# Chicago Rivet & Machine Co: Form 10-Q for the period ended Sep 30, 2024

- Company: [Chicago Rivet & Machine Co](/companies/cvr.md) (CIK 19871)
- Form: 10-Q
- Filed: 2024-11-12
- Accepted by EDGAR: Nov 12, 2024, 16:41 ET
- Period: 2024-09-30
- Accession: 0000950170-24-125575
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/19871/000095017024125575/cvr-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/19871/000095017024125575/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $7.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $22.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $6.3m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $20.0m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-07-01 to 2024-09-30 | $695.0k | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-01-01 to 2024-09-30 | $2.9m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-07-01 to 2024-09-30 | $808.1k | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-01-01 to 2024-09-30 | $2.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | −$823.6k | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | −$1.6m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $651.2k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $485.7k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$1.4m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$2.0m | us-gaap:NetIncomeLoss |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 966,132 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 966,132 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | −$93.4k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-07-01 to 2024-09-30 | $310.7k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $709.4k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2024-01-01 to 2024-09-30 | $289.8k | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2024-09-30 | $1.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $15.4m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $26.4m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $2.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $2.7m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-09-30 | $23.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 11,101 characters.

#### Results of Operations

Net sales for the third quarter of 2024 were $6,969,921 compared to $7,946,172 in the third quarter of 2023, a decrease of $976,251 or 12.3%. Assembly equipment segment sales increased $73,874 which slightly offset the $1,050,125 decline in fastener segment sales for the current year quarter. Although overall net sales were down compared to the third quarter of 2023, gross margins for both the fastener and assembly equipment segments improved in the current quarter. This improvement resulted from the improved pricing that the Company obtained earlier in the year, a reduction in certain operating costs and improved operating efficiency. However, the lower revenue level, deferred tax expense of $651,196 discussed in Note 5 above, and certain selling and administrative expenses had a negative impact on earnings for the third quarter of 2024. As a result, the Company recorded a net loss of ($1,446,621), or ($1.50) per share for the third quarter 2024, compared to a net loss of $(964,042), or $(1.00) per share, in the third quarter of 2023. During the third quarter of 2024, a regular quarterly dividend of $0.10 per share was paid on September 20, 2024, to shareholders of record on September 5, 2024.

For the first nine months of 2024, net sales totaled $22,882,579 compared to $24,726,828 in the first nine months of 2023, a decrease of $1,844,249, or 7.5%. The net loss for the first nine months of 2024 was ($2,002,484), or ($2.07) per share, compared to a net loss of ($2,858,685) or ($2.96) per share, for the same period in 2023.

Fastener segment revenues were $5,927,316 in the third quarter of 2024 compared to $6,977,441 in the third quarter of 2023, a decline of $1,050,125 or 15.1%. The automotive sector is the primary market for our fastener segment products, and sales to automotive customers were $3,578,390 in the third quarter this year compared to $5,184,547 in the third quarter of 2023, a decrease of $1,606,157, or 31.0%. Additionally, fastener segment sales to non-automotive customers, including those in the construction and electronics industries, were $2,348,926 in the third quarter of this year compared to $1,792,894 in the third quarter of 2023, an increase of $556,062 or 31.0%. Fastener segment gross margins were $703,955 in the third quarter of 2024 compared to $(161,831) in the third quarter of 2023, an increase of $865,786. Despite significantly lower volumes from the automotive fastener segment, this gross margin improvement is due, as noted above, to price increases secured since the end of the third quarter of 2023, certain operating cost reductions and improved efficiency.

For the first nine months of 2024, fastener segment revenues were $19,560,720 compared to $22,195,367 in the first nine months of 2023, a decline of $2,634,647, or 11.9%. On a year-to-date basis fastener segment operating profit was $195,190 compared to an operating loss of $(353,158) in the first nine months of 2023, an increase of $584,348. This gross margin improvement was due to price increases, operational efficiencies and cost reduction projects.

Assembly equipment segment revenues were $1,042,605 in the third quarter of 2024 compared to $968,731 in the third quarter of 2023, an increase of $73,874, or 7.6%. Both automotive and non-automotive assembly equipment revenue increased in this segment by $2,023 and $71,851 respectively over the same period last year. The increase in sales contributed to a $508,177, or 250.4%, improvement in segment gross margin, from $202,984 in 2023 to $711,161 in 2024.

For the first nine months of 2024, assembly equipment revenues were $3,321,859 compared to $2,531,461 in the first nine months of 2023, an increase of $790,398, or 31.2%. During the first nine months of 2024, assembly equipment operating profit was $575,173 compared to $542,778 in the first nine months of 2023, an increase of $32,395.

Selling and administrative expenses during the third quarter of 2024 were $1,518,557 compared to $1,273,175 recorded in the third quarter of 2023, an increase of $245,382, or 19.3% primarily due to higher professional fees and partially offset by reduced commissions of $79,761 for the period. Selling and administrative expenses were 21.8% of net sales in the third quarter of 2024 compared to 16.0% in the second quarter of 2023. For the first nine months of 2024, selling and administrative expenses were $4,474,310 compared to $3,890,335 for the first nine months of 2023, an increase of $583,975. The Company believes that it has made substantial progress in continuing to implement its plans to reduce costs and improve efficiency, and as the Company completes activities relating to the closure of the Albia facility, the Company plans to focus on reducing certain selling and administrative expenses.

