UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2015
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 000-01227
Chicago Rivet & Machine Co.
(Exact Name of Registrant as Specified in Its Charter)
Illinois | 36-0904920 | |
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) | |
901 Frontenac Road, Naperville, Illinois |
60563 | |
(Address of Principal Executive Offices) | (Zip Code) |
(630) 357-8500
Registrants Telephone Number, Including Area Code
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 x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ (Do not check if smaller reporting company) | Smaller reporting company | x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of August 3, 2015, there were 966,132 shares of the registrants common stock outstanding.
CHICAGO RIVET & MACHINE CO.
INDEX
1
Condensed Consolidated Balance Sheets
June 30, 2015 and December 31, 2014
June 30, 2015 |
December 31, 2014 |
|||||||
(Unaudited) | ||||||||
Assets |
||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ | 1,602,497 | $ | 231,252 | ||||
Certificates of deposit |
5,320,000 | 6,058,000 | ||||||
Accounts receivable, net of allowance of $150,000 |
5,906,646 | 5,669,654 | ||||||
Inventories, net |
5,010,529 | 5,162,474 | ||||||
Deferred income taxes |
448,191 | 446,191 | ||||||
Prepaid Income Taxes |
| 173,656 | ||||||
Other current assets |
458,528 | 348,413 | ||||||
|
|
|
|
|||||
Total current assets |
18,746,391 | 18,089,640 | ||||||
|
|
|
|
|||||
Property, Plant and Equipment: |
||||||||
Land and improvements |
1,270,242 | 1,270,242 | ||||||
Buildings and improvements |
6,521,533 | 6,494,896 | ||||||
Production equipment and other |
33,970,272 | 33,190,789 | ||||||
|
|
|
|
|||||
41,762,047 | 40,955,927 | |||||||
Less accumulated depreciation |
30,628,391 | 30,077,932 | ||||||
|
|
|
|
|||||
Net property, plant and equipment |
11,133,656 | 10,877,995 | ||||||
|
|
|
|
|||||
Total assets |
$ | 29,880,047 | $ | 28,967,635 | ||||
|
|
|
|
See Notes to the Condensed Consolidated Financial Statements
2
CHICAGO RIVET & MACHINE CO.
Condensed Consolidated Balance Sheets
June 30, 2015 and December 31, 2014
June 30, 2015 |
December 31, 2014 |
|||||||
(Unaudited) | ||||||||
Liabilities and Shareholders' Equity |
||||||||
Current Liabilities: |
||||||||
Accounts payable |
$ | 1,173,018 | $ | 923,819 | ||||
Accrued wages and salaries |
889,749 | 605,029 | ||||||
Other accrued expenses |
386,161 | 520,723 | ||||||
Unearned revenue and customer deposits |
174,828 | 69,866 | ||||||
|
|
|
|
|||||
Total current liabilities |
2,623,756 | 2,119,437 | ||||||
Deferred income taxes |
1,071,275 | 1,107,275 | ||||||
|
|
|
|
|||||
Total liabilities |
3,695,031 | 3,226,712 | ||||||
|
|
|
|
|||||
Commitments and contingencies (Note 3) |
||||||||
Shareholders' Equity: |
||||||||
Preferred stock, no par value, 500,000 shares authorized: none outstanding |
| | ||||||
Common stock, $1.00 par value, 4,000,000 shares authorized: |
||||||||
1,138,096 shares issued; 966,132 shares outstanding |
1,138,096 | 1,138,096 | ||||||
Additional paid-in capital |
447,134 | 447,134 | ||||||
Retained earnings |
28,521,884 | 28,077,791 | ||||||
Treasury stock, 171,964 shares at cost |
(3,922,098 | ) | (3,922,098 | ) | ||||
|
|
|
|
|||||
Total shareholders' equity |
26,185,016 | 25,740,923 | ||||||
|
|
|
|
|||||
Total liabilities and shareholders' equity |
$ | 29,880,047 | $ | 28,967,635 | ||||
|
|
|
|
See Notes to the Condensed Consolidated Financial Statements
3
Condensed Consolidated Statements of Income
For the Three and Six Months Ended June 30, 2015 and 2014
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Net sales |
$ | 9,206,174 | $ | 9,500,678 | $ | 18,489,965 | $ | 19,451,102 | ||||||||
Cost of goods sold |
6,958,664 | 7,260,171 | 14,148,590 | 14,948,287 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit |
2,247,510 | 2,240,507 | 4,341,375 | 4,502,815 | ||||||||||||
Selling and administrative expenses |
1,408,854 | 1,379,886 | 2,834,679 | 2,793,938 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating profit |
838,656 | 860,621 | 1,506,696 | 1,708,877 | ||||||||||||
Other income |
10,305 | 10,433 | 20,738 | 20,550 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income before income taxes |
848,961 | 871,054 | 1,527,434 | 1,729,427 | ||||||||||||
Provision for income taxes |
278,000 | 302,000 | 494,000 | 592,000 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
$ | 570,961 | $ | 569,054 | $ | 1,033,434 | $ | 1,137,427 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Per share data, basic and diluted: |
