Chicago Rivet & Machine Co.
2013 Annual Report
Highlights
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2013 |
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2012 |
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Net Sales |
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$ |
37,117,830 |
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$ |
34,223,772 |
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Net Income |
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2,479,029 |
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1,745,741 |
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Net Income Per Share |
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2.57 |
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1.81 |
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Dividends Per Share |
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.63 |
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.90 |
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Net Cash Provided by Operating Activities |
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3,058,485 |
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2,779,342 |
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Expenditures for Property, Plant and Equipment |
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3,474,858 |
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1,187,746 |
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Working Capital |
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15,527,257 |
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15,875,145 |
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Total Shareholders Equity |
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24,871,102 |
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23,000,736 |
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Common Shares Outstanding at Year-End |
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966,132 |
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966,132 |
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Shareholders Equity Per Common Share |
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25.74 |
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23.81 |
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Annual Meeting |
The annual meeting of shareholders |
will be held on May 13, 2014 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
Managements Report
on Financial Condition and Results of Operations
To Our Shareholders:
RESULTS OF OPERATIONS
Results for 2013 reflect strong growth in sales and net income compared to the year earlier periods. Revenues were $37,117,830 in 2013, an 8.5 percent increase from $34,223,772 reported in 2012. This includes a
14.2 percent increase in revenues, to $9,202,673, in the fourth quarter of 2013 from $8,056,614 in the fourth quarter of 2012. Both the fastener segment and the assembly equipment segment achieved increases in revenue and higher gross margins during
the year, aided by growth in domestic automotive production, which is our primary market, as well as increased sales to certain non-automotive customers. The increase in revenue and improved margins resulted in a 42 percent increase in net income,
to $2,479,029, or $2.57 per share, compared with net income of $1,745,741, or $1.81 per share, in 2012. These positive results have allowed us to make significant investments in production equipment and facilities improvements in 2013, while
increasing shareholder distributions.
2013 Compared to 2012
The average age of vehicles on U.S. roads reached a new high in 2013, which, coupled with an improving economy, led to increased sales of automobiles and light trucks during the year. Our fastener segment, which
relies on the automotive sector for the majority of its revenues, benefited from this environment as well as our ongoing efforts to increase sales in all markets. Fastener segment sales were $33,616,593 in 2013, compared with $30,999,163 in 2012, an
increase of 8.4 percent. This marked the fourth consecutive year of sales exceeding the year earlier period. Favorable material pricing in combination with higher sales resulted in an increase in fastener segment gross margins of $1,054,281 during
2013 compared to 2012.
Assembly equipment segment revenues were $3,501,237 in 2013, an increase of $276,628, or 8.6 percent, compared
to $3,224,609 recorded in 2012. An increase in the number of machines shipped, as well as a certain high-value order shipped during the fourth quarter of 2013, accounted for most of the increase in the assembly equipment segment sales. The higher
sales for the segment combined with overhead costs that were kept at levels consistent with the prior year, resulted in an increase in assembly equipment segment gross margins of $157,372 in 2013.
Selling and administrative expenses were $5,397,861 in 2013, an increase of $211,101, or 4.1 percent, compared to the 2012 total of $5,186,760.
The change is primarily due
to an increase in profit sharing expense of $114,600, related to improved operating results, and higher commissions of $89,477 related to the increase in sales. As a percentage of net sales,
selling and administrative expenses declined from 15.2 percent in 2012 to 14.5 percent in 2013.
Other income was $160,835 in 2013
compared to $118,099 in 2012. The increase was primarily due to gains on the sale of certain equipment formerly used in our fastener segment operations, as a result of the investment in new equipment.
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. In November 2013, the quarterly dividend was increased from
$.15 per share to $.18 per share. The Company paid four regular quarterly dividends totaling $.63 per share during 2013. On February 17, 2014, the Board of Directors declared a regular quarterly dividend of $.18 per share, payable
March 20, 2014 to shareholders of record on March 5, 2014. This continues the uninterrupted record of consecutive quarterly dividends paid by the Company to its shareholders that extends over 80 years. At that same meeting, the Board also
declared an extra dividend of $.40 per share payable March 20, 2014 to shareholders of record on March 5, 2014.
