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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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, 2021
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
(State or other jurisdiction
of incorporation or organization)
|
36-0904920
I.R.S. Employer
Identification Number
|
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
|
Trading Symbol(s)
|
Name of each exchange
on which registered
|
|
Common Stock, par
value $1.00 per share
|
CVR
|
NYSE American (Trading
privileges only, not registered)
|
Indicate by check
mark if the registrant is a well-known seasoned issuer, as defined
in Rule 405 of the Securities Act. Yes o No ý
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 o No ý
Indicate by check
mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes ý No o
Indicate by check
mark whether the registrant has submitted electronically every
Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was
required to submit such files). Yes ý No o
Indicate by check
mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions
of “large accelerated filer,” “accelerated filer,” “smaller
reporting company” and “emerging growth company” in Rule 12b-2 of
the Exchange Act.:
Large
accelerated fileroAccelerated
filero
Non-accelerated
filerýSmaller
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 has filed a report on and attestation
to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the
Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☐
Indicate by check
mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ☐ No ý
The aggregate market
value of common stock held by non-affiliates of the Company as of
June 30, 2021 was $20,323,420.
As of March 18, 2022,
there were 966,132 shares of the Company's common stock
outstanding.
Documents Incorporated By Reference
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
2022 Annual Meeting of Shareholders are incorporated by reference
in Part III of this report.
CHICAGO RIVET & MACHINE CO.
YEAR
ENDING DECEMBER 31, 2021
ItemPage
No. No.
Part
I
1.Business
3
1A.Risk
Factors 4
1B.Unresolved
Staff Comments 7
2.Properties
7
3.Legal
Proceedings 7
4.Mine
Safety Disclosures 7
Part
II
5.Market
for Registrant’s Common Equity, Related Stockholder Matters
and
Issuer Purchases of Equity Securities9
6.Selected
Financial Data 9
7.Management's
Discussion and Analysis of Financial Condition
and Results of Operations
9
7A.Quantitative
and Qualitative Disclosures About Market Risk12
8.Financial
Statements and Supplementary Data13
9.Changes
in and Disagreements with Accountants on Accounting
and Financial
Disclosure26
9A.Controls
and Procedures26
9B.Other
Information26
Part
III
10.Directors,
Executive Officers and Corporate Governance27
11.Executive
Compensation27
12.Security
Ownership of Certain Beneficial Owners and
Management and Related Stockholder
Matters27
13.Certain
Relationships and Related Transactions,
and Director Independence27
14.Principal
Accountant Fees and Services27
Part
IV
15.Exhibits
and Financial Statement Schedules28
16.Form
10-K Summary28
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. The level of business
activity for the Company is closely related to the overall level of
industrial activity in the United States. During 2021, sales
to three customers were at least 10% of the Company’s consolidated
revenues. Sales to TI Group Automotive Systems, LLC accounted
for approximately 13% and 14% of the Company’s consolidated
revenues in 2021 and 2020, respectively. Sales to
Cooper-Standard Holdings Inc. accounted for approximately 11% and
12% of the Company’s consolidated revenues in 2021 and 2020,
respectively. Sales to Parker-Hannifin Corporation accounted
for approximately 12% and 10% of the Company's consolidated
revenues in 2021 and 2020, respectively.
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, 2021, the
Company employed 201 people.
The
Company has no foreign operations. Sales to foreign customers
represent approximately 16% of the Company's total sales.
3
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.
Our business and operations
have been, and may continue to be, adversely affected by the
COVID-19 pandemic.
In March 2020,
the World Health Organization characterized the novel coronavirus
(“COVID-19”) a pandemic and the President of the United States
declared the COVID-19 outbreak a national emergency. On January 30,
2020, the World Health Organization declared a Public Health
Emergency of International Concern regarding the outbreak of
COVID-19. In response to the resulting pandemic, governments around
the world took various preventative measures in order to control
the spread of the virus, including restricting travel, full or
partial business shutdowns and implementing social distancing
policies. As a result, we experienced a significant drop in
orders, especially in the second quarter of 2020, and the global
economy was plunged into a recession. Although business
conditions in our markets had improved by late in the third quarter
of that year, the effects of the pandemic have continued to
negatively impact our operations and those of our customers and
suppliers. The duration of these effects is uncertain and will
likely be tied to the course of the pandemic. As we cannot
predict the duration or scope of the COVID-19 pandemic, or its
broader impact on the global economy, including the demand for
automobiles, it is unknown what the impact of COVID-19 and its
related effects will be on our business, results of operations or
financial condition, but the impact could be material and last for
an extended period of time.
We are dependent on the
automotive industry.
Demand for our products is
directly related to conditions in the global 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 automotive
industry is characterized by fierce competition and has undergone
major restructuring in recent years. The impact of evolving
technological changes, including a growing emphasis on electric
vehicles, as well as any decline in the automotive industry,
domestic or foreign, 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. Faced
with intense international competition and pressure to reduce
costs, many customers have expanded their sourcing of components
worldwide. 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 36% of our consolidated
revenues in 2021. Sales to TI Group Automotive Systems, LLC,
Parker-Hannifin Corporation and Cooper-Standard Holdings Inc.
accounted for approximately 13%, 12% and 11% of the Company's
consolidated revenues in 2021, respectively. 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.