||||||||||||||||
Net income per share |
$ | 0.59 | $ | 0.59 | $ | 1.07 | $ | 1.18 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Average common shares outstanding |
966,132 | 966,132 | 966,132 | 966,132 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Cash dividends declared per share |
$ | 0.18 | $ | 0.18 | $ | 0.61 | $ | 0.76 | ||||||||
|
|
|
|
|
|
|
|
See Notes to the Condensed Consolidated Financial Statements
4
Condensed Consolidated Statements of Retained Earnings
For the Six Months Ended June 30, 2015 and 2014
(Unaudited)
2015 | 2014 | |||||||
Retained earnings at beginning of period |
$ | 28,077,791 | $ | 27,207,970 | ||||
Net income |
1,033,434 | 1,137,427 | ||||||
Cash dividends declared in the period; |
||||||||
$.61 per share in 2015 and $.76 per share in 2014 |
(589,341 | ) | (734,260 | ) | ||||
|
|
|
|
|||||
Retained earnings at end of period |
$ | 28,521,884 | $ | 27,611,137 | ||||
|
|
|
|
See Notes to the Condensed Consolidated Financial Statements
5
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2015 and 2014
(Unaudited)
2015 | 2014 | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 1,033,434 | $ | 1,137,427 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation |
627,475 | 618,736 | ||||||
(Gain) loss on disposal of equipment |
3,719 | (18,700 | ) | |||||
Deferred income taxes |
(38,000 | ) | (22,000 | ) | ||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
(236,992 | ) | (683,329 | ) | ||||
Inventories |
151,945 | (333,437 | ) | |||||
Other current assets |
63,541 | (34,410 | ) | |||||
Accounts payable |
230,949 | 512,700 | ||||||
Accrued wages and salaries |
284,720 | 278,018 | ||||||
Other accrued expenses |
(134,562 | ) | (129,411 | ) | ||||
Unearned revenue and customer deposits |
104,962 | (71,339 | ) | |||||
|
|
|
|
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Net cash provided by operating activities |
2,091,191 | 1,254,255 | ||||||
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|
|
|
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Cash flows from investing activities: |
||||||||
Capital expenditures |
(868,605 | ) | (765,051 | ) | ||||
Proceeds from the sale of equipment |
| 18,700 | ||||||
Proceeds from certificates of deposit |
4,813,000 | 1,842,248 | ||||||
Purchases of certificates of deposit |
(4,075,000 | ) | (996,000 | ) | ||||
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|
|
|
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Net cash provided by (used in) investing activities |
(130,605 | ) | 99,897 | |||||
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Cash flows from financing activities: |
||||||||
Cash dividends paid |
(589,341 | ) | (734,260 | ) | ||||
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|
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Net cash used in financing activities |
(589,341 | ) | (734,260 | ) | ||||
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|
|||||
Net increase in cash and cash equivalents |
1,371,245 | 619,892 | ||||||
Cash and cash equivalents at beginning of period |
231,252 | 443,608 | ||||||
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Cash and cash equivalents at end of period |
$ | 1,602,497 | $ | 1,063,500 | ||||
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Supplemental schedule of non-cash investing activities: |
||||||||
Capital expenditures in accounts payable |
$ | 18,250 | $ | 35,036 |
See Notes to the Condensed Consolidated Financial Statements
6
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of the Company, the accompanying unaudited interim financial statements contain all adjustments necessary to present fairly the financial position of the Company as of June 30, 2015 (unaudited) and December 31, 2014 (audited) and the results of operations and changes in cash flows for the indicated periods. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted from these unaudited financial statements in accordance with applicable rules. Please refer to the financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2014.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The results of operations for the three and six-month period ending June 30, 2015 are not necessarily indicative of the results to be expected for the year.
Certain items in 2014 have been reclassified to conform to the presentation in 2015. These changes have no effect on net income or the financial position of the Company.
