UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-K

 

 

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2018

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

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

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

901 Frontenac Road, Naperville, Illinois   60563
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (630) 357-8500

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

 

Title of Each Class

 

Name of Each Exchange on Which Registered

Common Stock, par value $1.00 per share  

NYSE American

(Trading privileges only, not registered)

Securities registered pursuant to Section 12(g) of the Act: None

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  ☐    No  ☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes  ☐    No  ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☑    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes  ☑    No  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ☑

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 Act).    Yes  ☐    No  ☑

The aggregate market value of common stock held by non-affiliates of the Company as of June 30, 2018 was $25,335,536.

As of March 18, 2019, there were 966,132 shares of the Company’s common stock outstanding.

Documents Incorporated By Reference

(1) Portions of the Company’s Annual Report to Shareholders for the year ended December 31, 2018 (the “2018 Report”) are incorporated by reference in Parts I and II of this report.

(2) Portions of the Company’s definitive Proxy Statement which is to be filed with the Securities and Exchange Commission in connection with the Company’s 2019 Annual Meeting of Shareholders are incorporated by reference in Part III of this report.

 

 

 


CHICAGO RIVET & MACHINE CO.

YEAR ENDING DECEMBER 31, 2018

 

Item
No.

       

Page
No.

   Part I   
1.    Business    3
1A.    Risk Factors    3
1B.    Unresolved Staff Comments    6
2.    Properties    6
3.    Legal Proceedings    6
4.    Mine Safety Disclosures    6
   Part II   
5.    Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities    8
6.    Selected Financial Data    8
7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations    8
7A.    Quantitative and Qualitative Disclosures About Market Risk    11
8.    Financial Statements and Supplementary Data    11
9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure    11
9A.    Controls and Procedures    11
9B.    Other Information    12
   Part III   
10.    Directors, Executive Officers and Corporate Governance    13
11.    Executive Compensation    13
12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters    13
13.    Certain Relationships and Related Transactions, and Director Independence    13
14.    Principal Accountant Fees and Services    13
   Part IV   
15.    Exhibits and Financial Statement Schedules    13
16.    Form 10-K Summary    14

 

2


PART I

ITEM 1 – Business

Chicago Rivet & Machine Co. (the “Company”) was incorporated under the laws of the State of Illinois in December 1927, as successor to the business of Chicago Rivet & Specialty Co. The Company operates in two segments of the fastener industry: fasteners and assembly equipment. The fastener segment consists of the manufacture and sale of rivets, cold-formed fasteners and parts, and screw machine products. The assembly equipment segment consists primarily of the manufacture of automatic rivet setting machines, automatic assembly equipment and parts and tools for such machines.

The principal market for the Company’s products is the North American automotive industry. Sales are solicited by employees and by independent sales representatives.

The segments in which the Company operates are characterized by active and substantial competition. No single company dominates the industry. The Company’s competitors include both larger and smaller manufacturers, and segments or divisions of large, diversified companies with substantial financial resources. Principal competitive factors in the market for the Company’s products are price, quality and service.

The Company serves a variety of customers. Revenues are primarily derived from sales to customers involved, directly or indirectly, in the manufacture of automobiles and automotive components. Information concerning backlog of orders is not considered material to the understanding of the Company’s business due to relatively short production cycles. The level of business activity for the Company is closely related to the overall level of industrial activity in the United States. During 2018, sales to three customers were at least 10% of the Company’s consolidated revenues. Sales to TI Group Automotive Systems, LLC accounted for approximately 17% and 19% of the Company’s consolidated revenues in 2018 and 2017, respectively. Sales to Parker-Hannifin Corporation and Cooper-Standard Holdings Inc. each accounted for approximately 10% of the Company’s consolidated revenues in 2018.

The Company’s business has historically been stronger during the first half of the year.

The Company purchases raw material from a number of sources, primarily within the United States. There are numerous sources of raw material, and the Company does not have to rely on a single source for any of its requirements.

Patents, trademarks, licenses, franchises and concessions are not of significant importance to the business of the Company.

The Company does not engage in significant research activities, but rather in ongoing product improvement and development. The amounts spent on product development activities in the last two years were not material.

At December 31, 2018, the Company employed 228 people.

The Company has no foreign operations. Sales to foreign customers represent approximately 12% of the Company’s total sales.

ITEM 1A – Risk Factors

Our business is subject to a number of risks and uncertainties. If any of the events contemplated by the following risks actually occur, then our business, financial condition or results of operations could be materially adversely affected. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, financial condition and results of operations.

 

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We are dependent on the domestic automotive industry.

Demand for our products is directly related to conditions in the domestic automotive industry, which is highly cyclical and is affected by a variety of factors, including regulatory requirements, international trade policies, and consumer spending and preferences. The domestic automotive industry is characterized by fierce competition, and has undergone major restructuring in recent years in response to overcapacity, narrowing profit margins, significant pension and health care liabilities and excess debt. Conditions in the domestic automotive industry declined significantly during the global recession of 2008 and 2009, resulting in a substantial decline in vehicle sales. Overall, automotive production in the United States declined approximately 50 percent between 2000 and 2009, before starting to recover in 2010. Although automotive production recently improved to pre-recession levels, any decline in the domestic automotive industry could have a material adverse effect on our business, results of operations and financial condition.

We face intense competition.

We compete with a number of other manufacturers and distributors that produce and sell products similar to ours. Price, quality and service are the primary elements of competition. Our competitors include a large number of independent domestic and international suppliers. We are not as large as a number of these companies and do not have as many financial or other resources. The competitive environment has also changed dramatically over the past several years as our customers, faced with intense international competition and pressure to reduce costs, have expanded their worldwide sourcing of components. As a result, we have experienced competition from suppliers in other parts of the world that benefit from economic advantages, such as lower labor costs, lower health care costs and fewer regulatory burdens. There can be no assurance that we will be able to compete successfully with existing or new competitors. Increased competition could have a material adverse effect on our business, results of operations and financial condition.

We rely on sales to major customers.

Our sales to three customers constituted approximately 37% of our consolidated revenues in 2018. Sales to TI Group Automotive Systems, LLC accounted for approximately 17% of the Company’s consolidated revenues in 2018 and sales to Parker-Hannifin Corporation and Cooper-Standard Holdings Inc. each accounted for approximately 10% of the Company’s consolidated revenues in 2018. The loss of any significant portion of our sales to these customers could have a material adverse effect on our business, results of operations and financial condition.

We are subject to risks related to export sales.

Our export sales have increased in recent years, and we are working to continue to expand our business relationships with customers outside of the United States. Export sales are subject to various risks, including risks related to changes in local economic, social and political conditions (particularly in emerging markets), changes in tariffs and trade policies and foreign currency exchange rate fluctuations, which could have a material adverse effect on our business, results of operations and financial condition.

Increases in our raw material costs or difficulties with our suppliers could negatively affect us.

While we currently maintain alternative sources for raw materials, our business is subject to the risk of price fluctuations and periodic delays in the delivery of certain raw materials. At various times in recent years, we have been adversely impacted by increased costs for steel, our principal raw material, which we have been unable to wholly mitigate, as well as increases in other materials prices. Any continued fluctuation in the price or availability of our raw materials could have a material adverse impact on our business, results of operations and financial condition.

 

4


We may be adversely affected by labor relations issues.

Although none of our employees are unionized, the domestic automakers and many of their suppliers, including many of our customers, have unionized work forces. Work stoppages or slow-downs experienced by automakers or their suppliers could result in slow-downs or closures of assembly plants where our products are included in assembled components. In the event that one or more of our customers or their customers experiences a material labor relations issue, our business, results of operations and financial condition could be materially adversely affected.

We may incur losses as a result of product liability, warranty or other claims that may be brought against us.

We face risk of exposure to warranty and product liability claims in the event that our products fail to perform as expected or result, or are alleged to have resulted, in bodily injury, property damage or other losses. In addition, if any of our products are or are alleged to be defective, then we may be required to participate in a product recall. We may also be involved from time to time in legal proceedings and commercial or contractual disputes. Any losses or other liabilities related to these exposures could have a material adverse effect on our business, results of operations and financial condition.

We could be adversely impacted by environmental laws and regulations.

Our operations are subject to environmental laws and regulations. Currently, environmental costs and liabilities with respect to our operations are not material, but there can be no assurance that we will not be adversely impacted by these costs and liabilities in the future either under present laws and regulations or those that may be adopted or imposed in the future.

We could be adversely impacted by the loss of the services of key employees.

Successful operations depend, in part, upon the efforts of executive officers and other key employees. Our future success will depend, in part, upon our ability to attract and retain qualified personnel. Loss of the services of any of our key employees, or the inability to attract or retain employees could have a material adverse affect upon our business, financial condition and results of operations.

Any significant disruption, interruption or failure of our information systems could disrupt the operation of our business, result in increased costs and decreased revenues and expose us to liability.

Cybersecurity threats are growing in number and sophistication and include, among others, malicious software, attempts to gain unauthorized access to data, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information and corruption of data. In addition to security threats, we are also subject to other systems failures, including network, software or hardware failures, whether caused by us, third-party service providers, natural disasters, power shortages, terrorist attacks or other events. The unavailability of our information systems, the failure of these systems to perform as anticipated or any significant breach of data security could cause loss of data, disrupt our operations, lead to financial losses from remedial actions, require significant management attention and resources, and negatively impact our reputation among our customers, which could have a negative impact on our business, results of operations and financial condition.

The price of our common stock is subject to volatility, and our stock is thinly traded.

Various factors, such as general economic changes in the financial markets, announcements or significant developments with respect to the automotive industry, actual or anticipated variations in our or our competitors’ quarterly or annual financial results, the introduction of new products or technologies by us or our competitors, changes in other conditions or trends in our industry or in the markets of any of our significant customers, changes in governmental regulation, or changes in securities analysts’ estimates of our competitors or our industry, could cause the market price of our common stock to fluctuate substantially.

 

5


Our common stock is traded on the NYSE American (not registered, trading privileges only). The average daily trading volume for our common stock during 2018 was less than 2,000 shares per day. As a result, you may have difficulty selling shares of our common stock, and the price of our common stock may vary significantly based on trading volume.

 

ITEM 1B

– Unresolved Staff Comments

None.

ITEM 2 – Properties

The Company’s headquarters is located in Naperville, Illinois. It conducts its manufacturing and warehousing operations at three additional facilities. All of these facilities are described below. Each facility is owned by the Company and considered suitable and adequate for its present use. The Company also maintains a small sales and engineering office in Pembroke, Massachusetts in a leased office.

Of the properties described below, the Madison Heights, Michigan facility is used entirely in the fastener segment. The Albia, Iowa facility is used exclusively in the assembly equipment segment. The Tyrone, Pennsylvania and the Naperville, Illinois facilites are utilized in both operating segments.

Plant Locations and Descriptions

 

Naperville, Illinois   Brick, concrete block and partial metal construction with metal roof.
Tyrone, Pennsylvania   Concrete block with small tapered beam type warehouse.
Albia, Iowa   Concrete block with prestressed concrete roof construction.
Madison Heights, Michigan   Concrete, brick and partial metal construction with metal roof.

ITEM 3 – Legal Proceedings

The Company is, from time to time involved in litigation, including environmental claims, 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.

ITEM 4 – Mine Safety Disclosures

Not applicable.

Executive Officers of the Registrant

The names, ages and positions of all executive officers of the Company, as of March 18, 2019, are listed below. Officers are elected annually by the Board of Directors at the meeting of the directors immediately following the Annual Meeting of Shareholders. There are no family relationships among these officers, nor any arrangement or understanding between any officer and any other person pursuant to which the officer was selected.

 

Name and Age of Officer

  

Position

  

Years an Officer

John A. Morrissey    83    Chairman, Chief Executive Officer    38

Michael J. Bourg      56

   President, Chief Operating Officer and Treasurer    20

 

6


-

Mr. Morrissey has been Chairman of the Board of Directors of the Company since November 1979, and Chief Executive Officer since August 1981. He has been a director of the Company since 1968.

 

-

Mr. Bourg has been President, Chief Operating Officer and Treasurer of the Company since May 2006. Prior to that, he served in various executive roles since joining the Company in December 1998. He has been a director of the Company since May 2006.

 

7


PART II

ITEM 5 – Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company’s common stock is traded on the NYSE American (trading privileges only, not registered). As of March 5, 2019 there were approximately 150 shareholders of record of such stock.

Under the terms of a stock repurchase authorization originally approved by the Board of Directors of the Company in February of 1990, as amended, the Company is authorized to repurchase up to an aggregate of 200,000 shares of its common stock, in the open market or in private transactions, at prices deemed reasonable by management. Cumulative purchases under the repurchase authorization have amounted to 162,996 shares at an average price of $15.66 per share. The Company has not purchased any shares of its common stock since 2002.

ITEM 6 – Selected Financial Data

As a Smaller Reporting Company as defined in Rule 12b-2 of the Exchange Act and in item 10(f)(1) of Regulation S-K, we have elected scaled disclosure reporting obligations with respect to this item and therefore are not required to provide the information requested by this Item 6.

ITEM 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 above under “Risk Factors” and elsewhere in this Form 10-K. As stated elsewhere in this filing, such factors include, among other things: conditions in the domestic automotive industry, upon which we rely for sales revenue, the intense competition in our markets, the concentration of our sales with 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, information systems disruptions and the loss of the services of our key employees. 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.

RESULTS OF OPERATIONS

Financial results for 2018 were positive by most measures, as we increased our revenues to the highest level since 2007. However, rising raw material prices constrained gross margins compared to the prior year. Net sales were $37,174,249 in 2018 compared to $35,764,714 in 2017, an increase of $1,409,535, or 3.9%. Net income for 2018 was $2,001,185, or $2.07 per share, compared to $2,079,082, or $2.15 per share, in 2017.

