EX-13 3 d469568dex13.htm EX-13 EX-13

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Chicago Rivet & Machine Co.

2012 Annual Report


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Highlights

 

 

      2012      2011  

Net Sales

   $ 34,223,772       $ 30,915,122   

Net Income

     1,745,741         1,254,877   

Net Income Per Share

     1.81         1.30   

Dividends Per Share

     .90         .51   

Net Cash Provided by Operating Activities

     2,779,342         1,077,898   

Expenditures for Property, Plant and Equipment

     1,187,746         1,611,789   

Working Capital

     15,875,145         15,014,263   

Total Shareholders’ Equity

     23,000,736         22,124,513   

Common Shares Outstanding at Year-End

     966,132         966,132   

Shareholders’ Equity Per Common Share

     23.81         22.90   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual Meeting
The annual meeting of shareholders
will be held on May 14, 2013 at 10:00 a.m. at
901 Frontenac Road
Naperville, Illinois

Chicago Rivet & Machine Co. • 901 Frontenac Road • P.O. Box 3061 • Naperville, Illinois 60566 • www.chicagorivet.com

 

 

 


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Management’s Report

on Financial Condition and Results of Operations

 

  

 

 

To Our Shareholders:

 

RESULTS OF OPERATIONS

Results for 2012 were successful by most measures as we increased our revenues to the highest level in five years and our net income to the highest level in ten years. Revenues were $34,223,772 in 2012, a 10.7 percent increase from $30,915,122 in 2011. The increase in revenue was aided by domestic automotive production that reached its highest level since 2007 as well as increased volume to certain non-automotive customers. The increase in revenue more than offset raw material price fluctuations experienced during the year, resulting in net income of $1,745,741, or $1.81 per share, in 2012 compared with net income of $1,254,877, or $1.30 per share, in 2011. These positive results enabled the payment of an extra dividend in the fourth quarter, which brought the total dividend payout for 2012 to the highest amount in nine years.

2012 Compared to 2011

The pace of the domestic economic recovery continued to be slow in 2012, with high unemployment and stagnant wage growth, as well as the lingering effects of the financial crisis, keeping consumer spending restrained. The automotive sector was an exception to these forces as the average age of cars on U.S. roads reached an all-time high, which helped propel auto sales to double digit growth for the third straight year after the recent recession. Our fastener segment, which relies on the automotive sector for the majority of its revenues, benefited from this environment. These favorable conditions in the automotive market, coupled with our ongoing efforts to increase revenues, resulted in fastener segment sales of $30,999,163 in 2012, compared with $27,832,279 in 2011, an increase of 11.4 percent. The fourth quarter of 2012 marked the thirteenth consecutive quarter of sales exceeding the year earlier quarter. Higher raw material prices early in the year receded as the year progressed leaving most cost of sales components increasing at the year’s inflationary rate. The combination of higher sales and moderate increases in cost components resulted in an increase in fastener segment gross margins of $866,485 during 2012 compared to 2011.

Assembly equipment segment revenues were $3,224,609 in 2012, an increase of $141,766, or 4.6 percent, compared to the $3,082,843 recorded in 2011. An increase in the number of machines shipped, as well as a higher average unit value during 2012, accounted for most of the increase in the equipment segment sales. By holding operating costs to levels consistent with the prior year, the higher sales resulted in an increase in assembly equipment gross margins of $135,393 in 2012.

Selling and administrative expenses were $5,186,760 in 2012, an increase of $153,309, or 3 percent, compared to the 2011 total of $5,033,451. The change is primarily due

to an increase in profit sharing expense of $95,322, related to improved operating results. An increase of approximately $39,000 in payroll and related expenses and various smaller items make up the remaining net increase. As a percentage of net sales, selling and administrative expenses declined from 16.3 percent in 2011 to 15.2 percent in 2012.

Other income was $118,099 in 2012 compared to $249,804 in 2011. The decline was primarily due to a gain of approximately $142,000 in 2011 from the sale of our Jefferson, Iowa property, which had formerly been used in our fastener segment operations.

