CHICAGO RIVET & MACHINE CO - Quarter Report: 2015 March (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

For the quarterly period ended March 31, 2015

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

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  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of April 30, 2015, there were 966,132 shares of the registrant’s common stock outstanding.

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CHICAGO RIVET & MACHINE CO.

INDEX

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CHICAGO RIVET & MACHINE CO.

Condensed Consolidated Balance Sheets

March 31, 2015 and December 31, 2014

See Notes to the Condensed Consolidated Financial Statements

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CHICAGO RIVET & MACHINE CO.

Condensed Consolidated Balance Sheets

March 31, 2015 and December 31, 2014

See Notes to the Condensed Consolidated Financial Statements

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CHICAGO RIVET & MACHINE CO.

Condensed Consolidated Statements of Income

For the Three Months Ended March 31, 2015 and 2014

(Unaudited)

See Notes to the Condensed Consolidated Financial Statements

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CHICAGO RIVET & MACHINE CO.

Condensed Consolidated Statements of Retained Earnings

For the Three Months Ended March 31, 2015 and 2014

(Unaudited)

See Notes to the Condensed Consolidated Financial Statements

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Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2015 and 2014

(Unaudited)

See Notes to the Condensed Consolidated Financial Statements

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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 March 31, 2015 (unaudited) and December 31, 2014 (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, 2014.

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 month period ended March 31, 2015 are not necessarily indicative of the results to be expected for the year.

Certain items in 2014 have been reclassified to conform to the presentation in 2015. These changes have no effect on net income or the financial position of the Company.

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. The Company has entered into a contract to expand the fastener facility in Madison Heights, Michigan in order to provide additional capacity and improve workflow through the plant. The base contract amount is $1,502,500 and is expected to be completed before the end of 2015.

5. The Company’s effective tax rates were approximately 31.8% and 33.8% for the first quarter of 2015 and 2014, respectively. Rates were lower than the U.S. federal statutory rate primarily due to the Domestic Production Activities Deduction allowed under Internal Revenue Code Section 199.

The Company’s federal income tax returns for the 2011 through 2014 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 2011 through 2014 federal income tax returns will expire on September 15, 2015 through 2018, respectively.

The Company’s state income tax returns for the 2011 through 2014 tax years remain subject to examination by various state authorities with the latest closing period on October 31, 2018. The Company is not currently under examination by any state authority for income tax purposes and no statutes for state income tax filings have been extended.

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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:

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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 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:

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Revenues for the first quarter of 2015 were $9,283,791 compared to $9,950,424 in the first quarter of 2014, a decline of $666,633, or 6.7%. The reduction in sales was primarily related to weaker demand from certain automotive customers and lower export sales. While sales were lower, certain manufacturing expenses also declined, resulting in an overall gross margin rate that was only fractionally lower than in the first quarter of 2014. Net income was $462,473, or $0.48 per share, in the first quarter of this year compared to $568,373, or $0.59 per share, in the first quarter of 2014. In addition to a regular quarterly dividend of $.18 per share, an extra dividend of $.25 per share was paid in the first quarter based on the positive results achieved in 2014.

Fastener segment revenues were $8,400,497 in the first quarter of 2015, declining $687,238, or 7.6%, from $9,087,735 reported in the first quarter of 2014. The decline was primarily due to reduced demand from certain automotive customers, including a $269,000 drop in shipments to a customer with a production facility in China. North American vehicle production declined in the first two months of the year, compared to a year earlier, before rebounding in March. Additionally, even though our export sales account for less than 10% of overall sales, certain foreign markets have exhibited weakness recently. The impact of the lower sales was lessened due to a $123,000 reduction in tooling expense and a $68,000 reduction in natural gas expense from the elevated levels of 2014, as well as lower expenditures for supplies and maintenance. The net effect of these cost savings and the lower sales volume resulted in a decrease in fastener segment gross margin of approximately $178,000.

Assembly equipment segment revenues were $883,294 in the first quarter of 2015 compared to $862,689 in the first quarter of 2014, an increase of $20,605, or 2.4%. The increase in revenue was primarily due to an increase in parts and tool sales as fewer machines were shipped in the current year quarter compared to last year. The increase in sales during the quarter, while keeping manufacturing costs comparable to the same period last year, resulted in an improvement in segment margins of approximately $10,000 in the first quarter of 2015. As of March 31, 2015, machine orders trail the level of a year earlier.

Selling and administrative expenses during the first quarter of 2015 were $1,425,825, an increase of $11,773, or less than 1%, compared to $1,414,052 recorded in the first quarter of 2014. While profit sharing expense declined in the first quarter by $20,000, due to lower profitability, smaller increases in annual reporting expenses, repairs and maintenance and employee insurance contributed to the overall increase. Compared to net sales, selling and administrative expenses were 15.4% for the current year quarter compared to 14.2% in the first quarter of 2014.

Other income in the first quarter of 2015 was $10,433, compared to $10,117 in the first quarter of 2014. Other income consists primarily of interest income on certificates of deposit.

The Company’s effective tax rates were approximately 31.8% and 33.8% for the first quarter of 2015 and 2014, respectively. Rates were lower than the U.S. federal statutory rate primarily due to the Domestic Production Activities Deduction allowed under Internal Revenue Code Section 199.

Working capital amounted to $15.9 million as of March 31, 2015, a decrease of approximately $.1 million from the beginning of the current year. The largest component of the net change in the first quarter was accounts receivable, which increased by $.6 million due to greater sales activity during the quarter, compared to the seasonally lower fourth quarter of 2014. Partially offsetting this change was an increase of $.4 million in accounts payable, which relates to the greater level of activity in the quarter, and a reduction in prepaid income taxes of $.2 million since the beginning of the year. The net result of these changes and other cash flow items was to leave cash, cash equivalents and certificates of deposit relatively unchanged at March 31, 2015 from the beginning of the year at $6.3 million. Management believes that current cash, cash equivalents and operating cash flow will provide adequate working capital for the next twelve months.

We are pleased to report very respectable results for the first quarter of 2015, in spite of uneven demand in certain markets. We have adjusted our work schedules in response to reduced customer demand and will continue to emphasize cost controls wherever possible. Conditions in the automotive market, upon which we rely for the majority of our revenues, remain favorable, even though the current year growth rate is expected to be lower than in recent years. The slowing of the domestic economy experienced in late 2014 and early 2015 is currently expected to improve in coming quarters. We have seen a firming of fastener segment demand early in the second quarter, however equipment segment demand has been mixed, with increased tools and parts orders being somewhat offset by lower machine orders. Our financial condition remains sound, allowing us to make significant investments in our operations in recent years in an

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effort to remain competitive and pursue opportunities to profitably grow our revenues and improve our bottom line. We will continue to make adjustments to our activities which we feel are necessary based on conditions in our markets, while maintaining an emphasis on quality and reliability of service our customers demand.

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: conditions in the domestic automotive industry, upon which we rely for sales revenue, the intense competition in our markets, the concentration of our sales to two major 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, 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.

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(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.

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PART II — OTHER INFORMATION

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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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EXHIBITS

INDEX TO EXHIBITS

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