2. The Company extends credit on the basis of terms that are customary within our markets to various companies doing business primarily in the automotive industry. The Company has a concentration of credit risk primarily within the automotive industry and in the Midwestern United States.
3. The Company is, from time to time, involved in litigation, including environmental claims and contract disputes, in the normal course of business. While it is not possible at this time to establish the ultimate amount of liability with respect to contingent liabilities, including those related to legal proceedings, management is of the opinion that the aggregate amount of any such liabilities, for which provision has not been made, will not have a material adverse effect on the Companys financial position.
4. The Company has entered into a contract to expand the fastener facility in Madison Heights, Michigan in order to provide additional capacity and improve workflow through the plant. The base contract amount is $1,502,500 and construction will begin in the third quarter.
5. The Companys effective tax rates were approximately 32.7% and 34.7% for the second quarter of 2015 and 2014, respectively, and 32.3% and 34.2% for the six months ended June 30, 2015 and 2014, respectively. Rates were lower than the U.S. federal statutory rate in 2015 primarily due to the Domestic Production Activities Deduction allowed under Internal Revenue Code Section 199.
The Companys federal income tax returns for the 2011 through 2014 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 2011 through 2014 federal income tax returns will expire on September 15, 2015 through 2018, respectively.
The Companys state income tax returns for the 2011 through 2014 tax years remain subject to examination by various state authorities with the latest closing period on October 31, 2018. The Company is not currently under examination by any state authority for income tax purposes and no statutes for state income tax filings have been extended.
7
CHICAGO RIVET & MACHINE CO.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
6. Inventories are stated at the lower of cost or net realizable value, cost being determined by the first-in, first-out method. A summary of inventories is as follows:
June 30, 2015 |
December 31, 2014 |
|||||||
Raw material |
$ | 2,053,477 | $ | 2,154,572 | ||||
Work-in-process |
1,659,654 | 1,664,899 | ||||||
Finished goods |
1,914,398 | 1,961,003 | ||||||
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|
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|
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Inventory, gross |
5,627,529 | 5,780,474 | ||||||
Valuation reserves |
617,000 | 618,000 | ||||||
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|
|||||
Inventory, net |
$ | 5,010,529 | $ | 5,162,474 | ||||
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8
CHICAGO RIVET & MACHINE CO.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
7. Segment InformationThe Company operates in two business segments as determined by its products. The fastener segment includes rivets, cold-formed fasteners and screw machine products. The assembly equipment segment includes automatic rivet setting machines and parts and tools for such machines. Information by segment is as follows:
Fastener | Assembly Equipment |
Other | Consolidated | |||||||||||||
Three Months Ended June 30, 2015: |
||||||||||||||||
Net sales |
$ | 8,276,263 | $ | 929,911 | $ | | $ | 9,206,174 | ||||||||
Depreciation |
275,612 | 20,097 | 19,121 | 314,830 | ||||||||||||
Segment operating profit |
1,129,353 | 293,002 | | 1,422,355 | ||||||||||||
Selling and administrative expenses |
| | (579,611 | ) | (579,611 | ) | ||||||||||
Interest income |
| | 6,217 | 6,217 | ||||||||||||
|
|
|||||||||||||||
Income before income taxes |
$ | 848,961 | ||||||||||||||
|
|
|||||||||||||||
Capital expenditures |
108,726 | 344,367 | 20,078 | 473,171 | ||||||||||||
Segment assets: |
||||||||||||||||
Accounts receivable, net |
5,546,859 | 359,787 | | 5,906,646 | ||||||||||||
Inventories, net |
4,148,131 | 862,398 | | 5,010,529 | ||||||||||||
Property, plant and equipment, net |
9,175,077 | 1,471,665 | 486,914 | 11,133,656 | ||||||||||||
Other assets |
| | 7,829,216 | 7,829,216 | ||||||||||||
|
|
|||||||||||||||
$ | 29,880,047 | |||||||||||||||
|
|
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Three Months Ended June 30, 2014: |
||||||||||||||||
Net sales |