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 of $.15 per share during 2012. In addition, an extra dividend of $.30 per share was paid during the fourth quarter, bringing the total distribution for the year to $.90 per share. On February 18, 2013, the Board of Directors declared a regular quarterly dividend of $.15 per share, payable March 20, 2013 to shareholders of record on March 5, 2013. This continues the uninterrupted record of consecutive quarterly dividends paid by the Company to its shareholders that extends over 79 years.

PROPERTY, PLANT AND EQUIPMENT

Capital expenditures during 2012 totaled $1,187,746, of which $1,018,734 was invested in equipment for our fastener operations. Inspection equipment accounted for $450,720 of the fastener segment additions while cold heading and screw machine equipment comprised $371,466 of the total. Equipment to perform secondary operations on parts accounted for $46,582 of the additions, while the remaining additions of $149,966 were for various general plant and office equipment. Assembly equipment segment additions totaled $68,203, for a new turning center. Investments for the benefit of both operating segments, primarily for building improvements, totaled $100,809 during 2012.

Total capital expenditures in 2011 were $1,611,789. Fastener segment additions accounted for $1,510,036 of the total, including $838,000 for cold heading and screw machine equipment and $110,000 for secondary processing equipment. These expenditures served to expand our production capacity and capabilities. We invested $241,000 for inspection and other quality related equipment and $251,000 for general plant improvements, including energy efficient lighting and roof repairs. The balance of the fastener segment additions were for packaging and other small equipment. Assembly

 

 

 

 

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Management’s Report

(Continued)

 

 

 

equipment segment additions were $61,283, for production equipment. An additional $40,470 was invested in facility improvements and office equipment that benefits both operating segments.

Depreciation expense amounted to $993,951 in 2012 and $971,496 in 2011.

LIQUIDITY AND CAPITAL RESOURCES

Working capital at December 31, 2012 was $15.9 million, an improvement of $.9 million from the beginning of the year. Higher sales caused an increase in accounts receivable of $.2 million as of year-end. A decline in inventory of $.3 million offset this increase, while current liabilities were little changed from the beginning of the year. The Company’s holdings in cash, cash equivalents and certificates of deposit amounted to $7.5 million at the end of 2012, an increase of $.9 million. The Company’s investing activities in 2012 consisted primarily of capital expenditures of $1.2 million. The only financing activity during 2012 was the payment of $.9 million in dividends.

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

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 2013

Forecasts for economic growth in 2013 call for modest improvement over the rate achieved in 2012; however, ongoing uncertainty related to how the federal government may act to improve economic growth while dealing with large deficits continues to threaten the fragile three year old recovery. Unlike a year ago, when domestic automotive sales were projected by many to increase 10 percent, we are starting the new year with more subdued projections regarding automotive sales growth, with most projections in the low single digits. While these forecasts would underpin our outlook for fastener sales, our assembly equipment segment, which derives sales from a broad industry base, may continue to lag in comparison if business sentiment does not improve.

While the overall rate of inflation has been relatively low during the aforementioned recovery, a variety of our cost components have seen greater increases or experienced periods of volatility, including raw materials, certain supplies, fuel and insurance. That history of volatility makes forecasting costs difficult. At this time, there is no expectation that overall inflation will rise significantly in the near-term, but the accommodative monetary policy of recent years may eventually give rise to higher inflation which could negatively impact operations. Given that increases in costs are often difficult to recover, we will continue to concentrate our efforts on mitigating such increases through rigorous quoting and working to improve our operational efficiency.

The improvement in profitability and our sound financial position have allowed us to make significant investments in our operations in recent years while also increasing shareholder distributions. We believe that we remain well positioned to take advantage of opportunities that may improve profitability in the future. We will continue to pursue new customer relationships and work to expand existing ones in all the markets we serve by emphasizing value over price and by concentrating our efforts on more complex parts in order to differentiate ourselves in a very competitive global marketplace.