2018 Compared to 2017

Fastener segment revenues were $7,816,286 in the fourth quarter of 2018, an increase of $158,047, or 2.1%, from $7,658,239 reported in the fourth quarter of 2017. Fastener segment revenues for the full year were $33,712,458 in 2018 compared with $31,977,964 in 2017, an increase of $1,734,494, or 5.4%. The automotive sector is the primary market for our fastener segment products and while North American light-vehicle production was relatively flat in 2018 compared to 2017, our sales to automotive customers declined 7.8% during

 

8


the fourth quarter and 1.4% for the year. However, the decline in automotive sales was more than offset by growth in non-automotive sales which increased 25.9% and 21.7% in the fourth quarter and for the full year of 2018, respectively, compared to 2017. For the fourth quarter, the fastener segment gross margin was $1,468,690 compared to $1,588,746 in the year earlier quarter, a decline of $120,056. Steel is our primary raw material and we have experienced significant increases in our cost of steel during 2018 which was primarily responsible for the net decline in gross margins during the quarter despite the increase in sales. For the full year 2018, segment gross margin was $6,829,211 compared to $6,633,651 in 2017, an increase of $195,560, despite the higher raw material costs.

Assembly equipment segment revenues were $697,489 in the fourth quarter of 2018, a decline of $103,395, or 12.9%, compared to the fourth quarter of 2017, when revenues were $800,884. For the full year 2018, assembly equipment segment revenues were $3,461,791, a decline of $324,959, or 8.6%, compared to $3,786,750 reported in 2017. The decline in fourth quarter and full year sales was primarily due to a reduction in the number of high-dollar specialty machines shipped compared to the prior year periods, as the total number of machines shipped increased during 2018. The decline in assembly equipment segment sales was the primary cause of the reduction in segment gross margins of $72,975 in the fourth quarter and $203,523 for the full year of 2018 compared to 2017.

Selling and administrative expenses were $5,503,111 in 2018 compared to $5,548,541 in 2017, a decline of $45,430, or 0.8%. The reduction was primarily due to the ERP system conversion that was completed at one of our locations in 2017. This accounted for $167,000 of additional expenses in that year, which was only partially offset by a $113,000 increase in sales commissions, related to higher sales, in 2018. As a percentage of net sales, selling and administrative expenses were 14.8% in 2018 compared to 15.5% in 2017.

Other income was $153,537 in 2018 compared to $100,901 in 2017. Other income is primarily comprised of interest income which increased during the year due to rising interest rates.

The Company’s effective income tax rates were 21.7% and 15.7% in 2018 and 2017, respectively. The rate was lower than the U.S. federal statutory rate in 2017 primarily due to the enactment of the Tax Cuts and Jobs Act (“the Act”) in December 2017. Among other changes, the Act reduced the maximum corporate tax rate from 35% to 21% beginning in 2018. Although the lower tax rate took effect in 2018, deferred tax assets and liabilities should be measured using the enacted tax rate expected to apply in the years in which they are expected to be settled. The Company recorded a one-time net income tax benefit of $432,000 in the fourth quarter of 2017 as a result of the revaluation of the Company’s deferred tax assets and liabilities to reflect the lower future U.S. corporate tax rates.

DIVIDENDS

In determining to pay dividends, the Board considers current profitability, the outlook for longer-term profitability, known and potential cash requirements and the overall financial condition of the Company. The Company paid four regular quarterly dividends totaling $.84 per share during 2018. In addition, an extra dividend of $.30 per share was paid during the first quarter, bringing the total distribution for the year to $1.14 per share. On February 18, 2019, the Board of Directors declared a regular quarterly dividend of $.22 per share, an increase of 4.8% from the prior quarter, payable March 20, 2019 to shareholders of record on March 5, 2019. This continues the uninterrupted record of consecutive quarterly dividends paid by the Company to its shareholders that extends over 85 years. At that same meeting, the Board also declared an extra dividend of $.30 per share payable March 20, 2019 to shareholders of record on March 5, 2019.

PROPERTY, PLANT AND EQUIPMENT

Total capital expenditures in 2018 were $2,023,190. Fastener segment additions accounted for $1,635,115 of the total, including $956,739 for cold heading and screw machine equipment additions, $243,194 for

 

9


equipment to perform secondary operations on parts and $296,289 for inspection equipment. The remaining $138,893 fastener segment additions consisted of general plant equipment and facilities improvements. Assembly equipment segment additions in 2018 were $49,884 for production equipment. Investments for the benefit of both operating segments, primarily for building improvements, totaled $338,191 during 2018.

Capital expenditures during 2017 totaled $1,337,941. The fastener segment accounted for $1,093,539 of the total, including $904,312 for production equipment. Cold heading and screw machine equipment additions were $303,992, quality control equipment additions were $281,983, additions for secondary processing equipment were $261,143 and $57,194 was expended for general plant equipment. The remainder of the fastener segment additions relate to building improvements and technology equipment. Assembly equipment segment additions totaled $178,761, primarily for production equipment. Additional investments of $65,641 were made in 2017 for building improvements that benefit both operating segments.

Depreciation expense amounted to $1,308,448 in 2018 and $1,231,546 in 2017.

LIQUIDITY AND CAPITAL RESOURCES

Working capital at December 31, 2018 was approximately $17.4 million, an increase of $.4 million from the beginning of the year. The improvement was primarily due to continued profitable operations in 2018. The most significant component of the change was an increase in inventories of $1.6 million during the year as raw material purchases were accelerated in advance of price increases. The Company’s holdings in cash, cash equivalents and certificates of deposit amounted to $7.8 million at the end of 2018, a decrease of $1.2 million. The reduction was primarily related to the increase in inventory as well as a $.7 million increase in capital expenditures. The Company’s investing activities in 2018 included capital expenditures of $2 million. The only financing activity during 2018 was the payment of approximately $1.1 million in dividends.

Management believes that current cash, cash equivalents and operating cash flow will be sufficient to provide adequate working capital for the next twelve months.

Off-Balance Sheet Arrangements

The Company has not entered into, and has no current plans to enter into, any off-balance sheet financing arrangements.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of revenue and expenses during the reporting period. A summary of critical accounting policies can be found in Note 1 of the financial statements.

NEW ACCOUNTING STANDARDS

The Company’s financial statements and financial condition were not, and are not expected to be, materially impacted by new, or proposed, accounting standards. A summary of recent accounting pronouncements can be found in Note 1 of the financial statements.

OUTLOOK FOR 2019

We started 2018 with some optimism as the addition of new fastener segment customers and parts in 2017 was expected to be more fully reflected in the year’s financial results. That optimism was well placed as our

 

10


fastener segment sales reflected growth in each quarter of 2018 compared to the year earlier periods. Much of that growth came from non-automotive customers which added to the diversity of industries served. With the majority of our fastener segment revenue continuing to come from the automotive industry, our sales to automotive customers tracked closely to U.S. auto and light truck sales and production during most of the year, before weakening late in the fourth quarter. Current automotive sales forecasts for 2019 and our early 2019 activity indicate further weakness in the near-term, leading to a cautious outlook for our fastener segment demand. While the results for the assembly equipment segment reported in 2018 did not match those of the previous year, it was primarily due to a change in product sales mix that resulted in a lower amount per sales transaction being recognized compared to the prior year, as demand was stable during the year. As we begin 2019, our machine order backlog and overall assembly equipment demand appears consistent with the prior year.

Higher raw material prices, brought on by tariffs instituted during 2018, had a negative impact on earnings during the year. It is unknown whether there will be relief from higher material prices in 2019 even if the tariffs were to be eliminated. The growth in the domestic economy is also showing signs of slowing as higher interest rates take effect and the long-lived recovery runs its course. Both of these factors will contribute to a more challenging environment for our operations in 2019. In anticipation of the challenges ahead, we will continue our efforts to improve operational efficiency as a means of improving margins. We will also continue our efforts to develop new customer relationships and build on existing ones in all the markets we serve by emphasizing our experience, quality and customer service in a very competitive global marketplace.

In four of the last six years, we invested more than $2 million in equipment and facilities upgrades in order to increase our capabilities, expand production capacity and improve operating efficiency. We feel these investments are necessary to remain competitive and were made possible by our consistent profitability during that period. In the upcoming year, we expect to make additional investments in order to improve our operations. Our sound financial condition and our profitability has also allowed us to pay dividends of $5.8 million over the same six year period and declare an additional special dividend of $.3 million, to be paid in the first quarter of 2019, based on the results of 2018.

The positive results in the past year would not have been possible without the conscientious efforts of our dedicated employees, who consistently strive to exceed customer expectations related to quality, service and price. We are grateful for their contributions as well as the loyalty of our customers, who have placed their confidence in us to help them achieve their goals. We also take this opportunity to thank our shareholders for their continued support.

ITEM 7A – Quantitative and Qualitative Disclosures About Market Risk

As a Smaller Reporting Company as defined in Rule 12b-2 of the Exchange Act and in item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations with respect to this item and therefore are not required to provide the information requested by this Item 7A.

ITEM 8 – Financial Statements and Supplementary Data

See the section entitled “Consolidated Financial Statements” which appears on page 17 of this report.

ITEM 9 – Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

ITEM 9A – Controls and Procedures

Disclosure Controls and Procedures.

 

11


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 Chief Financial Officer 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.

Management’s Report on Internal Control Over Financial Reporting.

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as that term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). 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), assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2018, based on the 2013 criteria established in Internal Control—Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, the Company’s management has concluded that the Company’s internal controls over financial reporting are effective as of December 31, 2018.

Management’s assessment of internal control has not been audited, as the attestation report requirement for non-accelerated filers was permanently removed from the Sarbanes-Oxley Act by Section 989C of the Dodd-Frank Act as adopted by the SEC.

Changes in 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 quarter ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B – Other Information

None.

 

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PART III

ITEM 10 – Directors, Executive Officers and Corporate Governance

The information in the Company’s 2019 Proxy Statement (i) with respect to the Board of Directors’ nominees for directors that is not related to security ownership in “Security Ownership of Management” (ii) in the third paragraph in “Additional Information Concerning the Board of Directors and Committees” and (iii) in “Section 16(a) Beneficial Ownership Reporting Compliance” is incorporated herein by reference. The 2019 Proxy Statement is to be filed with the Securities and Exchange Commission in connection with the Company’s 2019 Annual Meeting of Shareholders. The information called for with respect to executive officers of the Company is included in Part I of this Report on Form 10-K under the caption “Executive Officers of the Registrant.”

The Company has adopted a code of ethics for its principal executive officer, chief operating officer and senior financial officers. A copy of this code of ethics was filed as Exhibit 14 to the Company’s Annual Report on Form 10-K dated March 29, 2005.

ITEM 11 – Executive Compensation

The information set forth in the Company’s 2019 Proxy Statement in “Compensation of Directors and Executive Officers” is incorporated herein by reference.

The Compensation Committee of the Board of Directors currently consists of Directors Edward L. Chott and William T. Divane, Jr.

ITEM 12 – Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information set forth in the Company’s 2019 Proxy Statement in “Principal Shareholders” and the information with respect to security ownership of the Company’s directors and officers set forth in “Security Ownership of Management” is incorporated herein by reference.

The Company does not have any equity compensation plans or arrangements.

ITEM 13 – Certain Relationships and Related Transactions, and Director Independence

The information set forth in the Company’s 2019 Proxy Statement in (i) “Additional Information Concerning the Board of Directors and Committees—Policy Regarding Related Person Transactions” and (ii) the first paragraph under “Additional Information Concerning the Board of Directors and Committees” is incorporated herein by reference.

ITEM 14 – Principal Accountant Fees and Services

The information set forth in the Company’s 2019 Proxy Statement in “Ratification of Selection of Independent Auditor – Audit and Non-Audit Fees” is incorporated herein by reference.

PART IV

ITEM 15 – Exhibits and Financial Statement Schedules

 

  (a)

The following documents are filed as a part of this report:

 

  1.

Financial Statements:

See the section entitled “Consolidated Financial Statements” which appears on page 17 of this report.

 

13


  2.

Financial Statement Schedules:

Financial statement schedules and supplementary information has been omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.

 

  3.

Exhibits:

See the section entitled “Exhibits” which appears on page 15 of this report.

 

ITEM 16

– Form 10-K Summary

None.

 

14


CHICAGO RIVET & MACHINE CO.

EXHIBITS

 

Exhibit

Number

    
3.1    Articles of Incorporation, as last amended August 18, 1997. Incorporated by reference to the Company’s report on Form 10-K, dated March 27, 1998. File number 0000-01227
3.2    Amended and Restated By-Laws, as amended through February  15, 2016 Incorporated by reference to the Company’s report on Form 10-K, dated March 21, 2016. File number 0000-01227
13*    Annual Report to Shareholders for the year ended December 31, 2018.
14    Code of Ethics for Principal Executive and Senior Financial Officers. Incorporated by reference to the Company’s report on Form 10-K, dated March 29, 2005. File number 0000-01227
21    Subsidiaries of the Registrant.
31.1    Certification of Principal Executive Officer 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 of Principal Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) as Adopted Pursuant to Section  302 of the Sarbanes-Oxley Act of 2002.
32.1    Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2    Certification of Principal Financial Officer 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 Annual Report on Form 10-K for the year ended December 31, 2018 formatted in Extensible Business Reporting Language (XBRL):(1) Consolidated Balance Sheets, (2) Consolidated Statements of Income, (3) Consolidated Statements of Retained Earnings, (4) Consolidated Statements of Cash Flows, and (5) Notes to Consolidated Financial Statements.

*    Only the portions of this exhibit which are specifically incorporated herein by reference shall be deemed to be filed herewith.

 

15


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Chicago Rivet & Machine Co. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Chicago Rivet & Machine Co.
By  

/s/ Michael J. Bourg

Michael J. Bourg

President and Chief Operating Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

 

/s/ John A. Morrissey

John A. Morrissey

 

Chairman of the Board of Directors, Chief Executive Officer (Principal Executive Officer) and Member of the Executive Committee

 

March 20, 2019

/s/ Michael J. Bourg

Michael J. Bourg

 

President, Chief Operating Officer, Treasurer (Principal Financial and Accounting Officer), Director and Member of the Executive Committee

  March 20, 2019

/s/ Edward L. Chott

Edward L. Chott

 

Director, Member of the Audit Committee

 

March 20, 2019

/s/ Kent H. Cooney

Kent H. Cooney

 

Director, Member of the Audit Committee

 

March 20, 2019

/s/ William T. Divane, Jr.

William T. Divane, Jr.