As previously disclosed, the Company was recently notified by one of its customers that certain fasteners manufactured by the Company’s wholly-owned subsidiary, H&L Tool Company Inc., may not conform to customer specifications. These fasteners become part of an assembly that is ultimately used in the braking system of certain vehicles. Based on information provided to the Company by the customer and the Company’s internal review, we understand that it was necessary for the customer to identify and sort the non-conforming parts in its inventory and take certain other related actions as a result of the alleged non-conforming parts. The customer has also indicated that its end customer has incurred costs relating to the alleged defective part, including costs to repair certain of the vehicles that included these non-conforming fasteners. Based on discussions with our customer as to the scope of the actions taken by the customer to date and the Company’s own internal analysis to date, we determined an estimate of $243,000 as a contingent liability in our financial statements during the three months ended March 31, 2024, in anticipation of potential reimbursement of certain expenses that the customer may have incurred as a result of the non-conforming parts. Our discussions with the customer and our internal review process are ongoing, and the ultimate amount of such liability, if any, may be more or less than the amount reflected in our financial statements for the second quarter of 2024.

The Company may also incur additional potentially significant costs related to this issue, which could materially and adversely affect our results of operations and financial condition. At this time, the Company cannot quantify potential additional financial liability, if any, due to the ultimate costs that may or may not be incurred by the parties involved in this matter, and the allocation of those costs among the parties involved. It is not possible at this time to establish the ultimate amount of any such contingent liabilities, including those related to any legal proceedings that may result related to this matter. Accordingly, no additional amount has been accrued in our financial statements at September 30, 2024.

#### Other Income

Other income in the third quarter of 2024 was $28,146 compared to $16,980 in the third quarter of 2023. Other income for the first nine months of 2024 was $102,570, compared to $83,030 in the first nine months of 2023. Other income is primarily comprised of interest income, which increased during the current year due to higher interest rates earned on such balances.

#### Income Tax Expense

The Company’s effective tax rates were approximately (81.9)% and 20.7% for the third quarter of 2024 and 2023, respectively, and (32.0)% and 23.2% for the nine months ended September 30, 2024 and 2023, respectively.

#### Liquidity and Capital Resources

Working capital was $12,838,707 as of September 30, 2024, compared to $13,976,864 at the beginning of the year, a decline of $2,190,540. Contributing to that decline were capital expenditures during the first nine months of $709,396, which primarily consisted of equipment used in production activities, and dividends paid of $96,613. The net result of these changes and other cash flow activity was to leave cash, cash equivalents and short-term investments at $2,161,917 as of September 30, 2024, compared to $3,158,195 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

The Company's automotive fastener segment volumes have experienced a significant decline during 2024, when compared to 2023. This segment volume decline has mitigated our pricing relief efforts, productivity gains and overall operating profit improvement. The reduced automotive fastener segment volume has been driven primarily by overall inventory reductions from our largest automotive customers as light vehicle production was weak in the third quarter, declining by close to 5% globally. Non-automotive fastener and non-automotive assembly equipment segments continue to outpace prior period comparisons and we believe both represent future opportunities for growth and profitability. While we anticipate automotive fastener segment business conditions and volume demand for the remainder of 2024 to reflect the current trend, we expect to leverage our cost structure and improved operating efficiencies once these customer platform volumes return to normal levels. Additionally, we intend to continue to seek to drive growth in our non-automotive fastener and assembly equipment segments.

#### 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 the section captioned “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, and in other fillings we make with the Securities and Exchange Commission. These factors include, among other things: risk related to conditions in the domestic and international 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 and rising costs, losses related to product liability, warranty and recall claims, costs relating to compliance with environmental laws and regulations, information systems disruptions and the threat of cyber attacks, 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 unless required under the federal securities laws.*

## Controls and procedures

As filed, 3,387 characters.

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

#### Material Weaknesses in Internal Control Over Financial Reporting

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

As previously disclosed, a material weakness in internal control over financial reporting related to inventory valuation was identified in the Company’s internal control over financial reporting as of December 31, 2023. Specifically, the Company did not design and maintain effective controls related to the review of the valuation of inventory.

#### Remediation Plans for Material Weakness Relating to Inventory Valuation

The Company’s management, under the oversight of the Audit Committee, is in the process of designing and implementing changes and enhancements in processes and controls to remediate the material weakness in internal control over financial reporting related to inventory valuation. Our enhanced design includes the timely review and update of new accounting standards and guidance applicable to inventory valuation as well as subsequent review and reconciliation of variance accounts.

This material weakness will not be considered remediated until management completes its remediation plans and the enhanced controls operate for a sufficient period of time and management has concluded, through testing, that the related controls are effective. The Company will monitor the effectiveness of its remediation plans and will continue to refine its remediation plans as appropriate.

Notwithstanding the material weakness noted above, the Company’s management, including the Company's Chief Executive Officer and Chief Financial Officer has concluded that our unaudited interim consolidated financial statements included in this Quarterly Report present fairly, in all material respects, our financial position, results of operations, and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States of America.

(b) Changes in Internal Control Over Financial Reporting. There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Filed Nov 12, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-125575. Last ingested by Listed: Oct 24, 2026, 14:52 ET. No prices; not investment advice.