UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

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FORM  i 10-Q

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(Mark One)

 i ☒  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended  i June 30, 2023

OR

o  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  i 000-01227

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Chicago Rivet & Machine Co.

(Exact Name of Registrant as Specified in Its Charter)

( i 630)  i 357-8500

Registrant’s Telephone Number, Including Area Code

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

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.   i Yes ý  No o 

Indicate by check mark whether the registrant has submitted electronically, every interactive data file required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   i Yes ý  No o 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.: 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  i ☐   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  i ☐  No ý   

As of August 7, 2023 there were  i 966,132 shares of the registrant’s common stock outstanding.

CHICAGO RIVET & MACHINE CO. 

INDEX

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

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CHICAGO RIVET & MACHINE CO.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

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

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CHICAGO RIVET & MACHINE CO.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Results of Operations

Net sales for the second quarter of 2023 were $8,050,931 compared to $9,023,398 in the second quarter of 2022, a decline of $972,467, or 10.8%. For the first half of 2023, net sales totaled $16,780,656 compared to $18,221,094 in the first half of 2022, a decline of $1,440,438, or 7.9%.  Both the fastener segment and the assembly equipment segment have experienced lower sales in the second quarter and current year to date.  Lower sales combined with higher operating costs in the current year resulted in a net loss of $(1,311,506), or $(1.36) per share, in the second quarter compared to net income of $153,904, or $0.16 per share, in the second quarter of 2022.  For the first half of 2023, the net loss was $(1,894,643), or $(1.96) per share, compared to net income of $601,217, or $0.62 per share, for the first half of 2022.

Fastener segment revenues were $7,361,113 in the second quarter of 2023 compared to $8,059,612 reported in the second quarter of 2022, a decline of $698,499, or 8.7%.  For the first six months of 2023, fastener segment revenues were $15,217,926 compared to $16,213,445 in the first half of 2022, a decline of $995,519, or 6.1%. The automotive sector is the primary market for our fastener segment products and sales to automotive customers were $4,959,381 in the second quarter this year compared to $4,550,809 in the second quarter of 2022, an increase of $408,572, or 9.0%.  Sales to automotive customers were $9,965,571 for the first six months of 2023 compared to $9,454,992 for the first six months of 2022, an increase of $510,579, or 5.4%.  The increase in the quarterly and year to date sales to automotive customers reflects increased North American light vehicle sales, which have improved as last year’s supply chain disruptions and parts shortages have eased.  Fastener segment sales to non-automotive customers were $2,401,732 in the second quarter of this year compared to $3,508,803 in the second quarter of 2022, a decline of $1,107,071, or 31.6%.  Sales to non-automotive customers for the first six months of the current year were $5,252,355 compared to $6,758,453 for the first six months of 2022, a decline of $1,506,098, or 22.3%, with the decline primarily related to a single industrial products customer.  Current year operating results have been significantly impacted by higher material and outside processing costs in recent quarters as well as record high inflation.  At the same time, we experienced labor market challenges that resulted in production inefficiencies which led to higher-than-normal quality expenses and expediting costs.  These increases have been difficult to recover from customers, especially automotive customers that often make purchases under restrictive terms and conditions; however, we will continue to review and seek to adjust pricing to address these higher costs.  The overall decline in fastener segment sales combined with higher operating costs have resulted in negative operating margins in the second quarter and year to date.  Second quarter fastener segment gross profit (loss) was $(442,951) compared to $1,191,471 in 2022, a decline of $1,634,422.  On a year-to-date basis, fastener segment gross profit (loss) was $(191,327) compared to $2,750,381 in the first half of 2022, a decline of $2,941,708.

Assembly equipment segment revenues were $689,818 in the second quarter of 2023 compared to $963,786 in the second quarter of 2022, a decline of $273,968, or 28.4%.  For the first half of 2023, assembly equipment segment revenues were $1,562,730 compared to $2,007,649 for the first half of 2022, a decline of $444,919, or 22.2%.  The second quarter and year-to-date decline in revenue was primarily due to fewer machines sold in the current year, as well as lower sales of machine tools.  Lower sales, along with higher operating costs, contributed to a decline in segment gross profit for the quarter and the first half of 2023.  Assembly equipment segment gross profit for the second quarter of 2023 was $113,915 compared to $254,905 in the second quarter of 2022, a decline of $140,990.  For the first half of 2023, segment gross profit was $339,794 compared to $552,218 in 2022, a decline of $212,424. 