 

Director, Member of the Audit Committee

 

March 20, 2019

/s/ Walter W. Morrissey

Walter W. Morrissey

 

Director, Member of the Executive Committee

 

March 20, 2019

/s/ John L. Showel

John L. Showel

 

Director

  March 20, 2019

 

16


CHICAGO RIVET & MACHINE CO.

CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements, together with the notes thereto and the report thereon of Crowe LLP dated March 20, 2019, appearing on pages 4 to 11 of the accompanying 2018 Annual Report, are incorporated herein by reference. With the exception of the aforementioned information and the information incorporated in Items 1, 5 and 8 herein, the 2018 Annual Report is not to be deemed filed as part of this Form 10-K Annual Report.

Consolidated Financial Statements from 2018 Annual Report (Exhibit 13 hereto):

Consolidated Balance Sheets (page 4 of 2018 Annual Report)

Consolidated Statements of Income (page 5 of 2018 Annual Report)

Consolidated Statements of Retained Earnings (page 5 of 2018 Annual Report)

Consolidated Statements of Cash Flows (page 6 of 2018 Annual Report)

Notes to Consolidated Financial Statements (pages 7, 8, 9, and 10 of 2018 Annual Report)

Report of Independent Registered Public Accounting Firm (page 11 of 2018 Annual Report)

 

17

EX-13

Exhibit 13

 


LOGO

 

 

Chicago Rivet & Machine Co.

2018 Annual Report


LOGO

 

 

 

 

Highlights

 

      2018      2017  

Net Sales

   $ 37,174,249      $ 35,764,714  

Net Income

     2,001,185        2,079,082  

Net Income Per Share

     2.07        2.15  

Dividends Per Share

     1.14        1.15  

Net Cash Provided by Operating Activities

     1,880,407        2,993,434  

Expenditures for Property, Plant and Equipment

     2,023,190        1,337,941  

Working Capital

     17,422,687        17,040,086  

Total Shareholders’ Equity

     29,759,749        28,859,955  

Common Shares Outstanding at Year-End

     966,132        966,132  

Shareholders’ Equity Per Common Share

     30.80        29.87  

 

Annual Meeting

The annual meeting of shareholders

will be held on May 14, 2019 at 10:00 a.m. at

901 Frontenac Road

Naperville, Illinois

Chicago Rivet & Machine Co. 901 Frontenac Road Naperville, Illinois 60563 • www.chicagorivet.com

 

 


LOGO

Management’s Report

on Financial Condition and Results of Operations

 

 

 

 

To Our Shareholders:

 

RESULTS OF OPERATIONS

Financial results for 2018 were positive by most measures, as we increased our revenues to the highest level since 2007. However, rising raw material prices constrained gross margins compared to the prior year. Net sales were $37,174,249 in 2018 compared to $35,764,714 in 2017, an increase of $1,409,535, or 3.9%. Net income for 2018 was $2,001,185, or $2.07 per share, compared to $2,079,082, or $2.15 per share, in 2017.

2018 Compared to 2017

Fastener segment revenues were $7,816,286 in the fourth quarter of 2018, an increase of $158,047, or 2.1%, from $7,658,239 reported in the fourth quarter of 2017. Fastener segment revenues for the full year were $33,712,458 in 2018 compared with $31,977,964 in 2017, an increase of $1,734,494, or 5.4%. The automotive sector is the primary market for our fastener segment products and while North American light-vehicle production was relatively flat in 2018 compared to 2017, our sales to automotive customers declined 7.8% during the fourth quarter and 1.4% for the year. However, the decline in automotive sales was more than offset by growth in non-automotive sales which increased 25.9% and 21.7% in the fourth quarter and for the full year of 2018, respectively, compared to 2017. For the fourth quarter, the fastener segment gross margin was $1,468,690 compared to $1,588,746 in the year earlier quarter, a decline of $120,056. Steel is our primary raw material and we have experienced significant increases in our cost of steel during 2018 which was primarily responsible for the net decline in gross margins during the quarter despite the increase in sales. For the full year 2018, segment gross margin was $6,829,211 compared to $6,633,651 in 2017, an increase of $195,560, despite the higher raw material costs.

Assembly equipment segment revenues were $697,489 in the fourth quarter of 2018, a decline of $103,395, or 12.9%, compared to the fourth quarter of 2017, when revenues were $800,884. For the full year 2018, assembly equipment segment revenues were $3,461,791, a decline of $324,959, or 8.6%, compared to $3,786,750 reported in 2017. The decline in fourth quarter and full year sales was primarily due to a reduction in the number of high-dollar specialty machines shipped compared to the prior year periods, as the total number of machines shipped increased during 2018. The decline in assembly equipment segment sales was the primary cause of the reduction in segment gross margins of $72,975 in the fourth quarter and $203,523 for the full year of 2018 compared to 2017.

Selling and administrative expenses were $5,503,111 in 2018 compared to $5,548,541 in 2017, a decline of $45,430, or 0.8%. The reduction was primarily due to the ERP system conversion that was completed at one of our locations in 2017. This accounted for $167,000 of additional expenses in that year, which was only partially offset by a $113,000 increase in sales commissions, related to higher sales, in 2018. As a percentage of net sales, selling and administrative expenses were 14.8% in 2018 compared to 15.5% in 2017.

Other income was $153,537 in 2018 compared to $100,901 in 2017. Other income is primarily comprised of interest income which increased during the year due to rising interest rates.

The Company’s effective income tax rates were 21.7% and 15.7% in 2018 and 2017, respectively. The rate was lower than the U.S. federal statutory rate in 2017 primarily due to the enactment of the Tax Cuts and Jobs Act (“the Act”) in December 2017. Among other changes, the Act reduced the maximum corporate tax rate from 35% to 21% beginning in 2018. Although the lower tax rate took effect in 2018, deferred tax assets and liabilities should be measured using the enacted tax rate expected to apply in the years in which they are expected to be settled. The Company recorded a one-time net income tax benefit of $432,000 in the fourth quarter of 2017 as a result of the revaluation of the Company’s deferred tax assets and liabilities to reflect the lower future U.S. corporate tax rates.

DIVIDENDS

In determining to pay dividends, the Board considers current profitability, the outlook for longer-term profitability, known and potential cash requirements and the overall financial condition of the Company. The Company paid four regular quarterly dividends totaling $.84 per share during 2018. In addition, an extra dividend of $.30 per share was paid during the first quarter, bringing the total distribution for the year to $1.14 per share. On February 18, 2019, the Board of Directors declared a regular quarterly dividend of $.22 per share, an increase of 4.8% from the prior quarter, payable March 20, 2019 to shareholders of record on March 5, 2019. This continues the uninterrupted record of consecutive quarterly dividends paid by the Company to its shareholders that extends over 85 years. At that same meeting, the Board also declared an extra dividend of $.30 per share payable March 20, 2019 to shareholders of record on March 5, 2019.

 

 

 

1


Management’s Report

(Continued)

 

 

 

 

PROPERTY, PLANT AND EQUIPMENT

Total capital expenditures in 2018 were $2,023,190. Fastener segment additions accounted for $1,635,115 of the total, including $956,739 for cold heading and screw machine equipment additions, $243,194 for equipment to perform secondary operations on parts and $296,289 for inspection equipment. The remaining $138,893 fastener segment additions consisted of general plant equipment and facilities improvements. Assembly equipment segment additions in 2018 were $49,884 for production equipment. Investments for the benefit of both operating segments, primarily for building improvements, totaled $338,191 during 2018.

Capital expenditures during 2017 totaled $1,337,941. The fastener segment accounted for $1,093,539 of the total, including $904,312 for production equipment. Cold heading and screw machine equipment additions were $303,992, quality control equipment additions were $281,983, additions for secondary processing equipment were $261,143 and $57,194 was expended for general plant equipment. The remainder of the fastener segment additions relate to building improvements and technology equipment. Assembly equipment segment additions totaled $178,761, primarily for production equipment. Additional investments of $65,641 were made in 2017 for building improvements that benefit both operating segments.

Depreciation expense amounted to $1,308,448 in 2018 and $1,231,546 in 2017.

LIQUIDITY AND CAPITAL RESOURCES

Working capital at December 31, 2018 was approximately $17.4 million, an increase of $.4 million from the beginning of the year. The improvement was primarily due to continued profitable operations in 2018. The most significant component of the change was an increase in inventories of $1.6 million during the year as raw material purchases were accelerated in advance of price increases. The Company’s holdings in cash, cash equivalents and certificates of deposit amounted to $7.8 million at the end of 2018, a decrease of $1.2 million. The reduction was primarily related to the increase in inventory as well as a $.7 million increase in capital expenditures. The Company’s investing activities in 2018 included capital expenditures of $2 million. The only financing activity during 2018 was the payment of approximately $1.1 million in dividends.

Management believes that current cash, cash equivalents and operating cash flow will be sufficient to provide adequate working capital for the next twelve months.

Off-Balance Sheet Arrangements

The Company has not entered into, and has no current plans to enter into, any off-balance sheet financing arrangements.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of revenue and expenses during the reporting period. A summary of critical accounting policies can be found in Note 1 of the financial statements.

NEW ACCOUNTING STANDARDS

The Company’s financial statements and financial condition were not, and are not expected to be, materially impacted by new, or proposed, accounting standards. A summary of recent accounting pronouncements can be found in Note 1 of the financial statements.

OUTLOOK FOR 2019

We started 2018 with some optimism as the addition of new fastener segment customers and parts in 2017 was expected to be more fully reflected in the year’s financial results. That optimism was well placed as our fastener segment sales reflected growth in each quarter of 2018 compared to the year earlier periods. Much of that growth came from non-automotive customers which added to the diversity of industries served. With the majority of our fastener segment revenue continuing to come from the automotive industry, our sales to automotive customers tracked closely to U.S. auto and light truck sales and production during most of the year, before weakening late in the fourth quarter. Current automotive sales forecasts for 2019 and our early 2019 activity indicate further weakness in the near-term, leading to a cautious outlook for our fastener segment demand. While the results for the assembly equipment segment reported in 2018 did not match those of the previous year, it was primarily due to a change in product sales mix that resulted in a lower amount per sales transaction being recognized compared to the prior year, as demand was stable during the year. As we begin 2019, our machine order backlog and overall assembly equipment demand appears consistent with the prior year.

 

 

 

2


LOGO

Management’s Report

(Continued)

 

 

 

 

Higher raw material prices, brought on by tariffs instituted during 2018, had a negative impact on earnings during the year. It is unknown whether there will be relief from higher material prices in 2019 even if the tariffs were to be eliminated. The growth in the domestic economy is also showing signs of slowing as higher interest rates take effect and the long-lived recovery runs its course. Both of these factors will contribute to a more challenging environment for our operations in 2019. In anticipation of the challenges ahead, we will continue our efforts to improve operational efficiency as a means of improving margins. We will also continue our efforts to develop new customer relationships and build on existing ones in all the markets we serve by emphasizing our experience, quality and customer service in a very competitive global marketplace.

In four of the last six years, we invested more than $2 million in equipment and facilities upgrades in order to increase our capabilities, expand production capacity and

improve operating efficiency. We feel these investments are necessary to remain competitive and were made possible by our consistent profitability during that period. In the upcoming year, we expect to make additional investments in order to improve our operations. Our sound financial condition and our profitability has also allowed us to pay dividends of $5.8 million over the same six year period and declare an additional special dividend of $.3 million, to be paid in the first quarter of 2019, based on the results of 2018.

The positive results in the past year would not have been possible without the conscientious efforts of our dedicated employees, who consistently strive to exceed customer expectations related to quality, service and price. We are grateful for their contributions as well as the loyalty of our customers, who have placed their confidence in us to help them achieve their goals. We also take this opportunity to thank our shareholders for their continued support.

 

 

Respectfully,

 

LOGO    LOGO
John A. Morrissey    Michael J. Bourg
Chairman    President

March 20, 2019

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: 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, labor relations issues, losses related to product liability, warranty and recall claims, costs relating to environmental laws and regulations, information systems disruptions and the loss of the services of our key employees. 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.

 

 

3


LOGO

 

 

 

 

Consolidated Balance Sheets

 

December 31    2018      2017  

Assets

     

Current Assets

     

Cash and Cash Equivalents

   $ 706,873      $ 1,152,569  

Certificates of Deposit

     7,063,000        7,810,000  

Accounts Receivable – Less allowances of $140,000

     5,529,307        5,326,650  

Inventories, net

     6,100,391        4,528,100  

Prepaid Income Taxes

     150,686        84,112  

Other Current Assets

     438,222        357,918  
  

 

 

    

 

 

 

Total Current Assets

     19,988,479        19,259,349  

Property, Plant and Equipment, net

     13,258,146        12,556,953  
  

 

 

    

 

 

 

Total Assets

   $ 33,246,625      $ 31,816,302  
  

 

 

    

 

 

 

Liabilities and Shareholders’ Equity

     

Current Liabilities

     

Accounts Payable

   $ 1,060,231      $ 737,040  

Accrued Wages and Salaries

     701,434        674,316  

Other Accrued Expenses

     475,973        495,132  

Unearned Revenue and Customer Deposits

     328,154        312,775  
  

 

 

    

 

 

 

Total Current Liabilities

     2,565,792        2,219,263  

Deferred Income Taxes, net

     921,084        737,084  
  

 

 

    

 

 

 

Total Liabilities

     3,486,876        2,956,347  
  

 

 

    

 

 

 
Commitments and Contingencies (Note 7)      

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

     32,096,617        31,196,823  

Treasury Stock, 171,964 Shares at cost

     (3,922,098      (3,922,098
  

 

 

    

 

 

 

Total Shareholders’ Equity

     29,759,749        28,859,955  
  

 

 

    

 

 

 

Total Liabilities and Shareholders’ Equity

   $ 33,246,625      $ 31,816,302  
  

 

 

    

 

 

 

The accompanying notes are an integral part of the Consolidated Financial Statements.