$ | 8,764,594 | $ | 736,084 | $ | | $ | 9,500,678 | ||||||||
Depreciation |
279,156 | 16,066 | 18,188 | 313,410 | ||||||||||||
Segment operating profit |
1,218,161 | 170,358 | | 1,388,519 | ||||||||||||
Selling and administrative expenses |
| | (523,810 | ) | (523,810 | ) | ||||||||||
Interest income |
| | 6,345 | 6,345 | ||||||||||||
|
|
|||||||||||||||
Income before income taxes |
$ | 871,054 | ||||||||||||||
|
|
|||||||||||||||
Capital expenditures |
218,717 | 21,540 | 9,212 | 249,469 | ||||||||||||
Segment assets: |
||||||||||||||||
Accounts receivable, net |
5,856,458 | 337,641 | | 6,194,099 | ||||||||||||
Inventories, net |
4,427,259 | 786,966 | | 5,214,225 | ||||||||||||
Property, plant and equipment, net |
8,946,522 | 1,126,541 | 517,408 | 10,590,471 | ||||||||||||
Other assets |
| | 7,187,722 | 7,187,722 | ||||||||||||
|
|
|||||||||||||||
$ | 29,186,517 | |||||||||||||||
|
|
9
CHICAGO RIVET & MACHINE CO.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Unaudited)
Fastener | Assembly Equipment |
Other | Consolidated | |||||||||||||
Six Months Ended June 30, 2015: |
||||||||||||||||
Net sales |
$ | 16,676,760 | $ | 1,813,205 | $ | | $ | 18,489,965 | ||||||||
Depreciation |
549,364 | 40,194 | 37,917 | 627,475 | ||||||||||||
Segment operating profit |
2,147,400 | 537,591 | | 2,684,991 | ||||||||||||
Selling and administrative expenses |
| | (1,170,607 | ) | (1,170,607 | ) | ||||||||||
Interest income |
| | 13,050 | 13,050 | ||||||||||||
|
|
|||||||||||||||
Income before income taxes |
$ | 1,527,434 | ||||||||||||||
|
|
|||||||||||||||
Capital expenditures |
459,543 | 399,142 | 28,170 | 886,855 | ||||||||||||
Six Months Ended June 30, 2014: |
||||||||||||||||
Net sales |
$ | 17,852,329 | $ | 1,598,773 | $ | | $ | 19,451,102 | ||||||||
Depreciation |
550,354 | 32,132 | 36,250 | 618,736 | ||||||||||||
Segment operating profit |
2,397,152 | 401,397 | | 2,798,549 | ||||||||||||
Selling and administrative expenses |
| | (1,081,984 | ) | (1,081,984 | ) | ||||||||||
Interest income |
| | 12,862 | 12,862 | ||||||||||||
|
|
|||||||||||||||
Income before income taxes |
$ | 1,729,427 | ||||||||||||||
|
|
|||||||||||||||
Capital expenditures |
769,335 | 21,540 | 9,212 | 800,087 |
10
CHICAGO RIVET & MACHINE CO.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
Results of Operations
Revenues for the second quarter of 2015 were $9,206,174 compared to $9,500,678 in the second quarter of 2014, a decline of $294,504, or 3.1%. Despite the lower sales, net income for the second quarter of 2015 was relatively unchanged from the previous year due to favorable raw material prices, reductions in certain production expenses and an increase in higher margin assembly equipment sales. Net income for the second quarter of 2015 was $570,961, or $0.59 per share, compared with $569,054, or $0.59 per share, in the second quarter of 2014. For the first half of 2015, net sales totaled $18,489,965 compared to $19,451,102 in the first half of 2014, a decline of $961,137, or 4.9%. Net income for the first half of 2015 was $1,033,434, or $1.07 per share, compared to $1,137,427, or $1.18 per share, reported in the first half of 2014.
Fastener segment revenues for the second quarter of 2015 were $8,276,263, a decline of $488,331, or 5.6%, compared to $8,764,594 reported in the second quarter of 2014. For the first six months of 2015, fastener segment revenues were $16,676,760, compared to $17,852,329 in the first half of 2014, a decline of $1,175,569, or 6.6%. Sales to the China location of a certain automotive customer improved to levels comparable to 2014 during the second quarter, after being down approximately $269,000 in the first quarter, but demand from certain other automotive customers remained below that of the prior year. Due in part to a $49,000 reduction in tooling expense and a $69,000 reduction in production supplies expense, as well as favorable raw material prices during the quarter, the decline in fastener segment gross margins caused by lower sales was limited to $118,254 during the second quarter. For the first half of 2015, tooling expense has been reduced $172,000 and production supplies expense has been reduced $130,000 compared to the first half of 2014. Additionally, natural gas expense has declined $67,000, primarily in the first quarter, from the elevated level of 2014, partially offsetting the decline in sales and resulting in a $296,656 reduction in segment gross margin for the first half of 2015.