4
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.
Supply Chain
Disruptions.
Many of our
customers depend upon intricate just-in-time supply chain systems.
A disruption in a supply chain caused by one or more
suppliers, and/or an unrelated supplier, due to part shortages,
work stoppages, bankruptcy, raw material shortages, natural
disasters, coronavirus, tariffs, etc. could adversely impact our
business, or our customers’ business, which could have a material
adverse effect on our results of operations and financial
condition.
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.
5
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.
Our common stock is traded on
the NYSE American (not registered, trading privileges only).
The average daily trading volume for our common stock during
2021 was less than 4,000 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.
6
ITEM 1B -
Unresolved Staff Comments
None.
ITEM 2 -
Properties
The Company's
headquarters is located in Naperville, Illinois. The Company
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.
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,
IllinoisBrick, concrete block and partial
metal
construction with metal roof.
Tyrone,
PennsylvaniaConcrete block with small tapered
beam type
warehouse.
Albia,
IowaConcrete block with prestressed
concrete
roof construction.
Madison
Heights, MichiganConcrete, 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.
7
Information about our Executive
Officers
The
names, ages and positions of all executive officers of the Company,
as of March 15, 2022, 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
OfficerPositionYears an Officer
Walter W.
Morrissey79Chairman,
Chief Executive Officer2
Michael J.
Bourg59President,
Chief Operating Officer23
and Treasurer
-Mr.
Morrissey has been Chairman of the Board of Directors of the
Company and Chief Executive Officer since May 2020. He has
been a director of the Company since 1972.
- 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.
8
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, 2022 there were approximately 140
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: risk related to the COVID-19 pandemic and its related
adverse effects, conditions in the domestic automotive industry,
upon which we rely for sales revenue, the intense competition in
our markets, the concentration of our sales with major customers,
risks related to export sales, the price and availability of raw
materials, supply chain disruptions, labor relations issues, losses
related to product liability, warranty and recall claims, costs
relating to environmental laws and regulations, information systems
disruptions 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 the first three quarters of 2021 improved dramatically over the
same period in 2020 which was adversely impacted by the global
COVID-19 pandemic. Although the pandemic continued to present
many challenges in 2021, as of September 30, 2021, sales had
increased $6,899,836, or 35.7%, compared to the same period in
2020. Ongoing supply chain disruptions weighed heavily on
demand from our automotive sector customers during the fourth
quarter even as overall economic activity improved. As a
result, sales in the fourth quarter of 2021 were limited to
$7,749,488 compared to $8,265,419 a year earlier, a decline of
$515,931, or 6.2%. The combination of lower sales and higher
costs in the quarter resulted in a reduction in fourth quarter net
income compared to a year earlier. Net income was $81,178, or
$0.08 per share, in the fourth quarter of 2021 compared to
$464,263, or $0.48 per share, for the fourth quarter of 2020.
For the full year 2021, net sales were $33,974,558 compared
to $27,590,653 in 2020, an increase of $6,383,905, or 23.1%.
Net sales in 2021 reflect an increase of $1,101,556, or 3.4%,
compared to the $32,873,002 reported in 2019. Full year net
income in 2021 was $1,113,472, or $1.15 per share, compared to
$50,450, or $0.05 per share, in 2020 and net income of $538,314, or
$0.56 per share, in 2019.
9
2021 Compared
to 2020
Fastener segment
revenues were $6,988,047 in the fourth quarter of 2021 compared to
$7,332,308 reported in the fourth quarter of 2020, a decline of
$344,261, or 4.7%. The decline was primarily due to the
ongoing computer chip shortage and transportation bottlenecks that
have constrained automotive production. During the fourth
quarter, sales to automotive customers declined $795,623, which
more than offset an increase in sales to non-automotive customers
of $451,362. Fastener segment revenues for the full year 2021
were $29,831,388 compared to $24,607,863 in 2020, an increase of
$5,223,525, or 21.2%. The full year increase in fastener
segment sales is primarily due to the strong rebound in demand from
the negative impact of the COVID-19 pandemic in 2020. The
automotive sector is the primary market for our fastener segment
products and much of that sector was idled for an extended period
of time during the second quarter of 2020 due to the pandemic.
Total sales to automotive customers in 2021 increased
$1,960,855, or 12.6%, compared to 2020. Sales to our
non-automotive customers increased $3,262,670, or 36.3%, in 2021
compared to 2020. The net decline in sales in the fourth
quarter of 2021, combined with worsening inflation, resulted in
lower fastener segment gross margin of $1,072,310 compared to
$1,638,836 in the year earlier quarter, a decline of $566,526.
For the full year 2021, fastener segment gross margins were
$5,185,956 compared to $4,170,276 in 2020, an increase of
$1,015,680. The increase in sales for the full year 2021 was
the primary factor impacting gross margins for the year.
Assembly
equipment segment revenues were $761,441 in the fourth quarter of
2021, compared to $933,111 in the fourth quarter of 2020, a decline
of $171,670, or 18.4%. For the full year 2021, assembly
equipment segment revenues were $4,143,170, compared to $2,982,790
reported in 2020, an increase of $1,160,380, or 38.9%.