 

 

4


LOGO

 

 

 

 

Consolidated Statements of Income

 

For the Years Ended December 31    2018      2017  

Net Sales

   $ 37,174,249      $ 35,764,714  

Cost of Goods Sold

     29,268,490        27,850,992  
  

 

 

    

 

 

 

Gross Profit

     7,905,759        7,913,722  

Selling and Administrative Expenses

     5,503,111        5,548,541  
  

 

 

    

 

 

 

Operating Profit

     2,402,648        2,365,181  

Other Income

     153,537        100,901  
  

 

 

    

 

 

 

Income Before Income Taxes

     2,556,185        2,466,082  

Provision for Income Taxes

     555,000        387,000  
  

 

 

    

 

 

 

Net Income

   $ 2,001,185      $ 2,079,082  
  

 

 

    

 

 

 

Net Income Per Share

   $ 2.07      $ 2.15  
  

 

 

    

 

 

 

Consolidated Statements of Retained Earnings

 

For the Years Ended December 31    2018      2017  

Retained Earnings at Beginning of Year

   $ 31,196,823      $ 30,228,793  

Net Income

     2,001,185        2,079,082  

Cash Dividends Paid, $1.14 and $1.15 Per Share in 2018 and 2017, respectively

     (1,101,391      (1,111,052
  

 

 

    

 

 

 

Retained Earnings at End of Year

   $ 32,096,617      $ 31,196,823  
  

 

 

    

 

 

 

The accompanying notes are an integral part of the Consolidated Financial Statements.

 

 

5


LOGO

 

 

 

 

Consolidated Statements of Cash Flows

 

For the Years Ended December 31    2018      2017  

Cash Flows from Operating Activities:

     

Net Income

   $ 2,001,185      $ 2,079,082  

Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:

     

Depreciation and Amortization

     1,308,448        1,231,546  

Gain on the Sale of Equipment

     (13,086      (1,700

Deferred Income Taxes

     184,000        (291,000

Changes in Operating Assets and Liabilities:

     

Accounts Receivable, net

     (202,657      (3,131

Inventories, net

     (1,572,291      9,593  

Other Current Assets

     (146,878      38,034  

Accounts Payable

     298,348        29,620  

Accrued Wages and Salaries

     27,118        (16,210

Other Accrued Expenses

     (19,159      (109,042

Unearned Revenue and Customer Deposits

     15,379        26,642  
  

 

 

    

 

 

 

Net Cash Provided by Operating Activities

     1,880,407        2,993,434  
  

 

 

    

 

 

 

Cash Flows from Investing Activities:

     

Capital Expenditures

     (1,998,347      (1,333,988

Proceeds from the Sale of Equipment

     26,635        1,700  

Proceeds from Certificates of Deposit

     5,727,000        7,063,000  

Purchases of Certificates of Deposit

     (4,980,000      (6,814,000
  

 

 

    

 

 

 

Net Cash Used in Investing Activities

     (1,224,712      (1,083,288
  

 

 

    

 

 

 

Cash Flows from Financing Activities:

     

Cash Dividends Paid

     (1,101,391      (1,111,052
  

 

 

    

 

 

 

Net Cash Used in Financing Activities

     (1,101,391      (1,111,052
  

 

 

    

 

 

 

Net Increase (Decrease) in Cash and Cash Equivalents

     (445,696      799,094  

Cash and Cash Equivalents:

     

Beginning of Year

     1,152,569        353,475  
  

 

 

    

 

 

 

End of Year

   $ 706,873      $ 1,152,569  
  

 

 

    

 

 

 

Net Cash Paid for Income Taxes

   $ 437,574      $ 706,000  

Supplemental Schedule of Non-cash Investing Activities:

     

Capital Expenditures in Accounts Payable

   $ 24,843      $ 3,953  

The accompanying notes are an integral part of the Consolidated Financial Statements.

 

 

6


LOGO

 

 

 

 

Notes to Consolidated

Financial Statements

 

1—Nature of Business and Significant Accounting Policies

Nature of Business—The Company operates in the fastener industry and is in the business of producing and selling rivets, cold-formed fasteners and parts, screw machine products, automatic rivet setting machines and parts and tools for such machines.

A summary of the Company’s significant accounting policies follows:

Principles of Consolidation—The consolidated financial statements include the accounts of Chicago Rivet & Machine Co. and its wholly-owned subsidiary, H & L Tool Company, Inc. (“H & L Tool”). All significant intercompany accounts and transactions have been eliminated.

Revenue Recognition—On January 1, 2018, the Company adopted Accounting Standard Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” using the modified retrospective method. The adoption did not result in the recognition of a cumulative adjustment to beginning retained earnings. For the Company, the most significant impact of the new standard was the addition of required disclosures within the notes to the financial statements.

Revenue is recognized when control of the promised goods or services is transferred to our customers, generally upon shipment of goods or completion of services, in an amount that reflects the consideration we expect to receive in exchange for those goods or services. Sales taxes we may collect concurrent with revenue producing activities are excluded from revenue. Revenue is recognized net of certain sales adjustments to arrive at net sales as reported on the statement of income. These adjustments primarily relate to customer returns and allowances, which vary over time. 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 December 31, 2018 and 2017, 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.

Credit Risk—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. The Company has established

an allowance for accounts that may become uncollectible in the future. This estimated allowance is based primarily on management’s evaluation of the financial condition of the customer and historical experience. The Company monitors its accounts receivable and charges to expense an amount equal to its estimate of potential credit losses. The Company considers a number of factors in determining its estimates, including the length of time its trade accounts receivable are past due, the Company’s previous loss history and the customer’s current ability to pay its obligation. Accounts receivable balances are charged off against the allowance when it is determined that the receivable will not be recovered.

Cash and Cash Equivalents and Certificates of Deposit—The Company considers all highly liquid investments, including certificates of deposit, with a maturity of three months or less when purchased to be cash equivalents. Certificates of deposit with an original maturity of greater than three months are separately presented at cost which approximates market value. The Company maintains cash on deposit in several financial institutions. At times, the account balances may be in excess of Federal Deposit Insurance Corporation insured limits.

Fair Value of Financial Instruments—The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, certificates of deposit, accounts receivable and accounts payable approximate fair value based on their short term nature.

Inventories—Inventories are stated at the lower of cost or net realizable value, cost being determined by the first-in, first-out method. The value of inventories is reduced for estimated excess and obsolete inventories based on a review of on-hand inventories compared to historical and estimated future sales and usage.

Property, Plant and Equipment—Properties are stated at cost and are depreciated over their estimated useful lives using the straight-line method for financial reporting purposes. Accelerated methods of depreciation are used for income tax purposes. Direct costs related to developing or obtaining software for internal use are capitalized as property and equipment. Capitalized software costs are amortized over the software’s useful life when the software is placed in service. The estimated useful lives by asset category are:

 

Asset category    Estimated useful life  

Land improvements

     15 to 40 years  

Buildings and improvements

     10 to 40 years  

Machinery and equipment

     5 to 18 years  

Capitalized software costs

     3 to 5 years  

Other equipment

     3 to 10 years  
 

 

 

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The Company reviews the carrying value of property, plant and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. There were no triggering events requiring assessment of impairment as of December 31, 2018 and 2017.

When properties are retired or sold, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss on disposition is recognized in current operations. Maintenance, repairs and minor betterments that do not improve the related asset or extend its useful life are charged to operations as incurred.

Income Taxes—Deferred income taxes are determined under the asset and liability method. Deferred income taxes arise from temporary differences between the income tax basis of assets and liabilities and their reported amounts in the financial statements. Deferred taxes are shown on the balance sheet as a net long-term asset or liability.

The Company applies a comprehensive model for the financial statement recognition, measurement, classification and disclosure of uncertain tax positions. In the first step of the two-step process, the Company evaluates the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. In the second step, the Company measures the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. As of December 31, 2018 and 2017, the Company determined that there are no uncertain tax positions with a more than 50% likelihood of being realized upon settlement.

The Company classifies interest and penalties related to unrecognized tax benefits as a component of income tax expense. There were no such expenses in 2018 or 2017.

The Company’s federal income tax returns for the 2015 through 2017 tax years are subject to examination by the Internal Revenue Service (“IRS”). While it may be possible that a reduction could occur with respect to the Company’s unrecognized tax benefits as an outcome of an IRS examination, management does not anticipate any adjustments that would result in a material change to the results of operations or financial condition of the Company.

No statutes have been extended on any of the Company’s federal income tax filings. The statute of limitations on the Company’s 2015, 2016 and 2017 federal income tax returns will expire on September 15, 2019, 2020 and 2021, respectively.

The Company’s state income tax returns for the 2015 through 2017 tax years are subject to examination by various state

authorities with the latest closing period on October 31, 2021. The Company is currently not under examination by any state authority for income tax purposes and no statutes for state income tax filings have been extended.

Segment Information—The Company reports segment information based on the internal structure and reporting of the Company’s operations.

Net Income Per Share—Net income per share of common stock is based on the weighted average number of shares outstanding of 966,132 in 2018 and 2017.

Use of Estimates—The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. Significant items subject to estimates and assumptions include depreciable lives, deferred taxes and valuation allowances for accounts receivable and inventory obsolescence. Actual results could differ from those estimates.

Recent Accounting Pronouncements—In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (”ASU”) No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, with early adoption permitted. The guidance can be applied prospectively or retrospectively. We expect to adopt this standard effective January 1, 2020 and are currently evaluating the impact that it will have on our consolidated financial statements and disclosures.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. The new guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. Management has not yet completed its assessment of the impact of the new standard on the Company’s consolidated financial statements. Currently, the Company believes that the most notable impact of this ASU may relate to its processes around the assessment of the adequacy of its allowance for doubtful accounts on trade accounts receivable.

 

 

 

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In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” The ASU is intended to increase transparency and comparability among entities by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements when the lease has a term of more than 12 months. The ASU will require lessees to recognize in the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The ASU is effective for annual reporting periods beginning after December 15, 2018 and interim periods within those annual periods. The impact of adopting this ASU is not expected to be significant based on current lease agreements.

2—Balance Sheet Details

 

     2018     2017  

Inventories:

    

Raw materials

   $ 2,798,918     $ 1,812,603  

Work in process

     1,878,977       1,604,867  

Finished goods

     2,001,496       1,674,630  
  

 

 

   

 

 

 
     6,679,391       5,092,100  

Valuation reserves

     (579,000     (564,000
  

 

 

   

 

 

 
   $ 6,100,391     $ 4,528,100  
  

 

 

   

 

 

 

Property, Plant and Equipment, net:

    

Land and improvements

   $ 1,632,299     $ 1,571,552  

Buildings and improvements

     8,292,749       8,039,831  

Machinery and equipment

     34,196,661       33,208,675  

Capitalized software and other

     1,372,215       1,362,714  
  

 

 

   

 

 

 
     45,493,924       44,182,772  

Accumulated depreciation

     (32,235,778     (31,625,819
  

 

 

   

 

 

 
   $ 13,258,146     $ 12,556,953  
  

 

 

   

 

 

 

Other Accrued Expenses:

    

Profit sharing plan contribution

   $ 277,743     $ 266,398  

Property taxes

     91,527       92,620  

All other items

     106,703       136,114  
  

 

 

   

 

 

 
   $ 475,973     $ 495,132  
  

 

 

   

 

 

 

Allowance for Doubtful Accounts:

    

Balance at beginning of year

   $ 140,000     $ 150,000  

Charges to statement of income

           6,435  

Write-offs

           (16,435
  

 

 

   

 

 

 

Balance at end of year

   $ 140,000     $ 140,000  
  

 

 

   

 

 

 

Inventory Valuation Reserves:

    

Balance at beginning of year

   $ 564,000     $ 562,000  

Charges to statement of income

     17,870       75,023  

Write-offs

     (2,870     (73,023
  

 

 

   

 

 

 

Balance at end of year

   $ 579,000     $ 564,000  
  

 

 

   

 

 

 

3—Income Taxes—The provision for income tax expense consists of the following:

 

     2018      2017  

Current:

     

Federal

   $ 351,000      $ 647,000  

State

     20,000        31,000  

Deferred

     184,000        (291,000
  

 

 

    

 

 

 
   $ 555,000      $ 387,000  
  

 

 

    

 

 

 

On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act includes significant changes to the taxation of corporations, including a reduction in the top corporate tax rate from 35% to 21%, effective January 1, 2018. Due to the enactment of the new tax law, we re-measured our deferred tax assets and liabilities using the rate at which we expect them to be recovered or settled. As a result, the Company recognized a $432,000 tax benefit for the year ended December 31, 2017 that is reflected in the 2017 income tax expense.

The following is a reconciliation of the statutory federal income tax rate to the actual effective tax rate:

 

    2018     2017  
    Amount     %     Amount     %  

Expected tax at U.S. statutory rate

  $ 537,000       21.0     $ 838,000       34.0  

Impact of the Act

                (432,000     (17.5

Permanent differences

    2,000       0.1       (39,000     (1.6

State taxes, net of federal benefit

    16,000       0.6       20,000       0.8  
 

 

 

   

 

 

   

 

 

   

 

 

 

Income tax expense

  $ 555,000       21.7     $ 387,000       15.7  
 

 

 

   

 

 

   

 

 

   

 

 

 

The Company’s effective tax rate was lower than the U.S. federal statutory rate in 2017 primarily due to the impact of the new tax law.

The deferred tax assets (liabilities) consist of the following:

 

     2018     2017  

Depreciation and amortization

   $ (1,190,597   $ (988,334

Inventory

     164,220       149,460  

Accrued vacation

     74,177       70,973  

Allowance for doubtful accounts

     31,500       31,500  

Other, net

     (384     (683
  

 

 

   

 

 

 
   $ (921,084   $ (737,084
  

 

 

   

 

 

 

Valuation allowances related to deferred taxes are recorded based on the “more likely than not” realization criteria. The Company reviews the need for a valuation allowance on a quarterly basis for each of its tax jurisdictions. A deferred tax valuation allowance was not required at December 31, 2018 or 2017.

4—Profit Sharing Plan—The Company has a noncontributory profit sharing plan covering substantially all employees. Total expenses relating to the profit sharing plan amounted to approximately $278,000 in 2018 and $266,000 in 2017.