Assembly equipment segment revenues were $929,911 in the second quarter of 2015, an increase of $193,827, or 26.3%, compared to the second quarter of 2014, when revenues were $736,084. The increase in second quarter sales was the result of an increase in the number and average price of machines shipped compared to the second quarter of 2014 as well as improved sales of tools and parts. For the first half of the year, assembly equipment sales increased $214,432, or 13.4%, to $1,813,205 compared to $1,598,773 reported for the first half of 2014. The increase in sales in the second quarter and the first half of the year resulted in an improvement in segment margins of $125,257 and $135,216, respectively.
Selling and administrative expenses for the second quarter of 2015 were $1,408,854, an increase of $28,968, or 2.1%, compared with the year earlier quarter total of $1,379,886. Approximately $20,000 of the increase was related to payroll and payroll related expenses. The remaining net increase related to smaller individual items. For the first six months of the year, selling and administrative expenses have increased $40,741, or 1.5%, from $2,793,938 in 2014, to $2,834,679 in 2015. Payroll and related expenses account for approximately $30,000 of the increase during the first half of 2015. The most significant item of reduction is profit sharing expense, which is down $22,000 compared to the first half of last year, due to lower profits. Repairs and maintenance increased $14,000 in the first half of the year, due to nonrecurring building maintenance, and other smaller items made up the remaining net increase. While the overall current year increase has been modest, selling and administrative expenses as a percentage of net sales for the first half of 2015 increased to 15.3%, from 14.4% in 2014, due to the decline in sales.
Other Income
Other income in the second quarter of 2015 was $10,305, compared to $10,433 in the second quarter of 2014. Other income for the first half of 2015 was $20,738, compared to $20,550 in the first six months of 2014. Other income consists primarily of interest income on certificates of deposit.
Income Tax Expense
The Companys effective tax rates were approximately 32.7% and 34.7% for the second quarter of 2015 and 2014, respectively, and 32.3% and 34.2% for the six months ended June 30, 2015 and 2014, respectively. Rates were lower than the U.S. federal statutory rate in 2015 primarily due to the Domestic Production Activities Deduction allowed under Internal Revenue Code Section 199.
11
Liquidity and Capital Resources
Working capital at June 30, 2015 amounted to $16.1 million, an increase of approximately $.2 million from the beginning of the year. The most significant change in the individual working capital components since the beginning of the year was the net increase in cash, cash equivalents and certificates of deposits. Capital expenditures for the first half of 2015 were $.9 million, which primarily consisted of equipment used in production activities. Dividends paid in the first two quarters were $.6 million, including two regular quarterly payments of $.18 per share and an extra dividend of $.25 per share paid in the first quarter. The net result of these changes and other cash flow items on cash, cash equivalents and certificates of deposit was a $.6 million increase in such total balances from the beginning of the year, to $6.9 million. Management believes that current cash, cash equivalents and operating cash flow will provide adequate working capital for the next twelve months.
Results of Operations Summary
Sales in the second quarter were mixed, with the increase in assembly equipment sales more than offset by lower fastener segment sales. Fastener segment demand remained uneven during the second quarter, but improved order activity for machines resulted in strong assembly equipment sales compared to last year. We have made adjustments to our operations in response to changing demand and will continue to emphasize cost controls wherever possible. Cost savings achieved during the second quarter resulted in net income that was relatively unchanged from the second quarter of 2014, at $.59 per share, despite the lower sales. Although the domestic economy did not perform as well as projected in the first half of 2015, our financial condition remains sound and has allowed us to continue to make investments in our operations in an effort to remain competitive and report positive operating results.
Forward-Looking Statements
This discussion contains certain forward-looking statements which are inherently subject to risks and uncertainties that may cause actual events to differ materially from those discussed herein. Factors which may cause such differences in events include, those disclosed under Risk Factors in our Annual Report on Form 10-K and in the other filings we make with the United States Securities and Exchange Commission. These factors, include among other things: 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, the loss of the services of our key employees and difficulties in achieving expected cost savings. Many of these factors are beyond our ability to control or predict. Readers are cautioned not to place undue reliance on these forward-looking statements. We undertake no obligation to publish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
12
CHICAGO RIVET & MACHINE CO.
Item 4. Controls and Procedures.
(a) Disclosure Controls and Procedures. The Companys management, with the participation of the Companys Chief Executive Officer and President, Chief Operating Officer and Treasurer (the Companys principal financial officer), has evaluated the effectiveness of the Companys 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 Companys Chief Executive Officer and President, Chief Operating Officer and Treasurer have concluded that, as of the end of such period, the Companys disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act.
(b) Internal Control Over Financial Reporting. There have not been any changes in the Companys internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.