PROPERTY, PLANT AND
EQUIPMENT
Capital expenditures during 2013 totaled $3,474,858, of which $3,092,842 was invested in equipment for our fastener
operations. Cold heading and screw machine equipment comprised $2,678,440 of the total and $414,402 was expended for equipment used in performing secondary operations on parts, inspection equipment and other general plant equipment. Assembly
equipment segment additions totaled $90,010, primarily for building improvements. Additional investments of $292,006 for building improvements and office equipment were made in 2013 that benefit both operating segments.
Total capital expenditures in 2012 were $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
1
Managements Report
(Continued)
operations on parts accounted for $46,582, while the remaining additions of $149,966 were for various general plant and office equipment. Assembly equipment segment additions in 2012 were
$68,203, for a new turning center. Investments for the benefit of both operating segments, primarily for building improvements, totaled $100,809 during 2012.
Depreciation expense amounted to $1,093,062 in 2013 and $993,951 in 2012.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at December 31, 2013 was $15.5 million, a reduction of $.3 million from the beginning of the year. The most
significant factor reducing working capital during the year was the $2.3 million increase in capital expenditures during the year compared to 2012. Partially offsetting that amount was the $.9 million increase in accounts receivable as of year-end
as a result of higher fourth quarter sales. The Companys holdings in cash, cash equivalents and certificates of deposit amounted to $6.7 million at the end of 2013, a decrease of $.8 million. The Companys investing activities in 2013
consisted primarily of capital expenditures of $3.5 million. The only financing activity during 2013 was the payment of $.6 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 Companys 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 2014
While automotive sales did not reach the double digit growth levels of the previous three years, 2013 was nonetheless another strong year for the automotive sector, which outperformed the overall economy.
Currently, most forecasts call for automotive sales in 2014 to improve to their highest level since 2007, which would again outpace the overall domestic economy. Pent-up demand, low interest rates and an improving housing market are all factors
cited to support this view. Our fastener segment should continue to benefit, based on this outlook, as the majority of that segments revenue comes from that market sector. Growth in our assembly equipment segment, which has a broader customer
base, is more closely tied to overall economic activity and may be more difficult due to the moderate economic growth forecast and the inclusion of a certain large order in 2013 sales.
During the past year, we benefited from favorable material pricing, however, history has shown that raw material prices can be volatile and
forecasting such costs is difficult. Many of our customers expect us to keep prices unchanged due to similar expectations from their customers, making it difficult to recover such increases in costs. In early 2014, we incurred a significant increase
in health insurance expense which will impact results throughout the year. Additionally, heating and fuel costs are higher than a year earlier due to the harsh winter. While we will continue our efforts to mitigate such increases through rigorous
quoting and by working to improve our operational efficiency, based on the size of some of these increases, the potential success of such efforts is uncertain.
Our profitable results since the end of the recent recession have allowed us to make significant investments in our operations, which have provided additional capacity and production capabilities. We believe these
investments are necessary to allow us to take advantage of opportunities that may improve revenue and profitability in the future. We will continue to pursue new customer relationships and work to build on existing ones in all the markets we serve
by emphasizing value over price and by
2
Managements Report
(Continued)
concentrating our efforts on producing more complex parts for which our expertise, quality and service are important factors in our customers purchasing decisions.
There are many factors that contributed to the successful results in 2013 and will need to be present for future success. A key element is the
dedicated efforts of our employees, who consistently work to meet the
ever-
changing challenges that characterize todays manufacturing environment. We gratefully acknowledge their contributions as well as the loyalty of our customers, who have placed 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 |
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Michael J. Bourg |
Chairman |
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President |
March 21, 2014
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.
