UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2020March 31, 2021

OR

For the transition period from                     to                     

Commission file number 000-01227

Chicago Rivet & Machine Co.

(Exact Name of Registrant as Specified in Its Charter)

(630) 357-8500

Registrant’s Telephone Number, Including Area Code

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

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.

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

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

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

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)

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)

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)

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:

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

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:

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.

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

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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