CHICAGO RIVET & MACHINE CO - Quarter Report: 2022 September (Form 10-Q)
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, 2022
OR
o 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
_________________________________
(Exact Name of Registrant as Specified in Its Charter)
Illinois |
36-0904920 |
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 |
(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 ý No o
Indicate by check mark whether the registrant has submitted electronically, every interactive data file required to be submitted 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 such files). Yes ý No o
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 o |
Accelerated filer o |
Non-accelerated filer ý |
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 ý
As of November 7, 2022, there were 966,132 shares of the registrant’s common stock outstanding.
CHICAGO RIVET & MACHINE CO.
INDEX
1
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
CHICAGO RIVET & MACHINE CO. | |||
Condensed Consolidated Balance Sheets | |||
|
|
|
|
|
September 30, 2022 (Unaudited) |
|
December 31, 2021 |
Assets |
|
|
|
|
|
|
|
Current Assets: |
|
|
|
Cash and cash equivalents |
$ 5,328,732 |
|
$ 2,036,954 |
Certificates of deposit |
2,741,000 |
|
2,741,000 |
Accounts receivable - Less allowances of $162,000 and $170,000, respectively |
6,578,114 |
|
5,647,984 |
Inventories, net |
9,921,472 |
|
8,519,780 |
Prepaid income taxes |
0 |
|
440 |
Other current assets |
422,002 |
|
346,236 |
|
|
|
|
Total current assets |
24,991,320 |
|
19,292,394 |
|
|
|
|
Property, Plant and Equipment: |
|
|
|
Land and improvements |
1,510,513 |
|
1,778,819 |
Buildings and improvements |
6,745,058 |
|
8,456,983 |
Production equipment and other |
37,133,750 |
|
36,679,114 |
|
45,389,321 |
|
46,914,916 |
Less accumulated depreciation |
33,481,667 |
|
34,441,052 |
Net property, plant and equipment |
11,907,654 |
|
12,473,864 |
|
|
|
|
Total assets |
$ 36,898,974 |
|
$ 31,766,258 |
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
Accounts payable |
$ 897,430 |
|
$ 692,635 |
Accrued wages and salaries |
838,030 |
|
509,332 |
Other accrued expenses |
411,519 |
|
366,418 |
Unearned revenue and customer deposits |
175,330 |
|
302,424 |
Federal and state income taxes |
1,164,586 |
|
0 |
Total current liabilities |
3,486,895 |
|
1,870,809 |
|
|
|
|
Deferred income taxes |
900,084 |
|
926,084 |
|
|
|
|
Total liabilities |
4,386,979 |
|
2,796,893 |
|
|
|
|
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 |
Additional paid-in capital |
447,134 |
|
447,134 |
Retained earnings |
34,848,863 |
|
31,306,233 |
Treasury stock, 171,964 shares at cost |
(3,922,098) |
|
(3,922,098) |
Total shareholders' equity |
32,511,995 |
|
28,969,365 |
|
|
|
|
Total liabilities and shareholders' equity |
$ 36,898,974 |
|
$ 31,766,258 |
|
|
|
|
See Notes to the Condensed Consolidated Financial Statements |
|
| |
2
CHICAGO RIVET & MACHINE CO. | ||||||||
Condensed Consolidated Statements of Income (Unaudited) | ||||||||
| ||||||||
Three Months Ended September 30, 2022 |
|