Assembly equipment segment sales in 2021 were the highest
annual total since 2007 as the recovery from the COVID-19 pandemic
took hold. Gross margins declined in the fourth quarter of
2021 to $195,237 from $255,296 in the fourth quarter of 2020, due
to lower sales volume and due to 2020 revenue being more heavily
weighted towards higher margin custom machine sales. For the
full year 2021, assembly equipment segment gross margins improved,
along with sales, to $1,279,136 from $744,926 in 2020.
Selling and administrative expenses were $5,106,177 in 2021
compared to $4,998,216 in 2020, an increase of $107,961, or 2.2%.
The increase was primarily due to a $79,469 increase in
commission expense related to the higher sales in 2021. The
remaining net change relates to various smaller items. As a
percentage of net sales, selling and administrative expenses were
15.0% in 2021 compared to 18.1% in 2020.
Other income was
$55,557 in 2021 compared to $148,464 in 2020. Other income is
primarily comprised of interest income which declined during the
year due to lower interest rates and lower invested
balances.
The Company’s
effective income tax rates were 21.3% and 22.9% in 2021 and 2020,
respectively.
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. At the onset of the COVID-19 pandemic in 2020,
the Company reduced the regular quarterly dividend from $0.22 per
share to $0.10 per share. The dividend was restored to the
pre-pandemic amount in February 2021. The Company paid four
regular quarterly dividends in 2021 totaling $0.88 per share.
On February 21, 2022, the Board of Directors declared a
regular quarterly dividend of $0.22 per share, payable March 18,
2022 to shareholders of record on March 4, 2022. This
continues the uninterrupted record of consecutive quarterly
dividends paid by the Company to its shareholders that extends over
88 years.
PROPERTY,
PLANT AND EQUIPMENT
Capital expenditures during 2021 were $670,898. Of the total,
$493,564 related to fastener segment activities, including cold
heading equipment additions of $62,600, secondary processing
equipment of $360,588 and general plant equipment additions of
$70,376. Additional investments of $177,334 were made in 2021
for facilities improvements that benefit both the assembly
equipment segment and the fastener segment.
10
Total capital expenditures in 2020 were $824,136. Fastener
segment additions accounted for $614,835 of the total, including
$410,114 for cold heading and screw machine equipment, $97,908 for
inspection equipment and $40,000 for equipment to perform secondary
operations on parts. The remaining $66,813 of fastener segment
additions consisted of parts cleaning and material handling
equipment. Assembly equipment segment additions in 2020 were
$13,924 for production equipment. Investments for the benefit
of both operating segments, primarily for building improvements,
totaled $195,377 during 2020.
Depreciation
expense was $1,318,554 in 2021 and $1,347,305 in 2020.
LIQUIDITY AND
CAPITAL RESOURCES
Working capital at December 31,
2021 was $17,421,585, an increase of $855,296 from the beginning of
the year. The net change was primarily due to an increase in
inventory of $3,366,486 which was only partially offset by a
reduction in cash, cash equivalents and certificates of deposit of
$2,522,777. In addition to higher prices for raw materials,
the increase in inventory was due to accelerated purchases in
anticipation of further price increases and to manage the impact of
supply chain disruptions. The Company’s investing activities
in 2021 included the net maturities of certificates of deposit of
$1,992,000 and capital expenditures of $670,898. The only
financing activity during 2021 was the payment of $850,196 in
dividends. The Company's holdings in cash, cash equivalents
and certificates of deposit amounted to $4,777,954 at the end of
2021.
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.
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
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. We base
our estimates and assumptions on historical experience, current
trends and on various other assumptions that are believed to be
reasonable under the circumstances. We evaluate our estimates
and judgments required by our policies on an ongoing basis and
update them as appropriate based on changing conditions. A
summary of critical accounting policies can be found in Note 1 of
the financial statements.
Critical accounting estimates are those that require application of
management’s most difficult, subjective or complex judgments, often
as a result of matters that are inherently uncertain and may change
in subsequent periods. We have reviewed our accounting
estimates, and none were deemed to be considered critical for the
accounting periods presented. While we apply our judgment
based on assumptions believed to be reasonable under the
circumstances, actual results could vary from these assumptions.
Additionally, future facts and circumstances could change and
impact our estimates and assumptions.
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.
11
OUTLOOK FOR 2022
As we entered 2021, the introduction of vaccines offered hope of a
continued rebound from the pandemic-induced recession and a return
to more stable operations. Instead, in addition to ongoing COVID-19
related challenges, we were faced with labor market shortages,
supply chain disruptions and inflation at a rate not seen in
decades. All these factors resulted in much higher operating
costs and operational challenges. Nevertheless, financial
results in 2021 were more positive than those of 2020 and 2019.
As we begin 2022, both our fastener segment and our assembly
equipment segment have seen stable demand. However, demand
from automotive sector customers, our primary customer market,
continues to be constrained as a shortage of computer chips limits
their production activities. These shortages are expected to
persist in the near-term which would negatively impact demand from
such customers. The current high rate of inflation is
particularly concerning as it has impacted not only raw materials,
but also labor, energy, transportation and other inputs related to
production. Our efforts to pass on these increases have
resulted in some success, but continue to be challenged. We
have also had difficulties maintaining staffing at ideal levels due
to the tight labor market. These factors, as well as the
uncertainties that COVID-19 still presents, are expected to
continue to be obstacles in the near-term.