 

 

 

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Management’s Report

(Continued)

 

 

 

Our success in the past year, as well as in the future, depends on numerous factors, a key element of which is the dedicated efforts of our employees, who consistently work to meet the ever-changing challenges that characterize today’s manufacturing environment. We gratefully

acknowledge their contributions as well as the loyalty of our customers, who entrust their confidence in us to provide them with quality solutions. We also take this opportunity to thank our shareholders for their support.

 

 

Respectfully,

 

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John A. Morrissey   Michael J. Bourg
Chairman   President

March 28, 2013

 

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 to two major customers, 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, 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.

 

 

 

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Consolidated Balance Sheets

 

December 31    2012     2011  

Assets

    

Current Assets

    

Cash and Cash Equivalents

   $ 392,810      $ 704,345   

Certificates of Deposit

     7,088,000        5,880,000   

Accounts Receivable — Less allowances of $150,000 and $140,000, respectively

     4,577,932        4,398,426   

Inventories, net

     4,936,372        5,212,040   

Deferred Income Taxes

     416,191        420,191   

Other Current Assets

     422,332        347,737   
  

 

 

   

 

 

 

Total Current Assets

     17,833,637        16,962,739   

Property, Plant and Equipment, net

     8,077,866        7,895,525   
  

 

 

   

 

 

 

Total Assets

   $ 25,911,503      $ 24,858,264   
  

 

 

   

 

 

 

Liabilities and Shareholders’ Equity

    

Current Liabilities

    

Accounts Payable

   $ 1,003,647      $ 968,266   

Accrued Wages and Salaries

     409,695        374,964   

Other Accrued Expenses

     460,245        453,594   

Unearned Revenue and Customer Deposits

     84,905        151,652   
  

 

 

   

 

 

 

Total Current Liabilities

     1,958,492        1,948,476   

Deferred Income Taxes

     952,275        785,275   
  

 

 

   

 

 

 

Total Liabilities

     2,910,767        2,733,751   
  

 

 

   

 

 

 

Commitments and Contingencies (Note 8)

    

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

     1,138,096        1,138,096   

Additional Paid-in Capital

     447,134        447,134   

Retained Earnings

     25,337,604        24,461,381   

Treasury Stock, 171,964 Shares at cost

     (3,922,098     (3,922,098
  

 

 

   

 

 

 

Total Shareholders’ Equity

     23,000,736        22,124,513   
  

 

 

   

 

 

 

Total Liabilities and Shareholders’ Equity

   $ 25,911,503      $ 24,858,264   
  

 

 

   

 

 

 

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

 

 

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Consolidated Statements of Income

 

For the Years Ended December 31    2012      2011  

Net Sales

   $ 34,223,772       $ 30,915,122   

Cost of Goods Sold

     26,572,370         24,265,598   
  

 

 

    

 

 

 

Gross Profit

     7,651,402         6,649,524   

Selling and Administrative Expenses

     5,186,760         5,033,451   
  

 

 

    

 

 

 

Operating Profit

     2,464,642         1,616,073   

Other Income

     118,099         249,804   
  

 

 

    

 

 

 

Income Before Income Taxes

     2,582,741         1,865,877   

Provision for Income Taxes

     837,000         611,000   
  

 

 

    

 

 

 

Net Income

   $ 1,745,741       $ 1,254,877   
  

 

 

    

 

 

 

Net Income Per Share

   $ 1.81       $ 1.30   
  

 

 

    

 

 

 

Consolidated Statements of Retained Earnings

 

For the Years Ended December 31    2012     2011  

Retained Earnings at Beginning of Year

   $ 24,461,381      $ 23,699,232   

Net Income

     1,745,741        1,254,877   

Cash Dividends Paid, $.90 and $.51 Per Share in 2012 and 2011, respectively

     (869,518     (492,728
  

 

 

   

 

 

 

Retained Earnings at End of Year

   $ 25,337,604      $ 24,461,381   
  

 

 

   

 

 

 

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

 

 

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Consolidated Statements of Cash Flows

 

For the Years Ended December 31    2012     2011  

Cash Flows from Operating Activities:

    