 

 

 

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5—Other Income—consists of the following:

 

     2018      2017  

Interest income

   $ 120,141      $ 75,926  

Other

     33,396        24,975  
  

 

 

    

 

 

 
   $ 153,537      $ 100,901  
  

 

 

    

 

 

 

6—Segment Information—The Company operates, primarily in the United States, in two business segments as determined by its products. The fastener segment, which comprises H & L Tool and the parent company’s fastener operations, 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  

Year Ended December 31, 2018:

       

Net sales

  $ 33,712,458     $ 3,461,791     $     $ 37,174,249  

Depreciation

    1,161,082       112,942       34,424       1,308,448  

Segment operating profit

    3,731,998       1,108,248             4,840,246  

Selling and administrative expenses

        (2,437,598     (2,437,598

Other income

        153,537       153,537  
       

 

 

 

Income before income taxes

          2,556,185  
       

 

 

 

Capital expenditures

    1,635,115       49,884       338,191       2,023,190  

Segment assets:

       

Accounts receivable, net

    5,196,437       332,870             5,529,307  

Inventories, net

    5,075,290       1,025,101             6,100,391  

Property, plant and equipment, net

    10,726,191       1,579,497       952,458       13,258,146  

Other assets

                8,358,781       8,358,781  
       

 

 

 
          33,246,625  
       

 

 

 

Year Ended December 31, 2017:

       

Net sales

  $ 31,977,964     $ 3,786,750     $     $ 35,764,714  

Depreciation

    1,093,476       100,908       37,162       1,231,546  

Segment operating profit

    3,574,783       1,350,111             4,924,894  

Selling and administrative expenses

        (2,559,713     (2,559,713

Other income

        100,901       100,901  
       

 

 

 

Income before income taxes

          2,466,082  
       

 

 

 

Capital expenditures

    1,093,539       178,761       65,641       1,337,941  

Segment assets:

       

Accounts receivable, net

    5,080,191       246,459             5,326,650  

Inventories, net

    3,565,361       962,739             4,528,100  

Property, plant and equipment, net

    10,282,910       1,642,555       631,488       12,556,953  

Other assets

                9,404,599       9,404,599  
       

 

 

 
          31,816,302  
       

 

 

 

The Company does not allocate certain selling and administrative expenses for internal reporting, thus, no allocation was made for these expenses for segment disclosure purposes. Segment assets reported internally are limited to accounts receivable, inventory and long-lived assets. Certain long-lived assets of one plant location are allocated between the two segments based on estimated plant utilization, as this plant serves both fastener and assembly equipment activities. Other assets are not allocated to segments internally and to do so would be impracticable.

The following table presents revenue by segment, further disaggregated by end-market:

 

      Fastener      Assembly
Equipment
     Consolidated  

Year Ended December 31, 2018:

        

Automotive

   $ 22,215,719      $ 237,565      $ 22,453,284  

Non-automotive

     11,496,739        3,224,226        14,720,965  
  

 

 

    

 

 

    

 

 

 

Total net sales

   $ 33,712,458      $ 3,461,791      $ 37,174,249  
  

 

 

    

 

 

    

 

 

 

Year Ended December 31, 2017:

        

Automotive

   $ 22,527,813      $ 192,091      $ 22,719,904  

Non-automotive

     9,450,151        3,594,659        13,044,810  
  

 

 

    

 

 

    

 

 

 

Total net sales

   $ 31,977,964      $ 3,786,750      $ 35,764,714  
  

 

 

    

 

 

    

 

 

 

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

 

Year Ended December 31, 2018:

        

United States

   $ 29,470,140      $ 3,260,683      $ 32,730,823  

Foreign

     4,242,318        201,108        4,443,426  
  

 

 

    

 

 

    

 

 

 

Total net sales

   $ 33,712,458      $ 3,461,791      $ 37,174,249  
  

 

 

    

 

 

    

 

 

 

Year Ended December 31, 2017:

        

United States

   $ 27,681,055      $ 3,684,135      $ 31,365,190  

Foreign

     4,296,909        102,615        4,399,524  
  

 

 

    

 

 

    

 

 

 

Total net sales

   $ 31,977,964      $ 3,786,750      $ 35,764,714  
  

 

 

    

 

 

    

 

 

 

Sales to one customer in the fastener segment accounted for 17 percent of consolidated revenues during 2018 and 19 percent in 2017. The accounts receivable balance for this customer accounted for 15 and 25 percent of consolidated accounts receivable as of December 31, 2018 and 2017, respectively. Sales to two other customers were each 10 percent of consolidated revenue in 2018 and accounted for 12 percent and 17 percent of consolidated accounts receivable as of December 31, 2018.

7—Commitments and Contingencies—The Company recorded rent expense aggregating approximately $26,000 and $30,000 in 2018 and 2017, respectively. Total future minimum rentals at December 31, 2018 are not significant.

The Company is, from time to time involved in litigation, including environmental claims, 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.

8—Subsequent Events—On February 18, 2019, the Board of Directors declared a regular quarterly dividend of $.22 per share, or $212,549, and an extra dividend of $.30 per share, or $289,840, payable March 20, 2019 to shareholders of record on March 5, 2019.

 

 

 

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Chicago Rivet & Machine Co.

Naperville, Illinois

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Chicago Rivet & Machine Co. (the “Company”) as of December 31, 2018 and 2017, the related consolidated statements of income, retained earnings, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

LOGO

Crowe LLP

We have served as the Company’s auditor since 2014.

Oak Brook, Illinois

March 20, 2019

 

 

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INFORMATION ON COMPANY’S COMMON STOCK

The Company’s common stock is traded on the NYSE American (trading privileges only, not registered).

The ticker symbol is CVR.

At December 31, 2018, there were approximately 150 shareholders of record.

The transfer agent and registrar for the Company’s common stock is:

Continental Stock Transfer & Trust Company

1 State Street, 30th Floor

New York, New York 10004-1561

The following table shows the dividends declared and the quarterly high and low prices of the common stock for the last two years.

 

     Dividends
Declared
     Market Range  

Quarter

   2018      2017      2018      2017  

First*

   $ .51      $ .55      $ 33.41      $ 29.89      $ 49.34      $ 36.93  

Second

     .21        .20      $ 32.40      $ 28.70      $ 41.90      $ 36.02  

Third

     .21        .20      $ 32.65      $ 30.18      $ 37.35      $ 26.50  

Fourth

     .21        .20      $ 34.90      $ 30.19      $ 33.52      $ 28.90  

 

*

Includes an extra dividend of $.30 and $.35 per share in 2018 and 2017, respectively.

 

BOARD OF DIRECTORS

John A. Morrissey (e)

Chairman of the Board

of the Company

Chairman of the Board of

Algonquin State Bank, N.A.

Algonquin, Illinois

Michael J. Bourg (e)

President of the Company

Edward L. Chott (a) (c) (n)

Chairman of the Board of

The Broaster Co.

Beloit, Wisconsin

Kent H. Cooney (a)

Private Investor

Woodstock, Illinois

William T. Divane, Jr. (a) (c) (n)

Chairman of the Board and

Chief Executive Officer of

Divane Bros. Electric Co.

Franklin Park, Illinois

Walter W. Morrissey (e)

Attorney at Law

Lillig & Thorsness, Ltd.

Oak Brook, Illinois

John L. Showel (n)

Portfolio Manager

Maggiore Fund I, LP

Chicago, Illinois

 

(a)

Member of Audit Committee

(c)

Member of Compensation Committee

(e)

Member of Executive Committee

(n)

Member of Nominating Committee

CORPORATE OFFICERS

John A. Morrissey

Chairman, Chief

Executive Officer

Michael J. Bourg

President, Chief Operating

Officer and Treasurer

Kimberly A. Kirhofer

Secretary

CHICAGO RIVET & MACHINE CO.

Administrative & Sales Offices

Naperville, Illinois

Pembroke, Massachusetts

Manufacturing Facilities

Albia Division

Albia, Iowa

Tyrone Division

Tyrone, Pennsylvania

H & L Tool Company, Inc.

Madison Heights, Michigan

 

 

Chicago Rivet & Machine Co. • 901 Frontenac Road • Naperville, Illinois 60563 • www.chicagorivet.com

 

 

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Chicago Rivet & Machine Co. 901 Frontenac Road Naperville, Illinois 60563 • www.chicagorivet.com

 

 

 

EX-21

Exhibit 21

CHICAGO RIVET & MACHINE CO.

SUBSIDIARIES OF THE REGISTRANT

The Company’s only subsidiary is H & L Tool Company, Inc., which is wholly-owned and is organized in the State of Illinois.

EX-31.1

Exhibit 31.1

I, John A. Morrissey, certify that:

 

1.

I have reviewed this annual report on Form 10-K of Chicago Rivet & Machine Co.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

     
Date: March 20, 2019       /s/ John A. Morrissey
      John A. Morrissey
     

Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

I, Michael J. Bourg, certify that:

 

1.

I have reviewed this annual report on Form 10-K of Chicago Rivet & Machine Co.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

     
Date: March 20, 2019            /s/ Michael J. Bourg
      Michael J. Bourg
      President, Chief Operating Officer and Treasurer (Principal Financial Officer)
EX-32.1

Exhibit 32.1

Certification Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 10-K of Chicago Rivet & Machine Co. (the “Company”) for the period ended December 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John A. Morrissey, as Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)    The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)    The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 
/s/ John A. Morrissey
Name:    John A. Morrissey
Title:  

Chief Executive Officer

(Principal Executive Officer)

Date:   March 20, 2019
EX-32.2

Exhibit 32.2

Certification Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 10-K of Chicago Rivet & Machine Co. (the “Company”) for the period ended December 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael J. Bourg, as President, Chief Operating Officer and Treasurer of the Company, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)    The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)    The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 
/s/ Michael J. Bourg
Name:    Michael J. Bourg
Title:   President, Chief Operating Officer and Treasurer (Principal Financial Officer)
Date:   March 20, 2019
v3.19.1
Document and Entity Information - USD ($)
12 Months Ended
Dec. 31, 2018
Mar. 18, 2019
Jun. 30, 2018
Details      
Registrant Name CHICAGO RIVET & MACHINE CO.    
Registrant CIK 0000019871    
SEC Form 10-K    
Period End date Dec. 31, 2018    
Fiscal Year End --12-31    
Trading Symbol CVR    
Tax Identification Number (TIN) 360904920    
Number of common stock shares outstanding   966,132  
Public Float     $ 25,335,536
Filer Category Non-accelerated Filer    
Current with reporting Yes    
Voluntary filer No    
Well-known Seasoned Issuer No    
Shell Company false    
Small Business true    
Emerging Growth Company false    
Amendment Flag false    
Document Fiscal Year Focus 2018    
Document Fiscal Period Focus FY    
Entity Incorporation, State Country Name Illinois    
Entity Address, Address Line One 901 Frontenac Road    
Entity Address, City or Town Naperville    
Entity Address, State or Province Illinois    
Entity Address, Postal Zip Code 60563    
City Area Code 630    
Local Phone Number 357-8500    
v3.19.1
Consolidated Balance Sheets - USD ($)
Dec. 31, 2018
Dec. 31, 2017
Current Assets    
Cash and Cash Equivalents $ 706,873 $ 1,152,569
Certificates of Deposit 7,063,000 7,810,000
Accounts Receivable - Less allowances of $140,000 5,529,307 5,326,650
Inventories, net 6,100,391 4,528,100
Prepaid Income Taxes 150,686 84,112
Other Current Assets 438,222 357,918
Total Current Assets 19,988,479 19,259,349
Property, Plant and Equipment, net 13,258,146 12,556,953
Total Assets 33,246,625 31,816,302
Current Liabilities    
Accounts Payable 1,060,231 737,040
Accrued Wages and Salaries 701,434 674,316
Other Accrued Expenses 475,973 495,132
Unearned Revenue and Customer Deposits 328,154 312,775
Total Current Liabilities 2,565,792 2,219,263
Deferred Income Taxes, net 921,084 737,084
Total Liabilities 3,486,876 2,956,347
Shareholders' Equity    
Preferred Stock, No Par Value, 500,000 Shares Authorized: None Outstanding 0 0
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 32,096,617 31,196,823
Treasury Stock, 171,964 Shares at cost (3,922,098) (3,922,098)
Total Shareholders' Equity 29,759,749 28,859,955
Total Liabilities and Shareholders' Equity $ 33,246,625 $ 31,816,302
v3.19.1
Consolidated Balance Sheets - Parenthetical - USD ($)
Dec. 31, 2018
Dec. 31, 2017
Details    
Allowance for Doubtful Accounts Receivable, Current $ 140,000 $ 140,000
Preferred Stock, Par or Stated Value Per Share $ 0 $ 0
Preferred Stock, Shares Authorized 500,000 500,000
Preferred Stock, Shares Outstanding 0 0
Common Stock, Par or Stated Value Per Share $ 1.00 $ 1.00
Common Stock, Shares Authorized 4,000,000 4,000,000
Common Stock, Shares, Issued 1,138,096 1,138,096
Common Stock, Shares, Outstanding 966,132 966,132
Treasury Stock, Shares 171,964 171,964
v3.19.1
Consolidated Statements of Income - USD ($)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Consolidated Statements of Income    
Net Sales $ 37,174,249 $ 35,764,714
Cost of Goods Sold 29,268,490 27,850,992
Gross Profit 7,905,759 7,913,722
Selling and Administrative Expenses 5,503,111 5,548,541
Operating Profit 2,402,648 2,365,181
Other Income 153,537 100,901
Income Before Income Taxes 2,556,185 2,466,082
Provision for Income Taxes 555,000 387,000
Net Income $ 2,001,185 $ 2,079,082
Net Income Per Share $ 2.07 $ 2.15
v3.19.1
Consolidated Statements of Cash Flows - USD ($)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Cash Flows from Operating Activities:    
Net Income $ 2,001,185 $ 2,079,082
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:    
Depreciation and Amortization 1,308,448 1,231,546
Gain on the Sale of Equipment (13,086) (1,700)
Deferred Income Taxes 184,000 (291,000)
Changes in Operating Assets and Liabilities:    
Accounts Receivable, net (202,657) (3,131)
Inventories, net (1,572,291) 9,593
Other Current Assets (146,878) 38,034
Accounts Payable 298,348 29,620
Accrued Wages and Salaries 27,118 (16,210)
Other Accrued Expenses (19,159) (109,042)
Unearned Revenue and Customer Deposits 15,379 26,642
Net Cash Provided by Operating Activities 1,880,407 2,993,434
Cash Flows from Investing Activities:    
Capital Expenditures (1,998,347) (1,333,988)
Proceeds from the Sale of Equipment 26,635 1,700
Proceeds from Certificates of Deposit 5,727,000 7,063,000
Purchases of Certificates of Deposit (4,980,000) (6,814,000)
Net Cash Used in Investing Activities (1,224,712) (1,083,288)
Cash Flows from Financing Activities:    
Cash Dividends Paid (1,101,391) (1,111,052)
Net Cash Used in Financing Activities (1,101,391) (1,111,052)
Net Increase (Decrease) in Cash and Cash Equivalents (445,696) 799,094
Beginning of Year 1,152,569 353,475
End of Year 706,873 1,152,569
Net Cash Paid for Income Taxes 437,574 706,000
Supplemental Schedule of Non-cash Investing Activities:    
Capital Expenditures in Accounts Payable $ 24,843 $ 3,953
v3.19.1
Consolidated Statements of Retained Earnings - USD ($)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Consolidated Statements of Retained Earnings    
Retained Earnings at Beginning of Year $ 31,196,823 $ 30,228,793
Net Income 2,001,185 2,079,082
Cash Dividends Paid, $1.14 and $1.15 Per Share in 2018 and 2017, respectively (1,101,391) (1,111,052)
Retained Earnings at End of Year $ 32,096,617 $ 31,196,823
v3.19.1
Consolidated Statements of Retained Earnings - Parenthetical - $ / shares
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Details    
Common Stock, Dividends, Per Share, Declared $ 1.14 $ 1.15
v3.19.1
1 - Nature of Business and Significant Accounting Policies
12 Months Ended
Dec. 31, 2018
Notes  
1 - Nature of Business and Significant Accounting Policies

1-Nature of Business and Significant Accounting Policies

 

Nature of Business-The Company operates in the fastener industry and is in the business of producing and selling rivets, cold-formed fasteners and parts, screw machine products, automatic rivet setting machines and parts and tools for such machines.