Our healthy financial condition has allowed us to successfully
navigate the difficult operating environment brought on by the
pandemic and should provide a sound basis for future activities.
We were able to increase our investment in equipment in 2021
compared to the previous year and expect to make additional
investments in 2022 as one means to maintain competitiveness.
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.
The positive results in the past year and our success in a uniquely
challenging environment would not have been possible without the
conscientious efforts of our dedicated employees, who consistently
strive to exceed our customers’ expectations related to quality,
price and service. We are grateful for their contributions as
well as for the loyalty of our customers that 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.
12
ITEM 8 - Financial Statements
and Supplementary Data
CONSOLIDATED
FINANCIAL STATEMENTS
Report of Independent Registered
Public Accounting Firm (PCAOB ID: 173)
Consolidated Balance Sheets
Consolidated Statements of
Income
Consolidated Statements of
Shareholders’ Equity
Consolidated Statements of Cash
Flows
Notes to Consolidated Financial
Statements
13
Report of Independent
Registered Public Accounting Firm
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, 2021 and
2020, the related consolidated statements of income, shareholders’
equity, 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, 2021 and 2020, 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.
Critical Audit
Matters
Critical
audit matters are matters arising from the current period audit of
the financial statements that were communicated or required to be
communicated to the audit committee and that: (1) relate to
accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective,
or complex judgments. We determined that there are no critical
audit matters.
/Crowe LLP/
We have served as the Company's
auditor since 2014.
Oak Brook, Illinois
March 21, 2022
14
|
CHICAGO RIVET
& MACHINE CO.
|
|
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
December 31,
2021
|
|
December 31,
2020
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
Cash and Cash
Equivalents
|
$
2,036,954
|
|
$
2,567,731
|
|
Certificates of
Deposit
|
2,741,000
|
|
4,733,000
|
|
Accounts
Receivable - Less allowances of $170,000
|
5,647,984
|
|
5,163,450
|
|
Inventories, net
|
8,519,780
|
|
5,153,294
|
|
Prepaid Income Taxes
|
440
|
|
85,940
|
|
Other Current Assets
|
346,236
|
|
383,772
|
|
Total Current Assets
|
19,292,394
|
|
18,087,187
|
|
Property, Plant and Equipment,
net
|
12,473,864
|
|
13,150,884
|
|
|
|
|
|
|
Total Assets
|
$
31,766,258
|
|
$
31,238,071
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
Accounts Payable
|
$
692,635
|
|
$
466,424
|
|
Accrued Wages and
Salaries
|
509,332
|
|
482,008
|
|
Other Accrued Expenses
|
366,418
|
|
322,968
|
|
Unearned Revenue and
Customer Deposits
|
302,424
|
|
249,498
|
|
Total Current
Liabilities
|
1,870,809
|
|
1,520,898
|
|
Deferred Income Taxes, net
|
926,084
|
|
1,011,084
|
|
|
|
|
|
|
Total Liabilities
|
2,796,893
|
|
2,531,982
|
|
|
|
|
|
|
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
|
31,306,233
|
|
31,042,957
|
|
Treasury Stock,
171,964 Shares at cost
|
(3,922,098)
|
|
(3,922,098)
|
|
Total Shareholders' Equity
|
28,969,365
|
|
28,706,089
|
|
|
|
|
|
|
Total Liabilities and
Shareholders' Equity
|
$
31,766,258
|
|
$
31,238,071
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an
integral part of the Consolidated Financial Statements.
|
|
|
15
|
CHICAGO RIVET
& MACHINE CO.
|
|
Consolidated
Statements of Income
|
|
|
|
|
|
|
Year Ended
December 31, 2021
|
|
Year Ended
December 31, 2020
|
|
Net Sales
|
$
33,974,558
|
|
$
27,590,653
|
|
Cost of Goods Sold
|
27,509,466
|
|
22,675,451
|
|
|
|
|
|
|
Gross Profit
|
6,465,092
|
|
4,915,202
|
|
Selling and Administrative
Expenses
|
5,106,177
|
|
4,998,216
|
|
|
|
|
|
|
Operating Profit (Loss)
|
1,358,915
|
|
(83,014)
|
|
|
|
|
|
|
Other Income
|
55,557
|
|
148,464
|
|
|
|
|
|
|
Income Before Income Taxes
|
1,414,472
|
|
65,450
|
|
Provision for Income Taxes
|
301,000
|
|
15,000
|
|
|
|
|
|
|
Net Income
|
$
1,113,472
|
|
$
50,450
|
|
|
|
|
|
|
Net Income Per Share
|
$
1.15
|
|
$
0.05
|
|
|
|
|
|
|
The accompanying notes are an
integral part of the Consolidated Financial Statements.
|
16
|
CHICAGO RIVET
& MACHINE CO.