Net Income

   $ 1,745,741      $ 1,254,877   

Adjustments to Reconcile Net Income to

    

Net Cash Provided by Operating Activities:

    

Depreciation and Amortization

     993,951        971,496   

Gain on the Sale of Property and Equipment

     (67,946     (192,544

Deferred Income Taxes

     171,000        14,000   

Changes in Operating Assets and Liabilities:

    

Accounts Receivable, net

     (179,506     (381,345

Inventories, net

     275,668        (901,886

Other Current Assets

     (74,595     5,280   

Accounts Payable

     (59,606     130,235   

Accrued Wages and Salaries

     34,731        (30,640

Other Accrued Expenses

     6,651        141,471   

Unearned Revenue and Customer Deposits

     (66,747     66,954   
  

 

 

   

 

 

 

Net Cash Provided by Operating Activities

     2,779,342        1,077,898   
  

 

 

   

 

 

 

Cash Flows from Investing Activities:

    

Capital Expenditures

     (1,092,759     (1,522,539

Proceeds from the Sale of Properties

     79,400        416,190   

Proceeds from Certificates of Deposit

     5,160,000        5,630,000   

Purchases of Certificates of Deposit

     (6,368,000     (5,130,000
  

 

 

   

 

 

 

Net Cash Used in Investing Activities

     (2,221,359     (606,349
  

 

 

   

 

 

 

Cash Flows from Financing Activities:

    

Cash Dividends Paid

     (869,518     (492,728
  

 

 

   

 

 

 

Net Cash Used in Financing Activities

     (869,518     (492,728
  

 

 

   

 

 

 

Net Decrease in Cash and Cash Equivalents

     (311,535     (21,179

Cash and Cash Equivalents:

    

Beginning of Year

     704,345        725,524   
  

 

 

   

 

 

 

End of Year

   $ 392,810      $ 704,345   
  

 

 

   

 

 

 

Net Cash Paid for Income Taxes

   $ 812,298      $ 490,846   

Supplemental Schedule of Non-cash Investing Activities:

    

Capital Expenditures in Accounts Payable

   $ 94,987      $ 89,250   

 

 

 

 

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

 

 

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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—Revenues from product sales are recognized upon shipment and an allowance is provided for estimated returns and discounts based on experience. Cash received by the Company prior to shipment is recorded as deferred revenue. The Company experiences a certain degree of sales returns that varies over time. The Company is able to make a reasonable estimation of expected sales returns based upon history. The Company records all shipping and handling fees billed to customers as revenue, 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—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. The Company maintains cash on deposit in several financial institutions. At times, the account balances may be in excess of FDIC 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 25 years

Buildings and improvements

   10 to 35 years

Machinery and equipment

   7 to 15 years

Capitalized software costs

   3 to 5 years

Other equipment

   3 to 15 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, 2012 and 2011.

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.

 

 

 

 

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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, 2012 and 2011, 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 2012.

The Company’s federal income tax returns for the 2009 through 2011 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 2009, 2010 and 2011 federal income tax returns will expire on September 15, 2013, 2014 and 2015, respectively.

The Company’s state income tax returns for the 2009 through 2011 tax years are subject to examination by various state authorities with the latest closing period on October 31, 2015. 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 2012 and 2011.

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 deferred taxes and valuation allowances for accounts receivable and inventory obsolescence. Actual results could differ from those estimates.

Recent Accounting Pronouncements—Effective January 1, 2012, the Company adopted Accounting Standards Update (“ASU”) No. 2011-04, “Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”, (“ASU 2011-04”). This ASU requires enhanced disclosures for fair value measurements, including quantitative analysis of unobservable inputs used in Level 3 fair value measurements. The ASU also clarifies the Financial Accounting Standards Board’s intent about the application of existing fair value measurement requirements. The adoption of ASU 2011-04 did not have a material impact on our financial condition or results of operation.