 

A summary of the Company’s significant accounting policies follows:

 

Principles of Consolidation-The consolidated financial statements include the accounts of Chicago Rivet & Machine Co. and its wholly-owned subsidiary, H & L Tool Company, Inc. (“H & L Tool”).  All significant intercompany accounts and transactions have been eliminated.

 

Revenue Recognition- On January 1, 2018, the Company adopted Accounting Standard Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” using the modified retrospective method.  The adoption did not result in the recognition of a cumulative adjustment to beginning retained earnings.  For the Company, the most significant impact of the new standard was the addition of required disclosures within the notes to the financial statements.

 

Revenue is recognized when control of the promised goods or services is transferred to our customers, generally upon shipment of goods or completion of services, in an amount that reflects the consideration we expect to receive in exchange for those goods or services.  Sales taxes we may collect concurrent with revenue producing activities are excluded from revenue.  Revenue is recognized net of certain sales adjustments to arrive at net sales as reported on the statement of income.  These adjustments primarily relate to customer returns and allowances, which vary over time.  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 December 31, 2018 and 2017, 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.

 

Credit Risk-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.  The Company has established an allowance for accounts that may become uncollectible in the future.  This estimated allowance is based primarily on management's evaluation of the financial condition of the customer and historical experience.  The Company monitors its accounts receivable and charges to expense an amount equal to its estimate of potential credit losses.  The Company considers a number of factors in determining its estimates, including the length of time its trade accounts receivable are past due, the Company's previous loss history and the customer's current ability to pay its obligation.  Accounts receivable balances are charged off against the allowance when it is determined that the receivable will not be recovered.

 

Cash and Cash Equivalents and Certificates of Deposit-The Company considers all highly liquid investments, including certificates of deposit, with a maturity of three months or less when purchased to be cash equivalents.  Certificates of deposit with an original maturity of greater than three months are separately presented at cost which approximates market value.  The Company maintains cash on deposit in several financial institutions. At times, the account balances may be in excess of Federal Deposit Insurance Corporation insured limits.

 

Fair Value of Financial Instruments-The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, certificates of deposit, accounts receivable and accounts payable approximate fair value based on their short term nature.

 

Inventories-Inventories are stated at the lower of cost or net realizable value, cost being determined by the first-in, first-out method.  The value of inventories is reduced for estimated excess and obsolete inventories based on a review of on-hand inventories compared to historical and estimated future sales and usage.

 

Property, Plant and Equipment-Properties are stated at cost and are depreciated over their estimated useful lives using the straight-line method for financial reporting purposes.  Accelerated methods of depreciation are used for income tax purposes.  Direct costs related to developing or obtaining software for internal use are capitalized as property and equipment.  Capitalized software costs are amortized over the software’s useful life when the software is placed in service.  The estimated useful lives by asset category are:

 

Asset Category

Estimated Useful Life

Land improvements……………..

15 to 40 years

Buildings and improvements……

10 to 40 years

Machinery and equipment………

5 to 18 years

Capitalized software costs………

3 to 5 years

Other equipment…………………

3 to 10 years

 

The Company reviews the carrying value of property, plant and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition.  In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets.  There were no triggering events requiring assessment of impairment as of December 31, 2018 and 2017.

 

When properties are retired or sold, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss on disposition is recognized in current operations.  Maintenance, repairs and minor betterments that do not improve the related asset or extend its useful life are charged to operations as incurred.

 

Income Taxes—Deferred income taxes are determined under the asset and liability method.  Deferred income taxes arise from temporary differences between the income tax basis of assets and liabilities and their reported amounts in the financial statements.  Deferred taxes are shown on the balance sheet as a net long-term asset or liability.

 

The Company applies a comprehensive model for the financial statement recognition, measurement, classification and disclosure of uncertain tax positions.  In the first step of the two-step process, the Company evaluates the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any.  In the second step, the Company measures the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement.  As of December 31, 2018 and 2017, the Company determined that there are no uncertain tax positions with a more than 50% likelihood of being realized upon settlement.

 

The Company classifies interest and penalties related to unrecognized tax benefits as a component of income tax expense.  There were no such expenses in 2018 or 2017.

 

The Company’s federal income tax returns for the 2015 through 2017 tax years are subject to examination by the Internal Revenue Service (“IRS”).  While it may be possible that a reduction could occur with respect to the Company’s unrecognized tax benefits as an outcome of an IRS examination, management does not anticipate any adjustments that would result in a material change to the results of operations or financial condition of the Company.

 

No statutes have been extended on any of the Company’s federal income tax filings. The statute of limitations on the Company’s 2015, 2016 and 2017 federal income tax returns will expire on September 15, 2019, 2020 and 2021, respectively.

 

The Company’s state income tax returns for the 2015 through 2017 tax years are subject to examination by various state authorities with the latest closing period on October 31, 2021.  The Company is currently not under examination by any state authority for income tax purposes and no statutes for state income tax filings have been extended.

 

Segment Information-The Company reports segment information based on the internal structure and reporting of the Company’s operations.

 

Net Income Per Share-Net income per share of common stock is based on the weighted average number of shares outstanding of 966,132 in 2018 and 2017.

 

Use of Estimates-The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes.  Significant items subject to estimates and assumptions include depreciable lives, deferred taxes and valuation allowances for accounts receivable and inventory obsolescence.  Actual results could differ from those estimates.

 

Recent Accounting Pronouncements- In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (”ASU”) No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.  The guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, with early adoption permitted. The guidance can be applied prospectively or retrospectively. We expect to adopt this standard effective January 1, 2020 and are currently evaluating the impact that it will have on our consolidated financial statements and disclosures.

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. The new guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. Management has not yet completed its assessment of the impact of the new standard on the Company’s consolidated financial statements. Currently, the Company believes that the most notable impact of this ASU may relate to its processes around the assessment of the adequacy of its allowance for doubtful accounts on trade accounts receivable.

 

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” The ASU is intended to increase transparency and comparability among entities by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements when the lease has a term of more than 12 months.  The ASU will require lessees to recognize in the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term.  The ASU is effective for annual reporting periods beginning after December 15, 2018 and interim periods within those annual periods.  The impact of adopting this ASU is not expected to be significant based on current lease agreements.

v3.19.1
2 - Balance Sheet Details
12 Months Ended
Dec. 31, 2018
Notes  
2 - Balance Sheet Details

2-Balance Sheet Details

 

 

December 31,

2018

December 31,

2017

Inventories:

 

 

Raw materials

$ 2,798,918   

$ 1,812,603   

Work in process

1,878,977   

1,604,867   

Finished goods

2,001,496   

1,674,630   

 

6,679,391   

5,092,100   

Valuation reserves

(579,000)  

(564,000)  

 

$ 6,100,391   

$ 4,528,100   

 

 

December 31,

2018

December 31,

2017

Property, Plant and Equipment, net:

 

 

Land and improvements

  $       1,632,299 

  $       1,571,552 

Buildings and improvements

           8,292,749 

           8,039,831 

Machinery and equipment

         34,196,661 

         33,208,675 

Capitalized software and other

           1,372,215 

           1,362,714 

 

         45,493,924 

         44,182,772 

Accumulated depreciation

         (32,235,778)

         (31,625,819)

 

  $    13,258,146 

  $    12,556,953 

 

 

December 31,

2018

December 31,

2017

Other Accrued Expenses:

 

 

Profit sharing plan contribution

  $    277,743

  $   266,398

  Property taxes

          91,527

        92,620

  All other items

        106,703

       136,114

 

  $    475,973

  $   495,132

 

 

December 31,

2018

December 31,

2017

Allowance for Doubtful Accounts:

 

 

  Balance at beginning of year………………………….

$ 140,000

$   150,000

  Charges to statement of income……………………...

0

6,435

  Write-offs………………………………………………...

0

(16,435)

  Balance at end of year…………………………………

$   140,000

$   140,000

 

 

 

December 31,

2018

December 31,

2017

Inventory Valuation Reserves:

 

 

  Balance at beginning of year………………………….

$ 564,000

$   562,000

  Charges to statement of income……………………...

17,870

75,023

  Write-offs………………………………………………...

(2,870)

(73,023)

  Balance at end of year…………………………………

$   579,000

$   564,000

 

v3.19.1
3 - Income Taxes
12 Months Ended
Dec. 31, 2018
Notes  
3 - Income Taxes

3-Income Taxes—The provision for income tax expense consists of the following:

 

 

2018

2017

Current:

 

 

Federal…………………………..

$     351,000

$      647,000

State………………………………

20,000

31,000

Deferred……………………………

184,000

(291,000)

 

$     555,000

$      387,000

 

On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act includes significant changes to the taxation of corporations, including a reduction in the top corporate tax rate from 35% to 21%, effective January 1, 2018.  Due to the enactment of the new tax law, we re-measured our deferred tax assets and liabilities using the rate at which we expect them to be recovered or settled. As a result, the Company recognized a $432,000 tax benefit for the year ended December 31, 2017 that is reflected in the 2017 income tax expense.

 

 

The following is a reconciliation of the statutory federal income tax rate to the actual effective tax rate:

 

 

2018

 

 

 

2017

 

 

 

Amount

 

%

 

Amount

 

%

Expected tax at U.S. statutory rate…………

$     537,000

 

21.0

 

  $     838,000

 

34.0

Impact of the Act……………………………..

 0

 

0

 

(432,000)

 

(17.5)

Permanent differences………………………

2,000

 

0.1

 

(39,000)

 

(1.6)

State taxes, net of federal benefit………….

16,000

 

0.6

 

20,000

 

0.8

Income tax expense…………………………

$     555,000

 

21.7

 

$    387,000

 

15.7

 

The Company’s effective tax rate was lower than the U.S. federal statutory rate in 2017 primarily due to the impact of the new tax law.

 

The deferred tax assets (liabilities) consist of the following:

 

 

2018

 

2017

 

 

 

 

Depreciation and amortization

$  (1,190,597)

 

  $ (988,334)

Inventory

        164,220 

 

     149,460 

Accrued vacation

          74,177 

 

       70,973 

Allowance for doubtful accounts

          31,500 

 

       31,500 

Other, net

              (384)

 

           (683)

 

$     (921,084)

 

  $ (737,084)

 

Valuation allowances related to deferred taxes are recorded based on the “more likely than not” realization criteria.  The Company reviews the need for a valuation allowance on a quarterly basis for each of its tax jurisdictions.  A deferred tax valuation allowance was not required at December 31, 2018 or 2017.

 

v3.19.1
4 - Profit Sharing Plan
12 Months Ended
Dec. 31, 2018
Notes  
4 - Profit Sharing Plan

4-Profit Sharing Plan-The Company has a noncontributory profit sharing plan covering substantially all employees.  Total expenses relating to the profit sharing plan amounted to approximately $278,000 in 2018 and $266,000 in 2017.

v3.19.1
5 - Other Income
12 Months Ended
Dec. 31, 2018
Notes  
5 - Other Income

5-Other Income-consists of the following:

 

 

2018

 

2017

 

 

 

 

Interest income….

$ 120,141   

 

$ 75,926   

Other…………………

33,396   

 

24,975   

 

$ 153,537   

 

$ 100,901   

 

v3.19.1
6 - Segment Information
12 Months Ended
Dec. 31, 2018
Notes  
6 - Segment Information

6-Segment Information-The Company operates, primarily in the United States, in two business segments as determined by its products.  The fastener segment, which comprises

H & L Tool and the parent company’s fastener operations, 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

Year Ended December 31, 2018:

 

 

 

 

Net Sales………………………………………

$      33,712,458

$      3,461,791

$                  0

$        37,174,249

 

 

 

 

 

Depreciation……………………………………...

1,161,082

112,942

34,424

1,308,448

 

 

 

 

 

Segment operating profit……………………………………

3,731,998

1,108,248

0

4,840,246

Selling and administrative expenses…………..

0

0

(2,437,598)

(2,437,598)

Other income……………………………………..

0

0

153,537

153,537

Income before income taxes……………………

 

 

 

2,556,185

 

 

 

 

 

Capital expenditures…………………………….

1,635,115

49,884

338,191

2,023,190

 

 

 

 

 

Segment assets:

 

 

 

 

   Accounts receivable, net……………………...

5,196,437

332,870

0

5,529,307

   Inventories, net………………………………...

5,075,290

1,025,101

0

6,100,391

   Property, plant and equipment, net………….