|
|
Consolidated
Statements of Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Treasury
Stock, At Cost
|
|
|
|
Preferred Stock
|
Shares
|
Amount
|
Additional Paid-In
Capital
|
Retained Earnings
|
Shares
|
Amount
|
Total Shareholders’
Equity
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019
|
$ 0
|
966,132
|
$
1,138,096
|
$
447,134
|
$
31,494,895
|
171,964
|
$
(3,922,098)
|
$
29,158,027
|
|
Net Income
|
|
|
|
|
50,450
|
|
|
50,450
|
|
Dividends Declared ($0.52 per
share)
|
|
|
|
|
(502,388)
|
|
|
(502,388)
|
|
Balance, December 31, 2020
|
$ 0
|
966,132
|
$ 1,138,096
|
$
447,134
|
$
31,042,957
|
171,964
|
$
(3,922,098)
|
$
28,706,089
|
|
Net Income
|
|
|
|
|
1,113,472
|
|
|
1,113,472
|
|
Dividends Declared ($0.88 per
share)
|
|
|
|
|
(850,196)
|
|
|
(850,196)
|
|
Balance, December 31, 2021
|
$ 0
|
966,132
|
$ 1,138,096
|
$
447,134
|
$
31,306,233
|
171,964
|
$
(3,922,098)
|
$
28,969,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of the Consolidated
Financial Statements.
|
17
|
CHICAGO RIVET
& MACHINE CO.
|
|
Consolidated
Statements of Cash Flows
|
|
|
|
|
|
|
|
Year Ended
December 31, 2021
|
|
Year Ended
December 31, 2020
|
|
Cash Flows from Operating
Activities:
|
|
|
|
|
Net Income
|
$
1,113,472
|
|
$
50,450
|
|
Adjustments to Reconcile Net
Income to Net Cash (Used in) Provided by Operating Activities:
|
|
|
|
|
Depreciation and
Amortization
|
1,318,554
|
|
1,347,305
|
|
Loss on the Sale of
Equipment
|
21,564
|
|
0
|
|
Deferred Income Taxes
|
(85,000)
|
|
68,000
|
|
Changes in Operating Assets and
Liabilities:
|
|
|
|
|
Accounts
Receivable, net
|
(484,534)
|
|
(554,136)
|
|
Inventories, net
|
(3,366,486)
|
|
(202,117)
|
|
Other Current
Assets
|
123,036
|
|
15,666
|
|
Accounts
Payable
|
226,211
|
|
(24,156)
|
|
Accrued Wages
and Salaries
|
27,324
|
|
(147,964)
|
|
Other Accrued Expenses
|
43,450
|
|
(26,101)
|
|
Unearned Revenue and Customer
Deposits
|
52,926
|
|
96,854
|
|
Net Cash (Used
in) Provided by Operating Activities
|
(1,009,483)
|
|
623,801
|
|
|
|
|
|
|
Cash Flows from Investing
Activities:
|
|
|
|
|
Capital Expenditures
|
(670,898)
|
|
(824,136)
|
|
Proceeds from the Sale of
Equipment
|
7,800
|
|
0
|
|
Proceeds from Certificates
of Deposit
|
4,484,000
|
|
6,574,000
|
|
Purchases of Certificates
of Deposit
|
(2,492,000)
|
|
(4,733,000)
|
|
Net Cash
Provided by Investing Activities
|
1,328,902
|
|
1,016,864
|
|
|
|
|
|
|
Cash Flows from Financing
Activities:
|
|
|
|
|
Cash Dividends Paid
|
(850,196)
|
|
(502,388)
|
|
Net Cash Used
in Financing Activities
|
(850,196)
|
|
(502,388)
|
|
|
|
|
|
|
Net (Decrease) Increase in Cash
and Cash Equivalents
|
(530,777)
|
|
1,138,277
|
|
Cash and Cash Equivalents:
|
|
|
|
|
Beginning of Year
|
2,567,731
|
|
1,429,454
|
|
End of Year
|
$
2,036,954
|
|
$
2,567,731
|
|
|
|
|
|
|
Net Cash Paid (Refunds Received)
for Income Taxes
|
$
300,500
|
|
$
(25,246)
|
|
|
|
|
|
|
The accompanying notes are an
integral part of the Consolidated Financial Statements.
|
18
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-
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, 2021
and 2020, reserves for warranty claims were not material.
Cash received by the Company prior to shipment is recorded as
unearned revenue. In 2021 and 2020 the Company recognized
revenue from such payments of $248,799 and $151,944, respectively,
that was included in the unearned revenue balance at the beginning
of the period. 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.
19
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, 2021 and 2020.
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, 2021 and 2020,
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 2021 or
2020.
The Company’s federal income
tax returns for the 2018 through 2020 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 2018, 2019 and 2020 federal income tax
returns will expire on September 15, 2022, 2023 and 2024,
respectively.
The Company’s state income tax
returns for the 2018 through 2020 tax years are subject to
examination by various state authorities with the latest closing
period on October 31, 2024. 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.
20
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 2021 and
2020.