2—Balance Sheet Details

 

     2012      2011  

Inventories:

     

Raw materials

   $ 2,009,691       $ 2,016,032   

Work in process

     1,869,830         1,984,368   

Finished goods

     1,606,851         1,760,640   
  

 

 

    

 

 

 
     5,486,372         5,761,040   

Valuation reserves

     550,000         549,000   
  

 

 

    

 

 

 
   $ 4,936,372       $ 5,212,040   
  

 

 

    

 

 

 

Property, Plant and Equipment, net:

     

Land and improvements

   $ 1,238,150       $ 1,238,150   

Buildings and improvements

     6,244,064         6,169,545   

Machinery and equipment and other

     29,495,765         28,785,896   
  

 

 

    

 

 

 
     36,977,979         36,193,591   

Accumulated depreciation

     28,900,113         28,298,066   
  

 

 

    

 

 

 
   $ 8,077,866       $ 7,895,525   
  

 

 

    

 

 

 

Other Accrued Expenses:

     

Profit sharing plan contribution

   $ 278,080       $ 182,000   

Property taxes

     91,547         109,313   

All other items

     90,618         162,281   
  

 

 

    

 

 

 
   $ 460,245       $ 453,594   
  

 

 

    

 

 

 

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

 

     2012      2011  

Current:

     

Federal

   $     624,000       $     585,000   

State

     42,000         12,000   

Deferred

     171,000         14,000   
  

 

 

    

 

 

 
   $ 837,000       $ 611,000   
  

 

 

    

 

 

 
 

 

 

 

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

 

     2012     2011  
     Amount     %     Amount     %  

Expected tax at U.S.

        

Statutory rate

   $ 878,000        34.0      $ 634,000        34.0   

Permanent differences

     (69,000     (2.7     (31,000     (1.7

State taxes, net of federal benefit

     28,000        1.1        8,000        .4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income tax expense

   $ 837,000        32.4      $ 611,000        32.7   
  

 

 

   

 

 

   

 

 

   

 

 

 

The Company’s effective tax rates were lower than the U.S. federal statutory rate in 2012 and 2011 primarily due to the Domestic Production Activities Deduction allowed under Internal Revenue Code Section 199.

The deferred tax liabilities and assets consist of the following:

 

     2012     2011  

Depreciation and amortization

   $ (952,275   $ (785,275
  

 

 

   

 

 

 

Inventory

     274,826        285,516   

Accrued vacation

     89,785        88,045   

Allowance for doubtful accounts

     51,450        48,000   

Other, net

     130        (1,370
  

 

 

   

 

 

 
     416,191        420,191   
  

 

 

   

 

 

 
   $ (536,084   $ (365,084
  

 

 

   

 

 

 

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, 2012 or 2011.

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 $277,000 in 2012 and $182,000 in 2011.

5—Other Income—consists of the following:

 

     2012      2011  

Interest income

   $ 34,138       $ 42,282   

Gain on sale of property and equipment

     67,946         192,544   

Other

     16,015         14,978   
  

 

 

    

 

 

 
   $ 118,099       $ 249,804   
  

 

 

    

 

 

 

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, 2012:

       

Net sales

  $ 30,999,163      $ 3,224,609      $      $ 34,223,772   

Depreciation

    859,045        59,199        75,707        993,951   

Segment profit

    3,775,045        773,902               4,548,947   

Selling and administrative expenses

        (2,084,305     (2,084,305

Other income

        118,099        118,099   
       

 

 

 

Income before income taxes

          2,582,741   
       

 

 

 

Capital expenditures

    1,018,734        68,203        100,809        1,187,746   

Segment assets:

       

Accounts receivable, net

    4,275,890        302,042               4,577,932   

Inventories, net

    4,175,702        760,670               4,936,372   

Property, plant and equipment, net

    6,363,280        1,106,318        608,268        8,077,866   

Other assets

                  8,319,333        8,319,333   
       

 

 

 
          25,911,503   
       

 

 

 

Year Ended December 31, 2011:

       

Net sales

  $ 27,832,279      $ 3,082,843      $      $ 30,915,122   

Depreciation

    836,062        62,463        72,971        971,496   

Segment profit

    2,997,799        624,234               3,622,033   

Selling and administrative expenses

        (2,005,960     (2,005,960

Other income

        249,804        249,804   
       

 