10,726,191

1,579,497

952,458

13,258,146

   Other assets……………………………………

0

0

8,358,781

8,358,781

 

 

 

 

33,246,625

 

 

 

 

 

Year Ended December 31, 2017:

 

 

 

 

Net Sales………………………………………

$      31,977,964

$      3,786,750

$                  0

$        35,764,714

 

 

 

 

 

Depreciation……………………………………...

1,093,476

100,908

37,162

1,231,546

 

 

 

 

 

Segment operating profit……………………………………

3,574,783

1,350,111

0

4,924,894

Selling and administrative expenses…………..

0

0

(2,559,713)

(2,559,713)

Other income……………………………………..

0

0

100,901

100,901

Income before income taxes……………………

 

 

 

2,466,082

 

 

 

 

 

Capital expenditures…………………………….

1,093,539

178,761

65,641

1,337,941

 

 

 

 

 

Segment assets:

 

 

 

 

   Accounts receivable, net……………………...

5,080,191

246,459

0

5,326,650

   Inventories, net………………………………...

3,565,361

962,739

0

4,528,100

   Property, plant and equipment, net………….

10,282,910

1,642,555

631,488

12,556,953

   Other assets……………………………………

0

0

9,404,599

9,404,599

 

 

 

 

31,816,302

                                                                                                                             

The Company does not allocate certain selling and administrative expenses for internal reporting, thus, no allocation was made for these expenses for segment disclosure purposes.  Segment assets reported internally are limited to accounts receivable, inventory and long-lived assets.  Certain long-lived assets of one plant location are allocated between the two segments based on estimated plant utilization, as this plant serves both fastener and assembly equipment activities.  Other assets are not allocated to segments internally and to do so would be impracticable.

 

The following table presents revenue by segment, further disaggregated by end-market:

 

 

  Fastener 

  Assembly Equipment 

  Consolidated 

Year Ended December 31, 2018:

 

 

 

Automotive

$  22,215,719

$        237,565

$   22,453,284

Non-automotive

11,496,739

3,224,226

14,720,965

Total net sales

$  33,712,458

$     3,461,791

$   37,174,249

 

 

 

 

Year Ended December 31, 2017:

 

 

 

Automotive

$  22,527,813

$        192,091

$   22,719,904

Non-automotive

9,450,151

3,594,659

13,044,810

Total net sales

$  31,977,964

$     3,786,750

$   35,764,714

 

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

 

 

  Fastener 

  Assembly Equipment 

  Consolidated 

Year Ended December 31, 2018:

 

 

 

United States

$  29,470,140

$       3,260,683

$   32,730,823

Foreign

4,242,318

201,108

4,443,426

Total net sales

$  33,712,458

$     3,461,791

$   37,174,249

 

 

 

 

Year Ended December 31, 2017:

 

 

 

United States

$  27,681,055

$       3,684,135

$   31,365,190

Foreign

4,296,909

102,615

4,399,524

Total net sales

$  31,977,964

$     3,786,750

$   35,764,714

 

 

 

 

 

Sales to one customer in the fastener segment accounted for 17 percent of consolidated revenues during 2018 and 19 percent in 2017.  The accounts receivable balance for this customer accounted for 15 and 25 percent of consolidated accounts receivable as of December 31, 2018 and 2017, respectively.  Sales to two other customers were each 10 percent of consolidated revenue in 2018 and accounted for 12 percent and 17 percent of consolidated accounts receivable as of December 31, 2018.

v3.19.1
7 - Commitments and Contingencies
12 Months Ended
Dec. 31, 2018
Notes  
7 - Commitments and Contingencies

7-Commitments and Contingencies-The Company recorded rent expense aggregating approximately $26,000 and $30,000 in 2018 and 2017, respectively.  Total future minimum rentals at December 31, 2018 are not significant.

 

The Company is, from time to time involved in litigation, including environmental claims, 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.

v3.19.1
8 - Subsequent Events
12 Months Ended
Dec. 31, 2018
Notes  
8 - Subsequent Events

8-Subsequent Events-On February 18, 2019, the Board of Directors declared a regular quarterly dividend of $.22 per share, or $212,549, and an extra dividend of $.30 per share, or $289,840, payable March 20, 2019 to shareholders of record on March 5, 2019.

v3.19.1
Significant Accounting Policies (Policies)
12 Months Ended
Dec. 31, 2018
Policies  
Principles of Consolidation

Principles of Consolidation-The consolidated financial statements include the accounts of Chicago Rivet & Machine Co. and its wholly-owned subsidiary, H & L Tool Company, Inc. (“H & L Tool”).  All significant intercompany accounts and transactions have been eliminated.

Revenue Recognition

Revenue Recognition- On January 1, 2018, the Company adopted Accounting Standard Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” using the modified retrospective method.  The adoption did not result in the recognition of a cumulative adjustment to beginning retained earnings.  For the Company, the most significant impact of the new standard was the addition of required disclosures within the notes to the financial statements.

 

Revenue is recognized when control of the promised goods or services is transferred to our customers, generally upon shipment of goods or completion of services, in an amount that reflects the consideration we expect to receive in exchange for those goods or services.  Sales taxes we may collect concurrent with revenue producing activities are excluded from revenue.  Revenue is recognized net of certain sales adjustments to arrive at net sales as reported on the statement of income.  These adjustments primarily relate to customer returns and allowances, which vary over time.  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 December 31, 2018 and 2017, 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.

Credit Risk

Credit Risk-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.  The Company has established an allowance for accounts that may become uncollectible in the future.  This estimated allowance is based primarily on management's evaluation of the financial condition of the customer and historical experience.  The Company monitors its accounts receivable and charges to expense an amount equal to its estimate of potential credit losses.  The Company considers a number of factors in determining its estimates, including the length of time its trade accounts receivable are past due, the Company's previous loss history and the customer's current ability to pay its obligation.  Accounts receivable balances are charged off against the allowance when it is determined that the receivable will not be recovered.

Cash and Cash Equivalents and Certificates of Deposit

Cash and Cash Equivalents and Certificates of Deposit-The Company considers all highly liquid investments, including certificates of deposit, with a maturity of three months or less when purchased to be cash equivalents.  Certificates of deposit with an original maturity of greater than three months are separately presented at cost which approximates market value.  The Company maintains cash on deposit in several financial institutions. At times, the account balances may be in excess of Federal Deposit Insurance Corporation insured limits.

Fair Value of Financial Instruments

Fair Value of Financial Instruments-The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, certificates of deposit, accounts receivable and accounts payable approximate fair value based on their short term nature.

Inventories

Inventories-Inventories are stated at the lower of cost or net realizable value, cost being determined by the first-in, first-out method.  The value of inventories is reduced for estimated excess and obsolete inventories based on a review of on-hand inventories compared to historical and estimated future sales and usage.

Property, Plant and Equipment

Property, Plant and Equipment-Properties are stated at cost and are depreciated over their estimated useful lives using the straight-line method for financial reporting purposes.  Accelerated methods of depreciation are used for income tax purposes.  Direct costs related to developing or obtaining software for internal use are capitalized as property and equipment.  Capitalized software costs are amortized over the software’s useful life when the software is placed in service.  The estimated useful lives by asset category are:

 

Asset Category

Estimated Useful Life

Land improvements……………..

15 to 40 years

Buildings and improvements……

10 to 40 years

Machinery and equipment………

5 to 18 years

Capitalized software costs………

3 to 5 years

Other equipment…………………

3 to 10 years

 

The Company reviews the carrying value of property, plant and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition.  In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets.  There were no triggering events requiring assessment of impairment as of December 31, 2018 and 2017.

 

When properties are retired or sold, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss on disposition is recognized in current operations.  Maintenance, repairs and minor betterments that do not improve the related asset or extend its useful life are charged to operations as incurred.

Income Taxes

Income Taxes—Deferred income taxes are determined under the asset and liability method.  Deferred income taxes arise from temporary differences between the income tax basis of assets and liabilities and their reported amounts in the financial statements.  Deferred taxes are shown on the balance sheet as a net long-term asset or liability.

 

The Company applies a comprehensive model for the financial statement recognition, measurement, classification and disclosure of uncertain tax positions.  In the first step of the two-step process, the Company evaluates the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any.  In the second step, the Company measures the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement.  As of December 31, 2018 and 2017, the Company determined that there are no uncertain tax positions with a more than 50% likelihood of being realized upon settlement.

 

The Company classifies interest and penalties related to unrecognized tax benefits as a component of income tax expense.  There were no such expenses in 2018 or 2017.

 

The Company’s federal income tax returns for the 2015 through 2017 tax years are subject to examination by the Internal Revenue Service (“IRS”).  While it may be possible that a reduction could occur with respect to the Company’s unrecognized tax benefits as an outcome of an IRS examination, management does not anticipate any adjustments that would result in a material change to the results of operations or financial condition of the Company.

 

No statutes have been extended on any of the Company’s federal income tax filings. The statute of limitations on the Company’s 2015, 2016 and 2017 federal income tax returns will expire on September 15, 2019, 2020 and 2021, respectively.

 

The Company’s state income tax returns for the 2015 through 2017 tax years are subject to examination by various state authorities with the latest closing period on October 31, 2021.  The Company is currently not under examination by any state authority for income tax purposes and no statutes for state income tax filings have been extended.

Segment Information

Segment Information-The Company reports segment information based on the internal structure and reporting of the Company’s operations.

Net Income Per Share

Net Income Per Share-Net income per share of common stock is based on the weighted average number of shares outstanding of 966,132 in 2018 and 2017.

Use of Estimates

Use of Estimates-The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes.  Significant items subject to estimates and assumptions include depreciable lives, deferred taxes and valuation allowances for accounts receivable and inventory obsolescence.  Actual results could differ from those estimates.

Recent Accounting Pronouncements

Recent Accounting Pronouncements- In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (”ASU”) No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.  The guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, with early adoption permitted. The guidance can be applied prospectively or retrospectively. We expect to adopt this standard effective January 1, 2020 and are currently evaluating the impact that it will have on our consolidated financial statements and disclosures.

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. The new guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. Management has not yet completed its assessment of the impact of the new standard on the Company’s consolidated financial statements. Currently, the Company believes that the most notable impact of this ASU may relate to its processes around the assessment of the adequacy of its allowance for doubtful accounts on trade accounts receivable.

 

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” The ASU is intended to increase transparency and comparability among entities by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements when the lease has a term of more than 12 months.  The ASU will require lessees to recognize in the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term.  The ASU is effective for annual reporting periods beginning after December 15, 2018 and interim periods within those annual periods.  The impact of adopting this ASU is not expected to be significant based on current lease agreements.

v3.19.1
2 - Balance Sheet Details: Inventory (Tables)
12 Months Ended
Dec. 31, 2018
Tables/Schedules  
Inventory

 

 

December 31,

2018

December 31,

2017

Inventories:

 

 

Raw materials

$ 2,798,918   

$ 1,812,603   

Work in process

1,878,977   

1,604,867   

Finished goods

2,001,496   

1,674,630   

 

6,679,391   

5,092,100   

Valuation reserves

(579,000)  

(564,000)  

 

$ 6,100,391   

$ 4,528,100   

v3.19.1
2 - Balance Sheet Details: Property, Plant and Equipment (Tables)
12 Months Ended
Dec. 31, 2018
Tables/Schedules  
Property, Plant and Equipment

 

 

December 31,

2018

December 31,

2017

Property, Plant and Equipment, net:

 

 

Land and improvements

  $       1,632,299 

  $       1,571,552 

Buildings and improvements

           8,292,749 

           8,039,831 

Machinery and equipment

         34,196,661 

         33,208,675 

Capitalized software and other

           1,372,215 

           1,362,714 

 

         45,493,924 

         44,182,772 

Accumulated depreciation

         (32,235,778)

         (31,625,819)

 

  $    13,258,146 

  $    12,556,953 

v3.19.1
2 - Balance Sheet Details: Other Accrued Expenses (Tables)
12 Months Ended
Dec. 31, 2018
Tables/Schedules  
Other Accrued Expenses

 

 

December 31,

2018

December 31,

2017

Other Accrued Expenses:

 

 

Profit sharing plan contribution

  $    277,743

  $   266,398

  Property taxes

          91,527

        92,620

  All other items

        106,703

       136,114

 

  $    475,973

  $   495,132

v3.19.1
2 - Balance Sheet Details: Schedule of Valuation and Qualifying Accounts (Tables)
12 Months Ended
Dec. 31, 2018
Tables/Schedules  
Schedule of Valuation and Qualifying Accounts

 

 

December 31,

2018

December 31,

2017

Allowance for Doubtful Accounts:

 

 

  Balance at beginning of year………………………….

$ 140,000

$   150,000

  Charges to statement of income……………………...

0

6,435

  Write-offs………………………………………………...

0

(16,435)

  Balance at end of year…………………………………

$   140,000

$   140,000

 

 

 

December 31,

2018

December 31,

2017

Inventory Valuation Reserves:

 

 

  Balance at beginning of year………………………….

$ 564,000

$   562,000

  Charges to statement of income……………………...

17,870

75,023

  Write-offs………………………………………………...

(2,870)

(73,023)

  Balance at end of year…………………………………

$   579,000

$   564,000

v3.19.1
3 - Income Taxes: Provision for Income Tax Exense (Tables)
12 Months Ended
Dec. 31, 2018
Tables/Schedules  
Provision for Income Tax Exense

 

 

2018

2017

Current:

 

 

Federal…………………………..

$     351,000

$      647,000

State………………………………

20,000

31,000

Deferred……………………………

184,000

(291,000)

 

$     555,000

$      387,000

v3.19.1
3 - Income Taxes: Schedule of Effective Income Tax Rate Reconciliation (Tables)
12 Months Ended
Dec. 31, 2018
Tables/Schedules  
Schedule of Effective Income Tax Rate Reconciliation

 

 

2018

 

 

 

2017

 

 

 

Amount

 

%

 

Amount

 

%

Expected tax at U.S. statutory rate…………

$     537,000

 

21.0

 

  $     838,000

 

34.0

Impact of the Act……………………………..

 0

 

0

 

(432,000)

 

(17.5)

Permanent differences………………………

2,000

 

0.1

 

(39,000)

 

(1.6)

State taxes, net of federal benefit………….