Three Months Ended September 30, 2021 |
|
Nine Months Ended September 30, 2022 |
|
Nine Months Ended September 30, 2021 | ||
Net sales |
$ 8,567,785 |
|
$ 8,555,731 |
|
$ 26,788,879 |
|
$ 26,225,070 | |
Cost of goods sold |
7,447,877 |
|
7,069,700 |
|
22,366,372 |
|
21,027,525 | |
|
|
|
|
|
|
|
| |
Gross profit |
1,119,908 |
|
1,486,031 |
|
4,422,507 |
|
5,197,545 | |
|
|
|
|
|
|
|
| |
Operating (income) expenses: |
|
|
|
|
|
|
| |
Selling and administrative expenses |
1,250,385 |
|
1,290,046 |
|
3,809,970 |
|
3,936,995 | |
Gain on sale of property |
(4,738,394) |
|
0 |
|
(4,738,394) |
|
0 | |
|
|
|
|
|
|
|
| |
Total operating (income) expenses |
(3,488,009) |
|
1,290,046 |
|
(928,424) |
|
3,936,995 | |
|
|
|
|
|
|
|
| |
Operating profit |
4,607,917 |
|
195,985 |
|
5,350,931 |
|
1,260,550 | |
|
|
|
|
|
|
|
| |
Other income |
13,143 |
|
11,674 |
|
35,346 |
|
43,744 | |
|
|
|
|
|
|
|
| |
Income before income taxes |
4,621,060 |
|
207,659 |
|
5,386,277 |
|
1,304,294 | |
Provision for income taxes |
1,042,000 |
|
35,000 |
|
1,206,000 |
|
272,000 | |
|
|
|
|
|
|
|
| |
Net income |
$ 3,579,060 |
|
$ 172,659 |
|
$ 4,180,277 |
|
$ 1,032,294 | |
|
|
|
|
|
|
|
| |
Per share data: |
|
|
|
|
|
|
| |
Basic net income per share |
$ 3.71 |
|
$ 0.18 |
|
$ 4.33 |
|
$ 1.07 | |
Diluted net income per share |
$ 3.71 |
|
$ 0.18 |
|
$ 4.33 |
|
$ 1.07 | |
|
|
|
|
|
|
|
| |
Weighted average common shares outstanding: | ||||||||
Basic |
966,132 |
|
966,132 |
|
966,132 |
|
966,132 | |
Diluted |
966,132 |
|
966,132 |
|
966,132 |
|
966,132 | |
|
|
|
|
|
|
|
| |
Cash dividends declared per share |
$ 0.22 |
|
$ 0.22 |
|
$ 0.66 |
|
$ 0.66 | |
|
|
|
|
|
|
|
| |
See Notes to the Condensed Consolidated Financial Statements | ||||||||
3
CHICAGO RIVET & MACHINE CO. | ||||||||
Consolidated Statements of Shareholders’ Equity (Unaudited) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
Treasury Stock, At Cost |
| ||
Preferred Stock Amount |
Shares |
Amount |
Additional Paid-In Capital |
Retained Earnings |
Shares |
Amount |
Total Shareholders’ Equity | |
|
|
|
|
|
|
|
|
|
Balance, December 31, 2021 |
$ 0 |
966,132 |
$ 1,138,096 |
$ 447,134 |
$ 31,306,233 |
171,964 |
$(3,922,098) |
$ 28,969,365 |
Net income |
|
|
|
|
447,313 |
|
|
447,313 |
Dividends declared ($0.22 per share) |
|
|
|
|
(212,549) |
|
|
(212,549) |
Balance, March 31, 2022 |
$ 0 |
966,132 |
$ 1,138,096 |
$ 447,134 |
$ 31,540,997 |
171,964 |
$(3,922,098) |
$ 29,204,129 |
Net income |
|
|
|
|
153,904 |
|
|
153,904 |
Dividends declared ($0.22 per share) |
|
|
|
|
(212,549) |
|
|
(212,549) |
Balance, June 30, 2022 |
$ 0 |
966,132 |
$ 1,138,096 |
$ 447,134 |
$ 31,482,352 |
171,964 |
$(3,922,098) |
$ 29,145,484 |
Net income |
|
|
|
|
3,579,060 |
|
|
3,579,060 |
Dividends declared ($0.22 per share) |
|
|
|
|
(212,549) |
|
|
(212,549) |
Balance, September 30, 2022 |
$ 0 |
966,132 |
$ 1,138,096 |
$ 447,134 |
$ 34,848,863 |
171,964 |
$(3,922,098) |
$ 32,511,995 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2020 |
$ 0 |
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 |
$ 0 |
966,132 |
$ 1,138,096 |
$ 447,134 |