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 June 2016, the FASB issued ASU No. 2016-13,
Financial Instruments - Credit Losses (Topic 326): Measurement
of Credit Losses on Financial Instruments and in November 2018
issued an amendment, ASU 2018-19, Codification Improvements to
Topic 326, Financial Instruments – Credit Losses. ASU
2016-13 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. ASU 2016-13
and ASU 2018-19 should be applied on either a prospective
transition or modified-retrospective approach depending on the
subtopic. ASU 2016-13 is effective for annual periods
beginning after December 15, 2022, including interim periods within
those fiscal years, with early adoption permitted. The Company
believes that the most notable impact of this ASU relates to its
processes around the assessment of the adequacy of its allowance
for doubtful accounts on trade accounts receivable and is not
expected to have a material impact on our consolidated financial
statements.
2 - Balance Sheet
Details
|
December
31,
2021
|
December
31,
2020
|
|
Inventories:
|
|
|
|
Raw materials
|
$ 4,645,923
|
$ 2,245,709
|
|
Work in process
|
2,181,457
|
1,410,868
|
|
Finished goods
|
2,304,400
|
2,096,717
|
|
|
9,131,780
|
5,753,294
|
|
Valuation reserves
|
(612,000)
|
(600,000)
|
|
$ 8,519,780
|
$ 5,153,294
|
|
December
31,
2021
|
December
31,
2020
|
|
Property, Plant and Equipment,
net:
|
|
|
|
Land and improvements
|
$ 1,778,819
|
$ 1,636,749
|
|
Buildings and improvements
|
8,456,983
|
8,534,317
|
|
Machinery and equipment
|
35,618,735
|
35,194,944
|
|
Capitalized software and
other
|
1,060,379
|
1,045,027
|
|
|
46,914,916
|
46,411,037
|
|
Accumulated depreciation
|
(34,441,052)
|
(33,260,153)
|
|
$ 12,473,864
|
$ 13,150,884
|
21
|
December
31,
2021
|
December
31,
2020
|
|
Other Accrued Expenses:
|
|
|
|
Profit sharing plan
contribution
|
$ 145,000
|
$ 120,000
|
|
Property taxes
|
80,269
|
84,570
|
|
All other items
|
141,149
|
118,398
|
|
$ 366,418
|
$ 322,968
|
|
|
December
31,
2021
|
December
31,
2020
|
|
Allowance for Doubtful
Accounts:
|
|
|
|
Balance at beginning of
year
|
$
170,000
|
$ 140,000
|
|
Charges to statement of
income
|
0
|
35,774
|
|
Write-offs
|
0
|
(5,774)
|
|
Balance at end of
year
|
$
170,000
|
$ 170,000
|
|
|
December
31,
2021
|
December
31,
2020
|
|
Inventory Valuation
Reserves:
|
|
|
|
Balance at beginning of
year
|
$
600,000
|
$
457,000
|
|
Charges to statement of
income
|
41,308
|
155,058
|
|
Write-offs
|
(29,308)
|
(12,058)
|
|
Balance at end of
year
|
$
612,000
|
$
600,000
|
3 - Income Taxes—The
provision for income tax expense consists of the
following:
|
|
2021
|
2020
|
|
Current:
|
|
|
|
Federal
|
$
378,000
|
$
(53,000)
|
|
State
|
8,000
|
0
|
|
Deferred
|
(85,000)
|
68,000
|
|
$
301,000
|
$
15,000
|
The following is a
reconciliation of the statutory federal income tax rate to the
actual effective tax rate:
|
|
2021
|
|
|
|
2020
|
|
|
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Expected tax at U.S. statutory
rate
|
$ 297,000
|
|
21.0
|
|
$
14,000
|
|
21.0
|
|
Permanent differences
|
(2,000)
|
|
(0.1)
|
|
1,000
|
|
1.9
|
|
State taxes, net of federal
benefit
|
6,000
|
|
0.4
|
|
0
|
|
0
|
|
Income tax expense
|
$
301,000
|
|
21.3
|
|
$
15,000
|
|
22.9
|
22
The deferred tax
assets (liabilities) consist of the following:
|
2021
|
|
2020
|
|
|
|
|
|
|
Depreciation and
amortization
|
$ (1,196,119)
|
|
$ (1,295,804)
|
|
Inventory
|
157,600
|
|
175,739
|
|
Accrued vacation
|
74,037
|
|
70,787
|
|
Allowance for doubtful
accounts
|
38,250
|
|
38,250
|
|
Other, net
|
148
|
|
(56)
|
|
$
(926,084)
|
|
$(1,011,084)
|
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, 2021 or 2020.
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 $145,000 in 2021 and $120,000 in
2020.
5 - Other Income-
consists of the following:
|
|
2021
|
|
2020
|
|
Interest income
|
$ 19,797
|
|
$
94,956
|
|
Other
|
35,760
|
|
53,508
|
|
$ 55,557
|
|
$ 148,464
|
6 - Segment Information-
The Company operates 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,
2021:
|
|
|
|
|
|
Net Sales………………………………………
|
$
29,831,388
|
$
4,143,170
|
$
0
|
$
33,974,558
|
|
|
|
|
|
|
|
Depreciation……………………………………...
|
1,161,596
|
134,957
|
22,001
|
1,318,554
|
|
|
|
|
|
|
|
Segment operating
profit………………………
|
2,384,486
|
997,048
|
0
|
3,381,534
|
|
Selling and administrative
expenses…………..
|
0
|
0
|
(2,022,619)
|
(2,022,619)
|
|
Other income……………………………………..
