is far fromnot entirely under control, the wider availability of vaccines has allowed for fewer COVID-related restrictions and as a result,an improved economic outlook. We will continue to monitor the impact of the pandemic on all aspects of our operations and act as necessary in the operationsbest interests of our customersemployees and suppliers willthe Company. While demand improved in the first quarter, some automobile manufacturers have recently reduced operations due to shortages of critical components. These disruptions could result in reduced demand for our products. We have also experienced higher prices for various commodities compared to last year and longer lead times for certain items. Cost increases can be difficult to recover and further increases are expected. These factors, as well as the uncertainties related to COVID-19, are expected to continue to be adversely affected.present challenges in the near-term. As we cannot predictface these challenges, we will make adjustments to our activities which we believe are necessary based on market conditions, while continuing to pursue opportunities to develop new customer relationships and build on existing ones in all the duration or scope of the COVID-19 pandemic, or its broader impact on the global economy, including the demand for automobiles, it is unknown how long COVID-19 restrictions will remain in place or what the impact of COVID-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.markets we serve.

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: 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 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 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 — OTHER INFORMATION

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 September 30, 2020March 31, 2021 formatted in Extensible Business Reporting Language (XBRL): (1) Condensed Consolidated Balance Sheets, (2) Condensed Consolidated Statements of Income, (3) Condensed Consolidated Statements of Stockholders’Shareholders’ Equity, (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)
Date: November 6, 2020May 7, 2021   
   /s/ Walter W. Morrissey
   Walter W. Morrissey
   Chairman of the Board of Directors
and Chief Executive Officer
(Principal Executive Officer)
Date: November 6, 2020May 7, 2021   
   /s/ Michael J. Bourg
   Michael J. Bourg
   President, Chief Operating
Officer and Treasurer
(Principal Financial Officer)

 

16

15