$ 31,370,536 |
171,964 |
$(3,922,098) |
$ 29,033,668 |
Net income |
|
|
|
|
319,507 |
|
|
319,507 |
Dividends declared ($0.22 per share) |
|
|
|
|
(212,549) |
|
|
(212,549) |
Balance, June 30, 2021 |
$ 0 |
966,132 |
$ 1,138,096 |
$ 447,134 |
$ 31,477,494 |
171,964 |
$(3,922,098) |
$ 29,140,626 |
Net income |
|
|
|
|
172,659 |
|
|
172,659 |
Dividends declared ($0.22 per share) |
|
|
|
|
(212,549) |
|
|
(212,549) |
Balance, September 30, 2021 |
$ 0 |
966,132 |
$ 1,138,096 |
$ 447,134 |
$ 31,437,604 |
171,964 |
$(3,922,098) |
$ 29,100,736 |
|
|
|
|
|
|
|
|
|
| ||||||||
See Notes to the Condensed Consolidated Financial Statements. | ||||||||
4
CHICAGO RIVET & MACHINE CO. | |||
Condensed Consolidated Statements of Cash Flows (Unaudited) | |||
|
|
|
|
|
Nine Months Ended September 30, 2022 |
|
Nine Months Ended September 30, 2021 |
Cash flows from operating activities: |
|
|
|
Net income |
$ 4,180,277 |
|
$ 1,032,294 |
Adjustments to reconcile net income to net cash used in operating activities: |
|
|
|
Depreciation |
960,139 |
|
990,983 |
(Gain) loss on sale of property and equipment |
(4,736,096) |
|
21,564 |
Deferred income taxes |
(26,000) |
|
(94,000) |
Changes in operating assets and liabilities: |
|
|
|
Accounts receivable |
(930,130) |
|
(911,293) |
Inventories |
(1,401,692) |
|
(2,591,976) |
Other current assets |
(75,326) |
|
(7,890) |
Accounts payable |
204,795 |
|
710,141 |
Accrued wages and salaries |
328,698 |
|
389,796 |
Other accrued expenses |
1,209,687 |
|
34,353 |
Unearned revenue and customer deposits |
(127,094) |
|
(40,959) |
Net cash used in operating activities |
(412,742) |
|
(466,987) |
|
|
|
|
Cash flows from investing activities: |
|
|
|
Capital expenditures |
(696,073) |
|
(587,615) |
Proceeds from the sale of property |
5,038,240 |
|
7,800 |
Proceeds from certificates of deposit |
1,245,000 |
|
4,084,000 |
Purchases of certificates of deposit |
(1,245,000) |
|
(2,092,000) |
Net cash provided by investing activities |
4,342,167 |
|
1,412,185 |
|
|
|
|
Cash flows from financing activities: |
|
|
|
Cash dividends paid |
(637,647) |
|
(637,647) |
Net cash used in financing activities |
(637,647) |
|
(637,647) |
|
|
|
|
Net increase in cash and cash equivalents |
3,291,778 |
|
307,551 |
Cash and cash equivalents at beginning of period |
2,036,954 |
|
2,567,731 |
Cash and cash equivalents at end of period |
$ 5,328,732 |
|
$ 2,875,282 |
|
|
|
|
See Notes to the Condensed Consolidated Financial Statements. | |||
5
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, 2022 (unaudited) and December 31, 2021 (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, 2021.
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 nine month period ended September 30, 2022 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 the third quarter of 2022, the Company did not realize any revenue related to such contracts. As of September 30, 2022, there are no such contracts outstanding.
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, 2022 and December 31, 2021 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.