16,000

 

0.6

 

20,000

 

0.8

Income tax expense…………………………

$     555,000

 

21.7

 

$    387,000

 

15.7

v3.19.1
3 - Income Taxes: Schedule of Deferred Tax Assets and Liabilities (Tables)
12 Months Ended
Dec. 31, 2018
Tables/Schedules  
Schedule of Deferred Tax Assets and Liabilities

 

 

2018

 

2017

 

 

 

 

Depreciation and amortization

$  (1,190,597)

 

  $ (988,334)

Inventory

        164,220 

 

     149,460 

Accrued vacation

          74,177 

 

       70,973 

Allowance for doubtful accounts

          31,500 

 

       31,500 

Other, net

              (384)

 

           (683)

 

$     (921,084)

 

  $ (737,084)

v3.19.1
5 - Other Income: Other Income (Tables)
12 Months Ended
Dec. 31, 2018
Tables/Schedules  
Other Income

 

 

2018

 

2017

 

 

 

 

Interest income….

$ 120,141   

 

$ 75,926   

Other…………………

33,396   

 

24,975   

 

$ 153,537   

 

$ 100,901   

v3.19.1
6 - Segment Information: Schedule of Segment Reporting Information (Tables)
12 Months Ended
Dec. 31, 2018
Tables/Schedules  
Schedule of Segment Reporting Information

 

 

Fastener

Assembly Equipment

Other

Consolidated

Year Ended December 31, 2018:

 

 

 

 

Net Sales………………………………………

$      33,712,458

$      3,461,791

$                  0

$        37,174,249

 

 

 

 

 

Depreciation……………………………………...

1,161,082

112,942

34,424

1,308,448

 

 

 

 

 

Segment operating profit……………………………………

3,731,998

1,108,248

0

4,840,246

Selling and administrative expenses…………..

0

0

(2,437,598)

(2,437,598)

Other income……………………………………..

0

0

153,537

153,537

Income before income taxes……………………

 

 

 

2,556,185

 

 

 

 

 

Capital expenditures…………………………….

1,635,115

49,884

338,191

2,023,190

 

 

 

 

 

Segment assets:

 

 

 

 

   Accounts receivable, net……………………...

5,196,437

332,870

0

5,529,307

   Inventories, net………………………………...

5,075,290

1,025,101

0

6,100,391

   Property, plant and equipment, net………….

10,726,191

1,579,497

952,458

13,258,146

   Other assets……………………………………

0

0

8,358,781

8,358,781

 

 

 

 

33,246,625

 

 

 

 

 

Year Ended December 31, 2017:

 

 

 

 

Net Sales………………………………………

$      31,977,964

$      3,786,750

$                  0

$        35,764,714

 

 

 

 

 

Depreciation……………………………………...

1,093,476

100,908

37,162

1,231,546

 

 

 

 

 

Segment operating profit……………………………………

3,574,783

1,350,111

0

4,924,894

Selling and administrative expenses…………..

0

0

(2,559,713)

(2,559,713)

Other income……………………………………..

0

0

100,901

100,901

Income before income taxes……………………

 

 

 

2,466,082

 

 

 

 

 

Capital expenditures…………………………….

1,093,539

178,761

65,641

1,337,941

 

 

 

 

 

Segment assets:

 

 

 

 

   Accounts receivable, net……………………...

5,080,191

246,459

0

5,326,650

   Inventories, net………………………………...

3,565,361

962,739

0

4,528,100

   Property, plant and equipment, net………….

10,282,910

1,642,555

631,488

12,556,953

   Other assets……………………………………

0

0

9,404,599

9,404,599

 

 

 

 

31,816,302

v3.19.1
6 - Segment Information: Disaggregation of Revenue (Tables)
12 Months Ended
Dec. 31, 2018
Location  
Disaggregation of Revenue

 

 

  Fastener 

  Assembly Equipment 

  Consolidated 

Year Ended December 31, 2018:

 

 

 

United States

$  29,470,140

$       3,260,683

$   32,730,823

Foreign

4,242,318

201,108

4,443,426

Total net sales

$  33,712,458

$     3,461,791

$   37,174,249

 

 

 

 

Year Ended December 31, 2017:

 

 

 

United States

$  27,681,055

$       3,684,135

$   31,365,190

Foreign

4,296,909

102,615

4,399,524

Total net sales

$  31,977,964

$     3,786,750

$   35,764,714

 

End-market  
Disaggregation of Revenue

 

 

  Fastener 

  Assembly Equipment 

  Consolidated 

Year Ended December 31, 2018:

 

 

 

Automotive

$  22,215,719

$        237,565

$   22,453,284

Non-automotive

11,496,739

3,224,226

14,720,965

Total net sales

$  33,712,458

$     3,461,791

$   37,174,249

 

 

 

 

Year Ended December 31, 2017:

 

 

 

Automotive

$  22,527,813

$        192,091

$   22,719,904

Non-automotive

9,450,151

3,594,659

13,044,810

Total net sales

$  31,977,964

$     3,786,750

$   35,764,714

 

v3.19.1
Estimated Useful Lives by Asset Category (Details)
12 Months Ended
Dec. 31, 2018
Land Improvements | Minimum  
Property, Plant and Equipment, Useful Life 15 years
Land Improvements | Maximum  
Property, Plant and Equipment, Useful Life 40 years
Building Improvements | Minimum  
Property, Plant and Equipment, Useful Life 10 years
Building Improvements | Maximum  
Property, Plant and Equipment, Useful Life 40 years
Machinery and Equipment | Minimum  
Property, Plant and Equipment, Useful Life 5 years
Machinery and Equipment | Maximum  
Property, Plant and Equipment, Useful Life 18 years
Software and Software Development Costs | Minimum  
Property, Plant and Equipment, Useful Life 3 years
Software and Software Development Costs | Maximum  
Property, Plant and Equipment, Useful Life 5 years
Other Capitalized Property Plant and Equipment | Minimum  
Property, Plant and Equipment, Useful Life 3 years
Other Capitalized Property Plant and Equipment | Maximum  
Property, Plant and Equipment, Useful Life 10 years
v3.19.1
Uncertain Tax Positions and Unrecognized Tax Benefits (Details) - USD ($)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Details    
Liability for Uncertain Tax Positions $ 0 $ 0
Unrecognized Tax Benefits $ 0 $ 0
v3.19.1
Weighted Avg. Number of Shares Outstanding (Details) - shares
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Details    
Weighted Average Common Shares Outstanding 966,132 966,132
v3.19.1
2 - Balance Sheet Details: Inventory (Details) - USD ($)
Dec. 31, 2018
Dec. 31, 2017
Details    
Raw materials $ 2,798,918 $ 1,812,603
Work in process 1,878,977 1,604,867
Finished goods 2,001,496 1,674,630
Valuation reserves (579,000) (564,000)
Inventories, net $ 6,100,391 $ 4,528,100
v3.19.1
2 - Balance Sheet Details: Property, Plant and Equipment (Details) - USD ($)
Dec. 31, 2018
Dec. 31, 2017
Details    
Land and improvements $ 1,632,299 $ 1,571,552
Buildings and improvements 8,292,749 8,039,831
Machinery and equipment 34,196,661 33,208,675
Capitalized software and other 1,372,215 1,362,714
Less: Accumulated depreciation (32,235,778) (31,625,819)
Property, Plant and Equipment, Other, Net $ 13,258,146 $ 12,556,953
v3.19.1
2 - Balance Sheet Details: Other Accrued Expenses (Details) - USD ($)
Dec. 31, 2018
Dec. 31, 2017
Details    
Profit sharing plan contribution $ 277,743 $ 266,398
Property taxes 91,527 92,620
All other items 106,703 136,114
Other Accrued Expenses $ 475,973 $ 495,132
v3.19.1
Schedule of Valuation and Qualifying Accounts (Details) - USD ($)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
SEC Schedule, 12-09, Allowance, Credit Loss    
Balance at beginning of year $ 140,000 $ 150,000
Charges to statement of income 0 6,435
Write-offs 0 (16,435)
Balance at end of year 140,000 140,000
SEC Schedule, 12-09, Reserve, Inventory    
Balance at beginning of year 564,000 562,000
Charges to statement of income 17,870 75,023
Write-offs (2,870) (73,023)
Balance at end of year $ 579,000 $ 564,000
v3.19.1
3 - Income Taxes: Provision for Income Tax Exense (Details) - USD ($)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Details    
Provision for Federal income tax expense, Current $ 351,000 $ 647,000
Provision for State income tax expense, Current 20,000 31,000
Provision for income tax expense, Deferred 184,000 (291,000)
Provision for Income Taxes $ 555,000 $ 387,000
v3.19.1
Other Income Tax Disclosures (Details) - USD ($)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Details    
Impact of the Act $ 0 $ 432,000
Deferred tax assets valuation allowance $ 0 $ 0
v3.19.1
3 - Income Taxes: Schedule of Effective Income Tax Rate Reconciliation (Details) - USD ($)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Details    
Expected tax at U.S. statutory rate $ 537,000 $ 838,000
Expected tax at U.S. statutory rate, % 21.00% 34.00%
Impact of the Act $ 0 $ (432,000)
Impact of the Act, % 0.00% (17.50%)
Permanent differences $ 2,000 $ (39,000)
Permanent differences, % 0.10% (1.60%)
State taxes, net of federal benefit $ 16,000 $ 20,000
State taxes, net of federal benefit, % 0.60% 0.80%
Income tax expense $ 555,000 $ 387,000
Income tax expense, % 21.70% 15.70%
v3.19.1
3 - Income Taxes: Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($)
Dec. 31, 2018
Dec. 31, 2017
Details    
Depreciation and amortization $ (1,190,597) $ (988,334)
Inventory 164,220 149,460
Accrued vacation 74,177 70,973
Allowance for doubtful accounts 31,500 31,500
Other, net (384) (683)
Deferred Tax Assets and Liabilities $ (921,084) $ (737,084)
v3.19.1
Profit Sharing Plan (Details) - USD ($)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Details    
Defined Contribution Plan, Employer Discretionary Contribution Amount $ 278,000 $ 266,000
v3.19.1
5 - Other Income: Other Income (Details) - USD ($)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Details    
Interest income…. $ 120,141 $ 75,926
Other nonoperating income 33,396 24,975
Other Income $ 153,537 $ 100,901
v3.19.1
6 - Segment Information: Schedule of Segment Reporting Information (Details) - USD ($)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Net Sales $ 37,174,249 $ 35,764,714
Depreciation and Amortization 1,308,448 1,231,546
Accounts receivable, net 5,529,307 5,326,650
Inventories, net 6,100,391 4,528,100
Property, plant and equipment, net 13,258,146 12,556,953
Fastener    
Net Sales 33,712,458 31,977,964
Depreciation and Amortization 1,161,082 1,093,476
Segment operating profit 3,731,998 3,574,783
Selling and administrative expenses 0 0
Other Income 0 0
Capital expenditures 1,635,115 1,093,539
Accounts receivable, net 5,196,437 5,080,191
Inventories, net 5,075,290 3,565,361
Property, plant and equipment, net 10,726,191 10,282,910
Other assets 0 0
Assembly Equipment    
Net Sales 3,461,791 3,786,750
Depreciation and Amortization 112,942 100,908
Segment operating profit 1,108,248 1,350,111
Selling and administrative expenses 0 0
Other Income 0 0
Capital expenditures 49,884 178,761
Accounts receivable, net 332,870 246,459
Inventories, net 1,025,101 962,739
Property, plant and equipment, net 1,579,497 1,642,555
Other assets 0 0
Unallocated Corporate    
Net Sales 0 0
Depreciation and Amortization 34,424 37,162
Segment operating profit 0 0
Selling and administrative expenses (2,437,598) (2,559,713)
Other Income 153,537 100,901
Capital expenditures 338,191 65,641
Accounts receivable, net 0 0
Inventories, net 0 0
Property, plant and equipment, net 952,458 631,488
Other assets $ 8,358,781 $ 9,404,599
v3.19.1
6 - Segment Information: Disaggregation of Revenue (Details) - USD ($)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Revenue $ 37,174,249 $ 35,764,714
United States    
Revenue 32,730,823 31,365,190
Foreign    
Revenue 4,443,426 4,399,524
Automotive    
Revenue 22,453,284 22,719,904
Nonautomotive    
Revenue 14,720,965 13,044,810
Fastener    
Revenue 33,712,458 31,977,964
Fastener | United States    
Revenue 29,470,140 27,681,055
Fastener | Foreign    
Revenue 4,242,318 4,296,909
Fastener | Automotive    
Revenue 22,215,719 22,527,813
Fastener | Nonautomotive    
Revenue 11,496,739 9,450,151
Assembly Equipment    
Revenue 3,461,791 3,786,750
Assembly Equipment | United States    
Revenue 3,260,683 3,684,135
Assembly Equipment | Foreign    
Revenue 201,108 102,615
Assembly Equipment | Automotive    
Revenue 237,565 192,091
Assembly Equipment | Nonautomotive    
Revenue $ 3,224,226 $ 3,594,659
v3.19.1
Summary of % of Revenues and A/R from Major Customers (Details)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
T.I. Group Automotive Systems    
Percentage of revenues from major customers 17.00% 19.00%
Percentage of accounts receivable balances 15 25
Cooper Standard    
Percentage of revenues from major customers 10.00%  
Percentage of accounts receivable balances 12  
Parker Hannifin    
Percentage of revenues from major customers 10.00%  
Percentage of accounts receivable balances 17  
v3.19.1
Commitments and Contingencies (Details) - USD ($)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Details    
Rent Expense $ 26,000 $ 30,000
v3.19.1
Subsequent Events (Details)
12 Months Ended
Dec. 31, 2018
USD ($)
$ / shares
Dividend declaration date Feb. 18, 2019
Dividends Payable, Date to be Paid Mar. 20, 2019
Dividends Payable, Date of Record Mar. 05, 2019
Regular Quarterly dividend  
Dividends per share | $ / shares $ 0.22
Dividends payable amount | $ $ 212,549
Extra dividend  
Dividends per share | $ / shares $ 0.30
Dividends payable amount | $ $ 289,840