3
Consolidated Balance Sheets
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December 31 |
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2013 |
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2012 |
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Assets |
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Current Assets |
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Cash and Cash Equivalents |
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$ |
443,608 |
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$ |
392,810 |
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Certificates of Deposit |
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6,207,348 |
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7,088,000 |
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Accounts Receivable Less allowances of $150,000 |
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5,510,770 |
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4,577,932 |
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Inventories, net |
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4,880,788 |
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4,936,372 |
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Deferred Income Taxes |
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410,191 |
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416,191 |
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Other Current Assets |
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295,521 |
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422,332 |
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Total Current Assets |
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17,748,226 |
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17,833,637 |
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Property, Plant and Equipment, net |
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10,409,120 |
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8,077,866 |
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Total Assets |
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$ |
28,157,346 |
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$ |
25,911,503 |
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Liabilities and Shareholders Equity |
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Current Liabilities |
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Accounts Payable |
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$ |
924,943 |
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$ |
1,003,647 |
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Accrued Wages and Salaries |
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560,114 |
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|
409,695 |
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Other Accrued Expenses |
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609,846 |
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|
460,245 |
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Unearned Revenue and Customer Deposits |
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126,066 |
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84,905 |
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Total Current Liabilities |
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2,220,969 |
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1,958,492 |
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Deferred Income Taxes |
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1,065,275 |
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952,275 |
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Total Liabilities |
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3,286,244 |
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2,910,767 |
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Commitments and Contingencies (Note 8) |
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Shareholders Equity |
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Preferred Stock, No Par Value, 500,000 Shares Authorized: |
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None Outstanding |
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Common Stock, $1.00 Par Value, 4,000,000 Shares Authorized: |
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1,138,096 Shares Issued |
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1,138,096 |
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1,138,096 |
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Additional Paid-in Capital |
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447,134 |
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|
447,134 |
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Retained Earnings |
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27,207,970 |
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|
25,337,604 |
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Treasury Stock, 171,964 Shares at cost |
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(3,922,098 |
) |
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(3,922,098 |
) |
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|
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Total Shareholders Equity |
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24,871,102 |
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|
|
23,000,736 |
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Total Liabilities and Shareholders Equity |
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$ |
28,157,346 |
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$ |
25,911,503 |
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The accompanying notes are an integral part of the Consolidated Financial Statements.
4
Consolidated Statements of Income
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For the Years Ended December 31 |
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2013 |
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2012 |
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Net Sales |
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$ |
37,117,830 |
|
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$ |
34,223,772 |
|
Cost of Goods Sold |
|
|
28,254,775 |
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|
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26,572,370 |
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Gross Profit |
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|
8,863,055 |
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|
|
7,651,402 |
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Selling and Administrative Expenses |
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|
5,397,861 |
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5,186,760 |
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Operating Profit |
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|
3,465,194 |
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|
|
2,464,642 |
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Other Income |
|
|
160,835 |
|
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|
118,099 |
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Income Before Income Taxes |
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3,626,029 |
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|
2,582,741 |
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Provision for Income Taxes |
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|
1,147,000 |
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|
837,000 |
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Net Income |
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$ |
2,479,029 |
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$ |
1,745,741 |
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Net Income Per Share |
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$ |
2.57 |
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$ |
1.81 |
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Consolidated Statements of Retained Earnings
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For the Years Ended December 31 |