13
Item 6. Exhibits
31 | Rule 13a-14(a) or 15d-14(a) Certifications | |
31.1 | Certification Pursuant to Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certification Pursuant to Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32 | Section 1350 Certifications | |
32.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101 | Interactive Data File. Includes the following financial and related information from Chicago Rivet & Machine Co.s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 formatted in Extensible Business Reporting Language (XBRL): (1) Condensed Consolidated Balance Sheets, (2) Condensed Consolidated Statements of Income, (3) Condensed Consolidated Statements of Retained Earnings, (4) Condensed Consolidated Statements of Cash Flows, and (5) Notes to Condensed Consolidated Financial Statements. |
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CHICAGO RIVET & MACHINE CO. | ||||||
(Registrant) | ||||||
Date: August 7, 2015 | ||||||
/s/ John A. Morrissey | ||||||
John A. Morrissey | ||||||
Chairman of the Board of Directors and Chief Executive Officer | ||||||
(Principal Executive Officer) | ||||||
Date: August 7, 2015 | ||||||
/s/ Michael J. Bourg | ||||||
Michael J. Bourg | ||||||
President, Chief Operating Officer and Treasurer | ||||||
(Principal Financial Officer) |
15
CHICAGO RIVET & MACHINE CO.
EXHIBITS
INDEX TO EXHIBITS
Exhibit Number |
Page | |||
31 |
Rule 13a-14(a) or 15d-14(a) Certifications |
|||
31.1 |
Certification Pursuant to Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
17 | ||
31.2 |
Certification Pursuant to Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
18 | ||
32 |
Section 1350 Certifications |
|||
32.1 |
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
19 | ||
32.2 |
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
20 | ||
101 |
Interactive Data File. Includes the following financial and related information from Chicago Rivet & Machine Co.s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 formatted in Extensible Business Reporting Language (XBRL): (1) Condensed Consolidated Balance Sheets, (2) Condensed Consolidated Statements of Operations, (3) Condensed Consolidated Statements of Retained Earnings, (4) Condensed Consolidated Statements of Cash Flows, and (5) Notes to Condensed Consolidated Financial Statements. |
16
EXHIBIT 31.1
I, John A. Morrissey, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Chicago Rivet & Machine Co.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 7, 2015 | /s/ John A. Morrissey | |||||
John A. Morrissey Chief Executive Officer (Principal Executive Officer) |
EXHIBIT 31.2
I, Michael J. Bourg, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Chicago Rivet & Machine Co.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 7, 2015 | /s/ Michael J. Bourg | |||||
Michael J. Bourg President, Chief Operating Officer and Treasurer (Principal Financial Officer) |
EXHIBIT 32.1
Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of Chicago Rivet & Machine Co. (the Company) for the quarterly period ended June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, John A. Morrissey, as Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ John A. Morrissey
Name: John A. Morrissey
Title: Chief Executive Officer
(Principal Executive Officer)
Date: August 7, 2015
EXHIBIT 32.2
Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of Chicago Rivet & Machine Co. (the Company) for the quarterly period ended June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Michael J. Bourg, as President, Chief Operating Officer and Treasurer of the Company, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Michael J. Bourg
Name: Michael J. Bourg
Title: President, Chief Operating Officer
and Treasurer (Principal Financial Officer)
Date: August 7, 2015
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Income Taxes |
6 Months Ended |
---|---|
Jun. 30, 2015 | |
Notes | |
Income Taxes | 5. The Companys effective tax rates were approximately 32.7% and 34.7% for the second quarter of 2015 and 2014, respectively, and 32.3% and 34.2% for the six months ended June 30, 2015 and 2014, respectively. Rates were lower than the U.S. federal statutory rate in 2015 primarily due to the Domestic Production Activities Deduction allowed under Internal Revenue Code Section 199.
The Companys federal income tax returns for the 2011 through 2014 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 2011 through 2014 federal income tax returns will expire on September 15, 2015 through 2018, respectively.
The Companys state income tax returns for the 2011 through 2014 tax years remain subject to examination by various state authorities with the latest closing period on October 31, 2018. The Company is not currently under examination by any state authority for income tax purposes and no statutes for state income tax filings have been extended. |
Commitments and Contingencies |
6 Months Ended |
---|---|
Jun. 30, 2015 | |
Notes | |
Commitments and Contingencies | 3. The Company is, from time to time, involved in litigation, including environmental claims and contract disputes, in the normal course of business. While it is not possible at this time to establish the ultimate amount of liability with respect to contingent liabilities, including those related to legal proceedings, management is of the opinion that the aggregate amount of any such liabilities, for which provision has not been made, will not have a material adverse effect on the Company's financial position.