 

 

Income before income taxes

          1,865,877   
       

 

 

 

Capital expenditures

    1,510,036        61,283        40,470        1,611,789   

Segment assets:

       

Accounts receivable, net

    4,143,186        255,240               4,398,426   

Inventories, net

    4,401,178        810,862               5,212,040   

Property, plant and equipment, net

    6,153,394        1,097,314        644,817        7,895,525   

Other assets

                  7,352,273        7,352,273   
       

 

 

 
          24,858,264   
       

 

 

 

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. 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. Sales to two customers in the fastener segment accounted for 18 and 17 percent and 15 and 16 percent of consolidated revenues during 2012 and 2011, respectively. The accounts receivable balances for these customers accounted for 22 and 24 percent of consolidated accounts receivable for the larger customer and 16 and 20 percent for the other customer as of December 31, 2012 and 2011, respectively.

 

 

 

 

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7—Shareholder Rights Agreement—On November 16, 2009, the Company adopted a shareholder rights agreement and declared a dividend distribution of one right for each outstanding share of Company common stock to shareholders of record at the close of business on December 3, 2009. Each right entitles the holder, upon occurrence of certain events, to buy one one-hundredth of a share of Series A Junior Participating Preferred Stock at a price of $75, subject to adjustment. The rights may only become exercisable under certain circumstances involving acquisition of the Company’s common stock, including the purchase of 10 percent or more by any person or group. The rights will expire on December 1, 2019 unless they are extended, redeemed or exchanged.

8—Commitments and Contingencies—The Company recorded rent expense aggregating approximately $32,000

and $42,000 for 2012 and 2011, respectively. Total future minimum rentals at December 31, 2012 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.

9—Subsequent Event—On February 18, 2013, the Board of Directors declared a regular quarterly dividend of $.15 per share, or $144,920, payable March 20, 2013 to shareholders of record on March 5, 2013.

 

 

 

 

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Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders Chicago Rivet & Machine Co.

We have audited the accompanying consolidated balance sheets of Chicago Rivet & Machine Co. (an Illinois corporation) and subsidiary (the “Company”) as of December 31, 2012 and 2011, and the related consolidated statements of income, retained earnings and cash flows for each of the two years in the period ended December 31, 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Chicago Rivet & Machine Co. and subsidiary as of December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America.

 

LOGO

Chicago, Illinois

March 28, 2013

 

 

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INFORMATION ON COMPANY’S COMMON STOCK

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

At December 31, 2012, there were approximately 190 shareholders of record.

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

Continental Stock Transfer & Trust Company

17 Battery Place

New York, New York 10004

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

   2012     2011      2012      2011  

First

   $ .15      $ .12       $ 23.50       $ 17.05       $ 20.58       $ 15.96   

Second

     .15        .12       $ 20.50       $ 18.36       $ 18.93       $ 14.90   

Third

     .15        .12       $ 19.30       $ 18.35       $ 17.96       $ 15.50   

Fourth

     .45     .15       $ 20.30       $ 18.17       $ 18.00       $ 15.56   

 

* Includes an extra dividend of $.30 per share

 

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)

Chief Financial Officer of

Heldon Bay Limited Partnership

Bigfork, Montana

William T. Divane, Jr. (a) (c) (n)

Chairman of the Board and

Chief Executive Officer of

Divane Bros. Electric Co.

Franklin Park, Illinois

George P. Lynch (c) (n)

Attorney at Law

George Patrick Lynch, Ltd.

Wheaton, Illinois

Walter W. Morrissey (e)

Attorney at Law

Lillig & Thorsness, Ltd.

Oak Brook, 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 • P.O. Box 3061 • Naperville, Illinois 60566 • www.chicagorivet.com

 

 

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Chicago Rivet & Machine Co. • 901 Frontenac Road • P.O. Box 3061 • Naperville, Illinois 60566 • www.chicagorivet.com