|
0
|
0
|
55,557
|
55,557
|
|
Income before income
taxes……………………
|
|
|
|
1,414,472
|
|
|
|
|
|
|
|
Capital
expenditures…………………………….
|
493,564
|
0
|
177,334
|
670,898
|
|
|
|
|
|
|
|
Segment assets:
|
|
|
|
|
|
Accounts receivable,
net……………………...
|
5,302,257
|
345,727
|
0
|
5,647,984
|
|
Inventories,
net………………………………...
|
7,214,050
|
1,305,730
|
0
|
8,519,780
|
|
Property, plant and
equipment, net………….
|
9,782,324
|
1,433,905
|
1,257,635
|
12,473,864
|
|
Other
assets……………………………………
|
0
|
0
|
5,124,630
|
5,124,630
|
|
|
|
|
|
31,766,258
|
|
|
|
|
|
|
|
Year Ended December 31,
2020:
|
|
|
|
|
|
Net Sales………………………………………
|
$
24,607,863
|
$
2,982,790
|
$
0
|
$
27,590,653
|
|
|
|
|
|
|
|
Depreciation……………………………………...
|
1,182,555
|
131,826
|
32,924
|
1,347,305
|
|
|
|
|
|
|
|
Segment operating
profit………………………
|
1,531,933
|
513,250
|
0
|
2,045,183
|
|
Selling and administrative
expenses…………..
|
0
|
0
|
(2,128,197)
|
(2,128,197)
|
|
Other income……………………………………..
|
0
|
0
|
148,464
|
148,4640
|
|
Income before income
taxes……………………
|
|
|
|
65,450
|
|
|
|
|
|
|
|
Capital
expenditures…………………………….
|
614,835
|
13,924
|
195,377
|
824,136
|
|
|
|
|
|
|
|
Segment assets:
|
|
|
|
|
|
Accounts receivable,
net……………………...
|
4,906,239
|
257,211
|
0
|
5,163,450
|
|
Inventories,
net………………………………...
|
4,024,138
|
1,129,156
|
0
|
5,153,294
|
|
Property, plant and
equipment, net………….
|
10,479,720
|
1,568,862
|
1,102,302
|
13,150,884
|
|
Other
assets……………………………………
|
0
|
0
|
7,770,443
|
7,770,443
|
|
|
|
|
|
31,238,071
|
23
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,
2021:
|
|
|
|
|
Automotive
|
$
17,573,104
|
$
157,652
|
$
17,730,756
|
|
Non-automotive
|
12,258,284
|
3,985,518
|
16,243,802
|
|
Total net sales
|
$
29,831,388
|
$
4,143,170
|
$
33,974,558
|
|
|
|
|
|
|
Year Ended December 31, 2020:
|
|
|
|
|
Automotive
|
$
15,612,249
|
$
136,899
|
$
15,749,148
|
|
Non-automotive
|
8,995,614
|
2,845,891
|
11,841,505
|
|
Total net sales
|
$
24,607,863
|
$
2,982,790
|
$
27,590,653
|
The following table presents
revenue by segment, further disaggregated by location:
|
|
Fastener
|
Assembly Equipment
|
Consolidated
|
|
Year Ended December 31,
2021:
|
|
|
|
|
United States
|
$
24,280,114
|
$
4,053,102
|
$
28,333,216
|
|
Foreign
|
5,551,274
|
90,068
|
5,641,342
|
|
Total net sales
|
$
29,831,388
|
$
4,143,170
|
$
33,974,558
|
|
|
|
|
|
|
Year Ended December 31, 2020:
|
|
|
|
|
United States
|
$
20,743,296
|
$
2,804,476
|
$
23,547,772
|
|
Foreign
|
3,864,567
|
178,314
|
4,042,881
|
|
Total net sales
|
$
24,607,863
|
$
2,982,790
|
$
27,590,653
|
Sales to one customer in the
fastener segment accounted for 13% of consolidated revenues during
2021 and 14% in 2020. The accounts receivable balance for
this customer accounted for 16% and 17% of consolidated accounts
receivable as of December 31, 2021 and 2020, respectively.
Sales to a second customer in the fastener segment accounted
for 11% of consolidated revenues during 2021 and 12% in 2020.
The accounts receivable balance for this customer accounted
for 11% and 15% of consolidated accounts receivable as of December
31, 2021 and 2020, respectively. Sales to a third customer
were 12% of consolidated revenue in 2021 and 10% in 2020. The
accounts receivable balance for this customer accounted for 18% and
15% of consolidated accounts receivable as of December 31, 2021 and
2020, respectively.
24
7 - Commitments and
Contingencies- The Company recorded rent expense aggregating
approximately $27,000 and $23,000 in 2021 and 2020, respectively.
Total future minimum rentals at December 31, 2021 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 - COVID-19- In March
2020, the World Health Organization characterized the novel
coronavirus (“COVID-19”) a pandemic and the President of the United
States declared the COVID-19 outbreak a national emergency.