6
The following table presents revenue by segment, further disaggregated by end-market:
|
Fastener |
Assembly Equipment |
Consolidated |
Three Months Ended September 30, 2022: |
|
|
|
Automotive |
$ 4,813,646 |
$ 45,012 |
$ 4,858,658 |
Non-automotive |
2,991,976 |
717,151 |
3,709,127 |
Total net sales |
$ 7,805,622 |
$ 762,163 |
$ 8,567,785 |
|
|
|
|
Three Months Ended September 30, 2021: |
|
|
|
Automotive |
$ 4,259,544 |
$ 27,998 |
$ 4,287,542 |
Non-automotive |
3,293,075 |
975,114 |
4,268,189 |
Total net sales |
$ 7,552,619 |
$ 1,003,112 |
$ 8,555,731 |
|
|
|
|
Nine Months Ended September 30, 2022: |
|
|
|
Automotive |
$ 14,268,638 |
$ 146,663 |
$ 14,415,301 |
Non-automotive |
9,750,429 |
2,623,149 |
12,373,578 |
Total net sales |
$ 24,019,067 |
$ 2,769,812 |
$ 26,788,879 |
|
|
|
|
Nine Months Ended September 30, 2021: |
|
|
|
Automotive |
$ 13,410,100 |
$ 100,953 |
$ 13,511,053 |
Non-automotive |
9,433,241 |
3,280,776 |
12,714,017 |
Total net sales |
$ 22,843,341 |
$ 3,381,729 |
$ 26,225,070 |
|
|
|
|
The following table presents revenue by segment, further disaggregated by location:
|
Fastener |
Assembly Equipment |
Consolidated |
Three Months Ended September 30, 2022: |
|
|
|
United States |
$ 6,268,813 |
$ 696,856 |
$ 6,965,669 |
Foreign |
1,536,809 |
65,307 |
1,602,116 |
Total net sales |
$ 7,805,622 |
$ 762,163 |
$ 8,567,785 |
|
|
|
|
Three Months Ended September 30, 2021: |
|
|
|
United States |
$ 6,300,067 |
$ 981,905 |
$ 7,281,972 |
Foreign |
1,252,552 |
21,207 |
1,273,759 |
Total net sales |
$ 7,552,619 |
$ 1,003,112 |
$ 8,555,731 |
|
|
|
|
Nine Months Ended September 30, 2022: |
|
|
|
United States |
$ 19,825,721 |
$ 2,633,475 |
$ 22,459,196 |
Foreign |
4,193,346 |
136,337 |
4,329,683 |
Total net sales |
$ 24,019,067 |
$ 2,769,812 |
$ 26,788,879 |
|
|
|
|
Nine Months Ended September 30, 2021: |
|
|
|
United States |
$ 18,589,576 |
$ 3,320,415 |
$ 21,909,991 |
Foreign |
4,253,765 |
61,314 |
4,315,079 |
Total net sales |
$ 22,843,341 |
$ 3,381,729 |
$ 26,225,070 |
|
|
|
|
7
5. The Company’s effective tax rates were approximately 22.5% and 16.9% for the third quarter of 2022 and 2021, respectively, and 22.4% and 20.9% for the nine months ended September 30, 2022 and 2021, respectively.
The Company’s federal income tax returns for the 2019, 2020 and 2021 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 2019, 2020 and 2021 federal income tax returns will expire on September 15, 2023, 2024 and 2025, respectively.
The Company’s state income tax returns for the 2019 through 2021 tax years remain subject to examination by various state authorities with the latest closing period on October 31, 2025. 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.