    Selling and administrative expenses for the second quarter of 2023 were $1,359,465 compared to $1,263,921 in the second quarter of 2022, an increase of $95,544, or 7.6%.  The increase is primarily related to outside consulting and building rent. For the first six months of 2023, selling and administrative expenses were $2,617,160 compared to $2,559,585 in the first half of 2022, an increase of $57,575, or 2.2%.  The net increase in the first half of 2023 primarily relates to the same items as in the second quarter.  The rent increase is the result of the leaseback of the office portion of a building that was sold in the third quarter of 2022.  We have also engaged certain outside consultants to assist in addressing the unprecedented challenges we currently face.  Selling and administrative expenses as a percentage of net sales for the first half of 2023 increased to 15.6%, from 14.0%, in the first half of 2022. 

Other Income

Other income in the second quarter of 2023 was $22,995, compared to $12,448 in the second quarter of 2022.  Other income for the first six months of 2023 was $66,050, compared to $22,203 in the first six months of 2022.  The increases were primarily due to higher interest rates on invested balances during the current year.

Income Tax Expense

The Company’s effective tax rates were approximately (21.3)% and 21.0% for the second quarter of 2023 and 2022, respectively.  The Company’s effective tax rates were approximately (21.1)% and 21.4% for the six months ended June 30, 2023 and 2022, respectively.

Liquidity and Capital Resources

Working capital was $17,521,207 as of June 30, 2023 compared to $20,073,089 at the beginning of the year, a decline of $2,551,882.  During the first half of 2023, accounts receivable increased by $929,264, due to the greater sales activity compared to the fourth quarter of 2022, and inventory increased by $302,013 due to higher raw material prices and production costs.  Prepaid income taxes increased by $476,000 due to refunds expected as a result of prior year overpayments and current year operating losses.  Partially offsetting these changes was an increase in accounts payable of $537,088 related to the greater level of operating activity during the second quarter compared to the end of the previous year.  The most significant factor in the working capital decline is the current year operating loss.  Other items reducing working capital in the first half of 2023 were capital expenditures of $760,248, which consisted primarily of equipment used in fastener production activities, and dividends paid of $425,098.  The net result of these changes and other cash flow activity was to leave cash, cash equivalents and certificates of deposit at $3,218,167 as of June 30, 2023 compared to $6,736,101 as of the beginning of the year.  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

Results in the second quarter continued to be negatively impacted by numerous factors.  Demand from our automotive customers has been relatively steady as that sector continues to recover from the aftereffects of the Covid-19 pandemic, but our margins have been significantly impacted by higher costs that have been difficult to obtain relief from due to long-term contracts that are common with such customers.  We have also experienced softening demand from non-automotive customers in both the fastener and assembly equipment segments.  The tight labor market has made maintaining an optimal workforce difficult and while inflation has receded from its recent historic high, most of our production-related expenses remain much higher than a year earlier.  These conditions are expected to persist in the near term.  We are reviewing and seeking to adjust our pricing in light of higher operating costs related to the current economic and labor market environment and have made investments in equipment to improve operating efficiency, but such investments may take time to show meaningful improvement in operating results.  We will also continue to adjust our activities based on changing market conditions, while pursuing opportunities to develop new customer relationships and build on existing ones in all the markets we serve.

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: risk related to the COVID-19 pandemic and its related adverse effects, conditions in the domestic automotive industry, upon which we rely for sales revenue, the intense competition in our markets, the concentration of our sales with major customers, risks related to export sales, the price and availability of raw materials, supply chain disruptions, labor relations issues, losses related to product liability, warranty and recall claims, costs relating to environmental laws and regulations, information systems disruptions, the loss of the services of our key employees and difficulties in achieving 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.

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CHICAGO RIVET & MACHINE CO.

Item 4. Controls and Procedures.

(a)  Disclosure Controls and Procedures.  The Company's management, with the participation of the Company's Chief Executive Officer and President, Chief Operating Officer and Treasurer (the Company’s principal financial officer), has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report.  Based on such evaluation, the Company's Chief Executive Officer and President, Chief Operating Officer and Treasurer have concluded that, as of the end of such period, the Company's disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act. 

(b)  Internal Control Over Financial Reporting.  There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. 

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PART II -- OTHER INFORMATION

Item 6.  Exhibits

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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, 2023

/s/                    Gregory D. Rizzo                  

Gregory D. Rizzo

Chief Executive Officer

(Principal Executive Officer) 

Date:  August 7, 2023

/s/                    Michael J. Bourg                  

Michael J. Bourg

President, Chief Operating Officer and Treasurer

(Principal Financial Officer)

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