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2013 |
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2012 |
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Retained Earnings at Beginning of Year |
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$ |
25,337,604 |
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$ |
24,461,381 |
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Net Income |
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|
2,479,029 |
|
|
|
1,745,741 |
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Cash Dividends Paid, $.63 and $.90 Per Share in 2013 and 2012, respectively |
|
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(608,663 |
) |
|
|
(869,518 |
) |
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Retained Earnings at End of Year |
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$ |
27,207,970 |
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$ |
25,337,604 |
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The accompanying notes are an integral part of the Consolidated Financial Statements.
5
Consolidated Statements of Cash Flows
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For the Years Ended December 31 |
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2013 |
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2012 |
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Cash Flows from Operating Activities: |
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Net Income |
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$ |
2,479,029 |
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|
$ |
1,745,741 |
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Adjustments to Reconcile Net Income to |
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Net Cash Provided by Operating Activities: |
|
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Depreciation and Amortization |
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|
1,093,062 |
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|
993,951 |
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Gain on the Sale of Equipment |
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|
(114,658 |
) |
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|
(67,946 |
) |
Deferred Income Taxes |
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|
119,000 |
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|
171,000 |
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Changes in Operating Assets and Liabilities: |
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Accounts Receivable, net |
|
|
(932,838 |
) |
|
|
(179,506 |
) |
Inventories, net |
|
|
55,584 |
|
|
|
275,668 |
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Other Current Assets |
|
|
126,811 |
|
|
|
(74,595 |
) |
Accounts Payable |
|
|
(108,686 |
) |
|
|
(59,606 |
) |
Accrued Wages and Salaries |
|
|
150,419 |
|
|
|
34,731 |
|
Other Accrued Expenses |
|
|
149,601 |
|
|
|
6,651 |
|
Unearned Revenue and Customer Deposits |
|
|
41,161 |
|
|
|
(66,747 |
) |
|
|
|
|
|
|
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Net Cash Provided by Operating Activities |
|
|
3,058,485 |
|
|
|
2,779,342 |
|
|
|
|
|
|
|
|
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Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
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Capital Expenditures |
|
|
(3,444,876 |
) |
|
|
(1,092,759 |
) |
Proceeds from the Sale of Equipment |
|
|
165,200 |
|
|
|
79,400 |
|
Proceeds from Certificates of Deposit |
|
|
7,088,000 |
|
|
|
5,160,000 |
|
Purchases of Certificates of Deposit |
|
|
(6,207,348 |
) |
|
|
(6,368,000 |
) |
|
|
|
|
|
|
|
|
|
Net Cash Used In Investing Activities |
|
|
(2,399,024 |
) |
|
|
(2,221,359 |
) |
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
Cash Dividends Paid |
|
|
(608,663 |
) |
|
|
(869,518 |
) |
|
|
|
|
|
|
|
|
|
Net Cash Used in Financing Activities |
|
|
(608,663 |
) |
|
|
(869,518 |
) |
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash and Cash Equivalents |
|
|
50,798 |
|
|
|
(311,535 |
) |
Cash and Cash Equivalents: |
|
|
|
|
|
|
|
|
Beginning of Year |
|
|
392,810 |
|
|
|
704,345 |
|
|
|
|
|
|
|
|
|
|
End of Year |
|
$ |
443,608 |
|
|
$ |
392,810 |
|
|
|
|
|
|
|
|
|
|
Net Cash Paid for Income Taxes |
|
$ |
877,494 |
|
|
$ |
812,298 |
|
|
|
|
Supplemental Schedule of Non-cash Investing Activities: |
|
|
|
|
|
|
|
|
Capital Expenditures in Accounts Payable |
|
$ |
29,982 |
|
|
$ |
94,987 |
|
The accompanying notes are an integral part of the Consolidated Financial Statements.
6
Notes to Consolidated
Financial Statements
1Nature of Business and Significant Accounting Policies
Nature of BusinessThe 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 Companys significant
accounting policies follows:
Principles of ConsolidationThe 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 RecognitionRevenues 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 RiskThe 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 managements 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 Companys previous loss history and the customers 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 EquivalentsThe 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 InstrumentsThe 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.
InventoriesInventories 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 EquipmentProperties 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 softwares useful life when the software is placed in service. The estimated useful lives by asset category are:
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Asset category |
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Estimated useful life |
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Land improvements |
|
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15 to 25 years |
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Buildings and improvements |
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10 to 35 years |
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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, 2013 and 2012.
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 TaxesDeferred 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.
7
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, 2013 and 2012, 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 2013 or 2012.
The Companys federal income tax returns for the 2010 through 2012 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 Companys 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 Companys federal income tax filings. The
statute of limitations on the Companys 2010, 2011 and 2012 federal income tax returns will expire on September 15, 2014, 2015 and 2016, respectively.
The Companys state income tax returns for the 2010 through 2012 tax years are subject to examination by various state authorities with the latest closing period on October 31, 2016. 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 InformationThe Company reports segment information based on the internal structure and reporting of the Companys operations.
Net Income Per ShareNet income per share of common stock is based on the weighted average number of shares outstanding of 966,132 in 2013 and 2012.
Use of EstimatesThe 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 PronouncementsIn July 2013, the
Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-11 Presentation of Unrecognized Tax Benefit When a Net
Operating Loss Carryforward, a Similar Tax Loss or a Tax Credit Carryforward Exists, to provide guidance on the presentation in the financial statements of unrecognized tax benefits. ASU
No. 2013-11 provides that an entity is required to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a
similar tax loss, or a tax credit carryforward. If a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date, the unrecognized tax benefit should be presented in the financial
statements as a liability and should not be combined with deferred tax assets. ASU 2013-11 is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. Retrospective application is
permitted. The adoption of ASU 2013-11 is not expected to have a material impact on our financial condition or results of operation.