4. The Company has entered into a contract to expand the fastener facility in Madison Heights, Michigan in order to provide additional capacity and improve workflow through the plant. The base contract amount is $1,502,500 and construction will begin in the third quarter. |
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) |
Jun. 30, 2015 |
Dec. 31, 2014 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Current Assets: | |||||||||||
Cash and cash equivalents | $ 1,602,497 | $ 231,252 | |||||||||
Certificates of deposit | 5,320,000 | 6,058,000 | |||||||||
Accounts receivable, net | [1] | 5,906,646 | 5,669,654 | ||||||||
Inventories, net | 5,010,529 | 5,162,474 | |||||||||
Deferred tax assets | 448,191 | 446,191 | |||||||||
Prepaid income taxes | 0 | 173,656 | |||||||||
Other current assets | 458,528 | 348,413 | |||||||||
Total current assets | 18,746,391 | 18,089,640 | |||||||||
Property, Plant and Equipment: | |||||||||||
Land | 923,587 | 923,587 | |||||||||
Land improvements | 346,655 | 346,655 | |||||||||
Buildings and improvements | 6,521,533 | 6,494,896 | |||||||||
Production equipment and other | 33,970,272 | 33,190,789 | |||||||||
Property, Plant and Equipment Gross | 41,762,047 | 40,955,927 | |||||||||
Less accumulated depreciation | 30,628,391 | 30,077,932 | |||||||||
Net property, plant and equipment | 11,133,656 | 10,877,995 | |||||||||
Total assets | 29,880,047 | 28,967,635 | |||||||||
Current Liabilities: | |||||||||||
Accounts payable | 1,173,018 | 923,819 | |||||||||
Accrued wages and salaries | 889,749 | 605,029 | |||||||||
Other accrued expenses | 386,161 | 520,723 | |||||||||
Unearned revenue and customer deposits | 174,828 | 69,866 | |||||||||
Total current liabilities | 2,623,756 | 2,119,437 | |||||||||
Deferred income taxes | 1,071,275 | 1,107,275 | |||||||||
Total liabilities | 3,695,031 | 3,226,712 | |||||||||
Shareholders' Equity: | |||||||||||
Preferred stock | [2] | 0 | 0 | ||||||||
Common stock | [3] | 1,138,096 | 1,138,096 | ||||||||
Additional paid-in capital | 447,134 | 447,134 | |||||||||
Retained earnings | 28,521,884 | 28,077,791 | |||||||||
Less: Treasury stock | [4] | 3,922,098 | 3,922,098 | ||||||||
Total shareholders' equity | 26,185,016 | 25,740,923 | |||||||||
Total liabilities and shareholders' equity | $ 29,880,047 | $ 28,967,635 | |||||||||
|
Accounting Policies |
6 Months Ended |
---|---|
Jun. 30, 2015 | |
Notes | |
Accounting Policies | 1. In the opinion of the Company, the accompanying unaudited interim financial statements contain all adjustments necessary to present fairly the financial position of the Company as of June 30, 2015 (unaudited) and December 31, 2014 (audited) and the results of operations and changes in cash flows for the indicated periods. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted from these unaudited financial statements in accordance with applicable rules. Please refer to the financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2014.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The results of operations for the three and six-month period ending June 30, 2015 are not necessarily indicative of the results to be expected for the year.