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, 2022 |
|
December 31, 2021 |
Raw material |
$ 5,018,465 |
|
$ 4,645,923 |
Work-in-process |
3,143,844 |
|
2,181,457 |
Finished goods |
2,395,163 |
|
2,304,400 |
Inventories, gross |
10,557,472 |
|
9,131,780 |
Valuation reserves |
(636,000) |
|
(612,000) |
Inventories, net |
$ 9,921,472 |
|
$ 8,519,780 |
8
7. Segment Information—The Company operates in two business segments as determined by its products. The fastener segment includes rivets, cold-formed fasteners and parts 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:
Fastener |
Assembly Equipment |
Other |
Consolidated | |
Three Months Ended September 30, 2022: |
|
|
|
|
Net sales |
$ 7,805,622 |
$ 762,163 |
0 |
$ 8,567,785 |
|
|
|
|
|
Depreciation |
281,842 |
33,363 |
4,086 |
319,291 |
|
|
|
|
|
Segment operating profit |
350,536 |
92,977 |
0 |
443,513 |
Selling and administrative expenses |
0 |
0 |
(565,740) |
(565,740) |
Gain on sale of property |
0 |
0 |
4,738,394 |
4,738,394 |
Interest income |
0 |
0 |
4,893 |
4,893 |
Income before income taxes |
|
|
|
$ 4,621,060 |
|
|
|
|
|
Capital expenditures |
462,445 |
0 |
21,925 |
484,370 |
|
|
|
|
|
Segment assets: |
|
|
|
|
Accounts receivable, net |
6,185,810 |
392,304 |
0 |
6,578,114 |
Inventories, net |
8,549,836 |
1,371,636 |
0 |
9,921,472 |
Property, plant and equipment, net |
9,575,293 |
1,333,816 |
998,545 |
11,907,654 |
Other assets |
0 |
0 |
8,491,734 |
8,491,734 |
|
|
|
|
$ 36,898,974 |
|
|
|
|
|
Three Months Ended September 30, 2021: |
|
|
|
|
Net sales |
$ 7,552,619 |
$ 1,003,112 |
0 |
$ 8,555,731 |
|
|
|
|
|
Depreciation |
291,512 |
33,534 |
5,448 |
330,494 |
|
|
|
|
|
Segment operating profit |
480,288 |
215,869 |
0 |
696,157 |
Selling and administrative expenses |
0 |
0 |
(491,547) |
(491,547) |
Interest income |
0 |
0 |
3,049 |
3,049 |
Income before income taxes |
|
|
|
$ 207,659 |
|
|
|
|
|
Capital expenditures |
77,007 |
0 |
165,395 |
242,402 |
|
|
|
|
|
Segment assets: |
|
|
|
|
Accounts receivable, net |
5,623,045 |
451,698 |
0 |
6,074,743 |
Inventories, net |
6,553,617 |
1,191,653 |
0 |
7,745,270 |
Property, plant and equipment, net |
9,986,600 |
1,468,262 |
1,263,290 |
12,718,152 |
Other assets |
0 |
0 |
6,093,884 |
6,093,884 |
|
|
|
|
$ 32,632,049 |
|
|
|
|
|
Nine Months Ended September 30, 2022: |
|
|
|
|
Net sales |
$ 24,019,067 |
$ 2,769,812 |
0 |
$ 26,788,879 |
|
|
|
|
|
Depreciation |
845,524 |
100,089 |
14,526 |
960,139 |
|
|
|
|
|
Segment operating profit |
1,685,574 |
516,367 |
0 |
2,201,941 |
Selling and administrative expenses |
0 |
0 |
(1,562,804) |
(1,562,804) |
Gain on sale of property |
0 |
0 |
4,738,394 |
4,738,394 |
Interest income |
0 |
0 |
8,746 |
8,746 |
Income before income taxes |
|
|
|
$ 5,386,277 |
|
|
|
|
|
Capital expenditures |
597,991 |
0 |
98,082 |
696,073 |
|
|
|
|
|
Nine Months Ended September 30, 2021: |
|
|
|
|
Net sales |
$ 22,843,341 |
$ 3,381,729 |
0 |
$ 26,225,070 |
|
|
|
|
|
Depreciation |
847,037 |
100,600 |
16,346 |
990,983 |
|
|
|
|
|
Segment operating profit |
1,982,084 |
852,571 |
0 |
2,834,655 |
Selling and administrative expenses |
0 |
0 |
(1,547,845) |
(1,547,845) |
Interest income |
0 |
0 |
17,484 |
17,484 |
Income before income taxes |
|
|
|
$ 1,304,294 |
|
|
|
|
|
Capital expenditures |
410,281 |
0 |
177,334 |
587,615 |
8. On August 12, 2022, the Company entered into a Purchase and Sale Agreement (the “PSA”) with Frontenac Properties LLC (the “Purchaser”) pursuant to which the Company agreed, subject to the terms and conditions of the PSA, to sell its facility in Naperville, Illinois, in which the Company headquarters and warehouse space are located, to the Purchaser. On September 27, 2022, the Company’s sale of the facility to the Purchaser was completed for a selling price of $5,350,000 in cash, less customary closing costs. The net gain on the transaction was $4,738,394. A portion of the net proceeds was invested in U.S. Treasury bills and included in cash and cash equivalents on September 30, 2022.