2Balance
Sheet Details
|
|
|
|
|
|
|
|
|
|
|
2013 |
|
|
2012 |
|
Inventories: |
|
|
|
|
|
|
|
|
Raw materials |
|
$ |
2,130,718 |
|
|
$ |
2,009,691 |
|
Work in process |
|
|
1,507,755 |
|
|
|
1,869,830 |
|
Finished goods |
|
|
1,806,315 |
|
|
|
1,606,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5,444,788 |
|
|
|
5,486,372 |
|
Valuation reserves |
|
|
564,000 |
|
|
|
550,000 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
4,880,788 |
|
|
$ |
4,936,372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, Plant and Equipment, net: |
|
|
|
|
|
|
|
|
Land and improvements |
|
$ |
1,238,150 |
|
|
$ |
1,238,150 |
|
Buildings and improvements |
|
|
6,438,022 |
|
|
|
6,244,064 |
|
Machinery and equipment and other |
|
|
31,806,103 |
|
|
|
29,495,765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
39,482,275 |
|
|
|
36,977,979 |
|
Accumulated depreciation |
|
|
29,073,155 |
|
|
|
28,900,113 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
10,409,120 |
|
|
$ |
8,077,866 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Accrued Expenses: |
|
|
|
|
|
|
|
|
Profit sharing plan contribution |
|
$ |
391,945 |
|
|
$ |
278,080 |
|
Property taxes |
|
|
91,957 |
|
|
|
91,547 |
|
All other items |
|
|
125,944 |
|
|
|
90,618 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
609,846 |
|
|
$ |
460,245 |
|
|
|
|
|
|
|
|
|
|
3Income TaxesThe provision for income tax expense consists of the following:
|
|
|
|
|
|
|
|
|
|
|
2013 |
|
|
2012 |
|
Current: |
|
|
|
|
|
|
|
|
Federal |
|
$ |
967,000 |
|
|
$ |
624,000 |
|
State |
|
|
61,000 |
|
|
|
42,000 |
|
Deferred |
|
|
119,000 |
|
|
|
171,000 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,147,000 |
|
|
$ |
837,000 |
|
|
|
|
|
|
|
|
|
|
8
The following is a reconciliation of the statutory federal income tax rate to the actual effective tax rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013 |
|
|
2012 |
|
|
|
Amount |
|
|
% |
|
|
Amount |
|
|
% |
|
Expected tax at U.S. statutory rate |
|
$ |
1,233,000 |
|
|
|
34.0 |
|
|
$ |
878,000 |
|
|
|
34.0 |
|
Permanent differences |
|
|
(127,000 |
) |
|
|
(3.5 |
) |
|
|
(69,000 |
) |
|
|
(2.7 |
) |
State taxes, net of federal benefit |
|
|
41,000 |
|
|
|
1.1 |
|
|
|
28,000 |
|
|
|
1.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
$ |
1,147,000 |
|
|
|
31.6 |
|
|
$ |
837,000 |
|
|
|
32.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys effective tax rates were lower than the U.S. federal statutory rate in 2013 and 2012 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:
|
|
|
|
|
|
|
|
|
|
|
2013 |
|
|
2012 |
|
Depreciation and amortization |
|
$ |
(1,065,275 |
) |
|
$ |
(952,275 |
) |
|
|
|
|
|
|
|
|
|
Inventory |
|
|
256,474 |
|
|
|
274,826 |
|
Accrued vacation |
|
|
100,314 |
|
|
|
89,785 |
|
Allowance for doubtful accounts |
|
|
52,500 |
|
|
|
51,450 |
|
Other, net |
|
|
903 |
|
|
|
130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
410,191 |
|
|
|
416,191 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(655,084 |
) |
|
$ |
(536,084 |
) |
|
|
|
|
|
|
|
|
|
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, 2013 or 2012.
4Profit Sharing PlanThe Company has a noncontributory profit sharing plan covering substantially all employees. Total expenses relating to the
profit sharing plan amounted to approximately $392,000 in 2013 and $277,000 in 2012.