The rapid spread of the virus and the response domestically
and internationally to combat it had a significant negative impact
on the global economy, including the automotive industry upon which
we rely for sales. Beginning in March 2020, most states
issued executive orders which temporarily closed businesses deemed
non-essential in an effort to prevent the spread of the
coronavirus. Similar measures also took place in foreign
markets we serve. As a result, our operations and the
operations of our customers and suppliers were adversely affected.
Since some of our customers are classified as essential
businesses and were allowed to continue to operate during this
period, we were able to continue our operations, but at a
significantly reduced and less efficient level, in order to service
those customers. Our automotive customers were particularly
affected, as much of the sector was idled for an extended period of
time during the second quarter of 2020 due to employee safety
concerns. While most shutdown orders were lifted late in that
quarter, various work-related restrictions remained in place for
some time resulting in widespread economic disruption. During
this period of rapidly changing business conditions and heightened
uncertainty resulting from COVID-19, we took measures to reduce
expenses and conserve capital, including reduced work schedules,
delayed capital expenditures and a reduction in dividend payments.
In the second half of 2020, we experienced improved demand as
certain government-imposed restrictions were relaxed and there was
further improvement in 2021 as vaccines against the virus became
widely available. The pandemic continues to disrupt and have
unpredictable impacts on our operations and the markets we serve,
most notably in terms of labor shortages, supply chain disruptions
and high inflation. These factors make the timing and
sustainability of any broad economic recovery uncertain and will
likely remain tied to the course of the pandemic. As we
cannot predict the duration or scope of the COVID-19 pandemic, or
its broader impact on the global economy, including the demand for
automobiles, it is unknown what the impact of COVID-19 and its
related effects will be on our business, results of operations or
financial condition, but the impact could be material and last for
an extended period of time.
9 - Subsequent
Events- On February 21, 2022, the Board of Directors declared a
regular quarterly dividend of $0.22 per share, or $212,549, payable
March 18, 2022 to shareholders of record on March 4, 2022.
25
ITEM 9 - Changes in and
Disagreements with Accountants on
Accounting and Financial
Disclosure
None.
ITEM 9A – Controls and
Procedures
Disclosure Controls and
Procedures.
The Company's management, with
the participation of the Company's Chief Executive Officer and
President, Chief Operating Officer and Treasurer (the Company’s
principal financial officer), has evaluated the effectiveness of
the Company's disclosure controls and procedures (as such term is
defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) as of the
end of the period covered by this report. Based on such
evaluation, the Company's Chief Executive Officer and 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, 2021, 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, 2021.
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, 2021 that have
materially affected, or are reasonably likely to materially affect,
the Company’s internal control over financial reporting.
ITEM 9B – Other
Information
None.
26
PART III
ITEM 10 – Directors,
Executive Officers and Corporate Governance
The information in the
Company’s 2022 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" and (ii) in the
third paragraph in "Additional Information Concerning the Board of
Directors and Committees" is incorporated herein by reference. The
2022 Proxy Statement is to be filed with the Securities and
Exchange Commission in connection with the Company's 2022 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 "Information about
our Executive Officers."
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 2022 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 Kent H.
Cooney and Kurt Moders.
ITEM 12 - Security Ownership
of Certain Beneficial
Owners and Management and
Related Stockholder Matters
The information set forth in
the Company's 2022 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 2022 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 2022 Proxy Statement in “Ratification of Selection of
Independent Auditor – Audit and Non-Audit Fees” is
incorporated herein by reference.
27
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" in Item 8 of
this report.
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 29 of this
report.
ITEM 16 – Form 10-K
Summary
None.
28
CHICAGO RIVET & MACHINE
CO.
EXHIBITS
Exhibit
Number
3.1Articles
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
3.2Amended
and Restated By-Laws, as amended through March 22, 2021.
14Code
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
21Subsidiaries
of the Registrant.
31.1Certification
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.
31.2Certification
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.
32.1Certification
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.
32.2Certification
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.INSInline
XBRL Instance Document – the instance document does not appear
in the Interactive Data File because its XBRL tags are embedded
within the Inline XBRL document.
101.SCHInline
XBRL Taxonomy Extension Schema Document
101.CALInline
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline
XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline
XBRL Taxonomy Extension Label Linkbase Document
101.PREInline
XBRL Taxonomy Extension Presentation Linkbase Document
104Cover
Page Interactive Data File (formatted in Inline XBRL and contained
in Exhibit 101).
29
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/Walter W.
MorrisseyChairman of the Board of Directors,
Walter W.
MorrisseyChief Executive Officer (Principal
Executive
Officer) and
Member of the Executive Committee
March
21, 2022
/s/Michael J.
BourgPresident, Chief Operating Officer,
Treasurer
Michael J.
Bourg(Principal Financial and Accounting Officer),
Director and Member of the Executive Committee
March 21, 2022
/s/Kent H.
CooneyDirector, Member of the Audit
Committee
Kent H.
CooneyMarch 21,
2022
/s/Patricia M.
MillerDirector
Patricia M.
MillerMarch 21,
2022
/s/Kurt Moders Director
Kurt
ModersMarch 21,
2022
/s/James W.
MorrisseyDirector, Member of the Executive
Committee
James W.
MorrisseyMarch
21, 2022
/s/John L.
ShowelDirector, Member of the Audit
Committee
John L.
ShowelMarch 21,
2022
30