Concurrently with the completion of the sale of the Naperville facility, the Company and the Purchaser entered into a lease agreement pursuant to which the Company will lease the warehouse portion of the Naperville facility from the Purchaser until December 31, 2022 and the office portion until June 30, 2023. The monthly rent payable by the Company under the lease is $12,500 for the period from the closing until December 31, 2022 and $8,500 for the period from January 1, 2023 to June 30, 2023. The Company has adopted the practical expedient for short-term leases under ASC 842 which allows for leases of 12 months or less to be expensed on a straight-line basis over the lease term without reporting on the balance sheet.
9
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 third quarter of 2022 were $8,567,785 compared to $8,555,731 in the third quarter of 2021, an increase of $12,054, or 0.1%. As of September 30, 2022, year to date sales totaled $26,788,879 compared to $26,225,070, for the first three quarters of 2021, an increase of $563,809, or 2.1%. Net income for the third quarter of 2022 was $3,579,060, or $3.71 per share compared to $172,659, or $0.18 per share in the third quarter of 2021. Net income for the first three quarters of 2022 was $4,180,277, or $4.33 per share, compared to net income of $1,032,294, or $1.07 per share, for the same period in 2021. The increase in net income in the third quarter and year-to-date was primarily due to a $4,738,394 gain on the sale of our Naperville property which was completed on September 27, 2022.
Fastener segment revenues were $7,805,622 in the third quarter of 2022 compared to $7,552,619 reported in the third quarter of 2021, an increase of $253,003, or 3.3%. For the first three quarters of 2022, fastener segment revenues were $24,019,067 compared to $22,843,341 for the same period in 2021, an increase of $1,175,726, or 5.1%. The automotive sector is the primary market for our fastener segment products and sales to automotive customers were $4,813,646 in the third quarter this year compared to $4,259,544 in the third quarter of 2021, an increase of $554,102, or 13.0%. Sales to automotive customers for the first nine months of 2022 were $14,268,638 compared to $13,410,100 for the first nine months of 2021, an increase of $858,538, or 6.4%. North American light vehicle production and sales have improved over 2021, but continue to be constrained by shortages of critical components. Fastener segment sales to non-automotive customers were $2,991,976 for the third quarter of 2022 compared to $3,293,075 in the third quarter of 2021, a $301,099 decline. Sales to non-automotive customers for the first three quarters of 2022 were $9,750,429 compared to $9,433,241 in the year earlier period, an increase of $317,188, or 3.4%. The overall increase in fastener segment sales during the third quarter and year-to-date was offset by higher operating costs as historically high inflation continued to negatively impact raw material, labor and most other operating costs. As a result, third quarter fastener segment gross profit was $972,363 compared to $1,195,425 in 2021, a decline of $220,764. On a year-to-date basis, fastener segment gross profit was $3,722,743 compared to $4,113,646 for the first three quarters of 2021, a decline of $388,605.
Assembly equipment segment revenues were $762,163 in the third quarter of 2022 compared to $1,003,112 in the third quarter of 2021, a decline of $240,949, or 24.0%. For the first nine months of 2022, assembly equipment segment revenues were $2,769,812 compared to $3,381,729 for the same period of 2021, a decline of $611,917, or 18.1%. The third quarter and year-to-date decline in revenue was primarily due to fewer machines sold and a lower average selling price on machines sold in the current year, as the first three quarters of 2021 included a number of high-dollar value specialty machines. Lower sales, along with higher operating costs, contributed to a decline in segment gross profit for the quarter and the first nine months of 2022. Assembly equipment segment gross profit for the third quarter of 2022 was $147,545 compared to $290,606 in the third quarter of 2021, a decline of $143,061. For the first three quarters of 2022, gross profit was $699,764 compared to $1,083,899 in 2021, a decline of $384,135.