5Other Incomeconsists of the following:
|
|
|
|
|
|
|
|
|
|
|
2013 |
|
|
2012 |
|
Interest income |
|
$ |
30,802 |
|
|
$ |
34,138 |
|
Gain on sale of property and equipment |
|
|
114,658 |
|
|
|
67,946 |
|
Other |
|
|
15,375 |
|
|
|
16,015 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
160,835 |
|
|
$ |
118,099 |
|
|
|
|
|
|
|
|
|
|
6Segment InformationThe 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 companys 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, 2013: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
33,616,593 |
|
|
$ |
3,501,237 |
|
|
$ |
|
|
|
$ |
37,117,830 |
|
Depreciation |
|
|
957,078 |
|
|
|
59,195 |
|
|
|
76,789 |
|
|
|
1,093,062 |
|
Segment profit |
|
|
4,659,006 |
|
|
|
943,887 |
|
|
|
|
|
|
|
5,602,893 |
|
Selling and administrative expenses |
|
|
|
|
|
|
|
|
|
|
(2,137,699 |
) |
|
|
(2,137,699 |
) |
Other income |
|
|
|
|
|
|
|
|
|
|
160,835 |
|
|
|
160,835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,626,029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
3,092,842 |
|
|
|
90,010 |
|
|
|
292,006 |
|
|
|
3,474,858 |
|
Segment assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
5,277,378 |
|
|
|
233,392 |
|
|
|
|
|
|
|
5,510,770 |
|
Inventories, net |
|
|
4,076,781 |
|
|
|
804,007 |
|
|
|
|
|
|
|
4,880,788 |
|
Property, plant and equipment, net |
|
|
8,727,541 |
|
|
|
1,137,133 |
|
|
|
544,446 |
|
|
|
10,409,120 |
|
Other assets |
|
|
|
|
|
|
|
|
|
|
7,356,668 |
|
|
|
7,356,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,157,346 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. Sales to two customers in the fastener segment accounted
for 18 and 18 percent and 14 and 15 percent of consolidated revenues during 2013 and 2012, respectively. The accounts receivable balances for these customers accounted for 20 and 22 percent of consolidated accounts receivable for the larger customer
and 16 and 16 percent for the other customer as of December 31, 2013 and 2012, respectively.
9
7Shareholder Rights AgreementOn 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 Companys
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.
8Commitments and ContingenciesThe Company recorded rent expense aggregating approximately $27,000 and $32,000 for 2013 and 2012, respectively. Total future minimum rentals at December 31,
2013 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 Companys financial position.
9Subsequent EventOn February 17, 2014, the Board of Directors declared a regular quarterly dividend of $.18 per share, or $173,904, and an
extra dividend of $.40 per share, or $386,453, payable March 20, 2014 to shareholders of record on March 5, 2014.
10
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, 2013 and 2012, and the related consolidated statements of income, retained earnings and cash flows for each of the two years in the period ended December 31, 2013. These financial
statements are the responsibility of the Companys 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. We were not engaged to perform an audit of the Companys 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 Companys 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, 2013 and 2012, and the results of
their operations and their cash flows for each of the two years in the period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.
Chicago, Illinois
March 21, 2014
11
INFORMATION ON COMPANYS COMMON STOCK
The
Companys common stock is traded on the NYSE MKT (trading privileges only, not registered.) The ticker symbol is CVR.
At December 31, 2013,
there were approximately 180 shareholders of record.
The transfer agent and registrar for the Companys 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 |
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
|
First |
|
$ |
.15 |
|
|
$ |
.15 |
|
|
$ |
27.23 |
|
|
$ |
18.84 |
|
|
$ |
23.50 |
|
|
$ |
17.05 |
|
Second |
|
|
.15 |
|
|
|
.15 |
|
|
$ |
27.80 |
|
|
$ |
23.25 |
|
|
$ |
20.50 |
|
|
$ |
18.36 |
|
Third |
|
|
.15 |
|
|
|
.15 |
|
|
$ |
31.00 |
|
|
$ |
25.78 |
|
|
$ |
19.30 |
|
|
$ |
18.35 |
|
Fourth |
|
|
.18 |
|
|
|
.45 |
* |
|
$ |
47.70 |
|
|
$ |
29.02 |
|
|
$ |
20.30 |
|
|
$ |
18.17 |
|
* |
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
John L. Showel
Portfolio Manager
Maggiore Fund I, LP
Chicago, Illinois
(a) |
Member of Audit Committee |
(c) |
Member of Compensation Committee |
(e) |
Member of Executive Committee |
(n) |
Member of Nominating Committee
|
CORPORATE OFFICERS
John A. Morrissey
Chairman, Chief
Executive Officer
Michael J. Bourg
President, Chief Operating
Officer and Treasurer
Kimberly A. Kirhofer
Secretary
CHICAGO RIVET & MACHINE CO.
Administrative & Sales Offices
Naperville, Illinois
Pembroke, Massachusetts
Manufacturing Facilities
Albia Division
Albia, Iowa
Tyrone Division
Tyrone, Pennsylvania
H & L Tool Company, Inc.
Madison Heights, Michigan
Chicago Rivet & Machine Co. 901
Frontenac Road 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