Certain items in 2014 have been reclassified to conform to the presentation in 2015. These changes have no effect on net income or the financial position of the Company. |
Risks and Uncertainties |
6 Months Ended |
---|---|
Jun. 30, 2015 | |
Notes | |
Risks and Uncertainties | 2. The Company extends credit on the basis of terms that are customary within our markets to various companies doing business primarily in the automotive industry. The Company has a concentration of credit risk primarily within the automotive industry and in the Midwestern United States. |
Condensed Consolidated Statements of Income (Unaudited) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2015 |
Jun. 30, 2014 |
Jun. 30, 2015 |
Jun. 30, 2014 |
|
Condensed Consolidated Statements of Income | ||||
Net sales | $ 9,206,174 | $ 9,500,678 | $ 18,489,965 | $ 19,451,102 |
Cost of goods sold | 6,958,664 | 7,260,171 | 14,148,590 | 14,948,287 |
Gross profit | 2,247,510 | 2,240,507 | 4,341,375 | 4,502,815 |
Selling and administrative expenses | 1,408,854 | 1,379,886 | 2,834,679 | 2,793,938 |
Operating profit | 838,656 | 860,621 | 1,506,696 | 1,708,877 |
Other income | 10,305 | 10,433 | 20,738 | 20,550 |
Income before provision for income taxes | 848,961 | 871,054 | 1,527,434 | 1,729,427 |
Provision for income taxes | 278,000 | 302,000 | 494,000 | 592,000 |
Net income | $ 570,961 | $ 569,054 | $ 1,033,434 | $ 1,137,427 |
Per share data, basic and diluted: | ||||
Net income per share | $ 0.59 | $ 0.59 | $ 1.07 | $ 1.18 |
Average common shares outstanding | 966,132 | 966,132 | 966,132 | 966,132 |
Cash dividends declared per share | $ 0.18 | $ 0.18 | $ 0.61 | $ 0.76 |
Document and Entity Information - Jun. 30, 2015 - USD ($) |
Total |
---|---|
Document and Entity Information: | |
Entity Registrant Name | CHICAGO RIVET & MACHINE CO. |
Document Type | 10-Q |
Document Period End Date | Jun. 30, 2015 |
Trading Symbol | cvr |
Amendment Flag | false |
Entity Central Index Key | 0000019871 |
Current Fiscal Year End Date | --12-31 |
Entity Common Stock, Shares Outstanding | 966,132 |
Entity Public Float | $ 21,996,744 |
Entity Filer Category | Smaller Reporting Company |
Entity Current Reporting Status | Yes |
Entity Voluntary Filers | No |
Entity Well-known Seasoned Issuer | No |
Document Fiscal Year Focus | 2015 |
Document Fiscal Period Focus | Q2 |
Accounting Policies (Policies) |
6 Months Ended |
---|---|
Jun. 30, 2015 | |
Policies | |
Accounting Policies | 1. In the opinion of the Company, the accompanying unaudited interim financial statements contain all adjustments necessary to present fairly the financial position of the Company as of June 30, 2015 (unaudited) and December 31, 2014 (audited) and the results of operations and changes in cash flows for the indicated periods. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted from these unaudited financial statements in accordance with applicable rules. Please refer to the financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2014.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The results of operations for the three and six-month period ending June 30, 2015 are not necessarily indicative of the results to be expected for the year.
Certain items in 2014 have been reclassified to conform to the presentation in 2015. These changes have no effect on net income or the financial position of the Company. |
Risks and Uncertainties | 2. The Company extends credit on the basis of terms that are customary within our markets to various companies doing business primarily in the automotive industry. The Company has a concentration of credit risk primarily within the automotive industry and in the Midwestern United States. |
Commitments and Contingencies | 3. The Company is, from time to time, involved in litigation, including environmental claims and contract disputes, in the normal course of business. While it is not possible at this time to establish the ultimate amount of liability with respect to contingent liabilities, including those related to legal proceedings, management is of the opinion that the aggregate amount of any such liabilities, for which provision has not been made, will not have a material adverse effect on the Company's financial position.
4. The Company has entered into a contract to expand the fastener facility in Madison Heights, Michigan in order to provide additional capacity and improve workflow through the plant. The base contract amount is $1,502,500 and construction will begin in the third quarter. |
Income Taxes | 5. The Companys effective tax rates were approximately 32.7% and 34.7% for the second quarter of 2015 and 2014, respectively, and 32.3% and 34.2% for the six months ended June 30, 2015 and 2014, respectively. Rates were lower than the U.S. federal statutory rate in 2015 primarily due to the Domestic Production Activities Deduction allowed under Internal Revenue Code Section 199.
The Companys federal income tax returns for the 2011 through 2014 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 2011 through 2014 federal income tax returns will expire on September 15, 2015 through 2018, respectively.
The Companys state income tax returns for the 2011 through 2014 tax years remain subject to examination by various state authorities with the latest closing period on October 31, 2018. The Company is not currently under examination by any state authority for income tax purposes and no statutes for state income tax filings have been extended. |
Inventory | 6. Inventories are stated at the lower of cost or net realizable value, cost being determined by the first-in, first-out method. |
Segment Reporting | 7. Segment InformationThe Company operates in two business segments as determined by its products. The fastener segment includes rivets, cold-formed fasteners and screw machine products. The assembly equipment segment includes automatic rivet setting machines and parts and tools for such machines. |
Segment Reporting |
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Segment Reporting | 7. Segment InformationThe Company operates in two business segments as determined by its products. The fastener segment includes rivets, cold-formed fasteners 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:
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