Selling and administrative expenses for the third quarter of 2022 were $1,250,385 compared to $1,290,046 in the third quarter of 2021, a reduction of $39,661, or 3.1%. While salaries were approximately $50,000 lower in the current year quarter, that reduction was offset by a $69,000 increase in profit sharing expense. For the first nine months of 2022, selling and administrative expenses were $3,809,970 compared to $3,936,995 for the same period in 2021, a decrease of $127,025, or 3.2%. The net reduction in the first three quarters of 2022 primarily relates to a reduction in salaries of approximately $137,000 which was only partially offset by an increase of $44,000 in outside consulting, related to recruiting and technology services, and a $40,000 increase in profit sharing expense. Selling and administrative expenses as a percentage of net sales for the first nine months of 2022 were reduced to 14.2%, from 15.0% for the first nine months of 2021.
As previously disclosed in a Current Report on Form 8-K filed on September 30, 2022, we sold our Naperville, Illinois facility in which the Company’s headquarters and warehouse space is located for a selling price of $5,350,000 in cash, less customary closing costs. Concurrently with the completion of the sale, the Company entered into a lease agreement with the purchaser pursuant to which the Company will lease the warehouse portion of the Naperville facility from the purchaser until December 31, 2022 and the office portion until June 30, 2023. The monthly rent payable by the Company under the Lease is $12,500 for the period from the closing until December 31, 2022 and $8,500 for the period from January 1, 2023 to June 30, 2023. The sale was undertaken in order to take advantage of favorable market conditions and begin the process of relocating to a more suitable sized facility.
Other Income
Other income in the third quarter of 2022 was $13,143, compared to $11,674 in the third quarter of 2021. The increase was primarily due to higher interest rates in recent months on certificates of deposit. Other income for the first three quarters of 2022 was $35,346 compared to $43,744 in the same period of 2021. The year-to-date decline was primarily due to a reduction in interest income due to lower average balances invested in the current year.
Income Tax Expense
The Company’s effective tax rates were approximately 22.5% and 16.9% for the third quarter of 2022 and 2021, respectively. The Company’s effective tax rates were approximately 22.4% and 20.9% for the nine months ended September 30, 2022 and 2021, respectively.
Liquidity and Capital Resources
Working capital improved to $21,504,425 as of September 30, 2022 from $17,421,585 at the beginning of the year. The improvement was primarily due to the gain realized on the sale of our Naperville property during the third quarter. During the first three quarters of 2022, accounts receivable increased by $930,130, due to the greater sales activity compared to the fourth quarter of 2021, and inventory increased by $1,401,692 due to higher raw material prices and an increase in quantities on hand to minimize supply disruptions. Partially offsetting these changes is an increase in income taxes payable related to the gain on the sale of property. Other items reducing working capital in 2022 were capital expenditures of $696,073, which consisted primarily of equipment used in fastener production activities, and dividends paid of $637,647. These changes and other cash flow activity resulted in a balance of cash, cash equivalents and short-term investments of $8,069,732 as of September 30, 2022 compared to $4,777,954 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
Overall customer demand remained positive during the third quarter despite sporadic constraints from some of our automotive customers related to their critical parts shortages. We have experienced higher operating costs related to historically high inflation and ongoing supply chain disruptions that has negatively impacted operating results. Cost increases can be difficult to recover and are expected to persist while supply imbalances persist. Just as significant, the tight labor market has made it difficult to maintain proper staffing and has resulted in less efficient operations and unmet customer demand. These factors are expected to continue to present challenges in the near-term. Rising interest rates have further unsettled the economic outlook. As we face these challenges, we will make adjustments to our activities as market conditions dictate, including continuing our efforts to optimize staffing in order to improve operating efficiencies, while pursuing opportunities beneficial to operating results.
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.
10
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.
11
PART II -- OTHER INFORMATION
Item 6. Exhibits
31Rule 13a-14(a) or 15d-14(a) Certifications
31.1Certification Pursuant to Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2Certification Pursuant to Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32Section 1350 Certifications
32.1Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).
12
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 8, 2022
/s/ Walter W. Morrissey
Walter W. Morrissey
Chairman of the Board of Directors
and Chief Executive Officer
(Principal Executive Officer)
Date: November 8, 2022
/s/ Michael J. Bourg
Michael J. Bourg
President, Chief Operating
Officer and Treasurer
(Principal Financial Officer)
13