Chicago Rivet & Machine (CVR) - 2020 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Unaudited Q3 and YTD 2020 financials show decreased assets, equity, and net sales, shifting to a net loss, primarily due to COVID-19 impact Condensed Consolidated Balance Sheets As of September 30, 2020, total assets decreased to $31.44 million, liabilities increased, and equity declined Condensed Consolidated Balance Sheet Summary | Balance Sheet Item | Sep 30, 2020 (Unaudited) | Dec 31, 2019 | | :--- | :--- | :--- | | Total Current Assets | $18,400,293 | $18,049,323 | | Net Property, Plant and Equipment | $13,034,794 | $13,674,053 | | Total Assets | $31,435,087 | $31,723,376 | | Total Current Liabilities | $2,225,564 | $1,622,265 | | Total Liabilities | $3,096,648 | $2,565,349 | | Total Shareholders' Equity | $28,338,439 | $29,158,027 | Condensed Consolidated Statements of Income Q3 2020 net sales were $7.65 million with stable net income, but YTD net sales fell, resulting in a net loss Income Statement Highlights (Unaudited) | Metric | Q3 2020 | Q3 2019 | Nine Months 2020 | Nine Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $7,645,259 | $8,188,905 | $19,325,234 | $25,686,034 | | Gross Profit | $1,640,493 | $1,649,767 | $3,021,070 | $4,859,500 | | Operating Profit (Loss) | $381,498 | $367,618 | $(737,682) | $927,990 | | Net Income (Loss) | $309,135 | $315,797 | $(413,813) | $832,198 | | Net Income (Loss) Per Share | $0.32 | $0.32 | $(0.43) | $0.86 | - Cash dividends declared per share were significantly reduced to $0.10 in Q3 2020 from $0.22 in Q3 2019, and to $0.42 for the nine-month period of 2020 from $0.96 in the same period of 2019[18] Condensed Consolidated Statements of Stockholders' Equity Shareholders' equity decreased from $29.16 million to $28.34 million by September 30, 2020, driven by net loss and dividends Change in Shareholders' Equity (YTD 2020) | Item | Amount | | :--- | :--- | | Balance, December 31, 2019 | $29,158,027 | | Net Loss (9 months) | $(413,813) | | Dividends Declared (9 months) | $(405,775) | | Balance, September 30, 2020 | $28,338,439 | Condensed Consolidated Statements of Cash Flows YTD 2020 net cash from operations sharply declined to $251,809, resulting in a net decrease of $431,623 in cash Cash Flow Summary (Nine Months Ended Sep 30) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $251,809 | $2,000,922 | | Net cash used in investing activities | $(277,657) | $(570,784) | | Net cash used in financing activities | $(405,775) | $(927,487) | | Net (decrease) increase in cash | $(431,623) | $502,651 | Notes to the Condensed Consolidated Financial Statements Notes detail accounting policies, revenue by segment, COVID-19 impact, and a negative effective tax rate from the CARES Act - The company's business is concentrated in the fastener industry, serving primarily the automotive sector, with a geographic focus in the Midwestern United States[27][29] Revenue by Segment (Nine Months Ended Sep 30) | Segment | 2020 | 2019 | | :--- | :--- | :--- | | Fastener | $17,275,555 | $22,702,719 | | Assembly Equipment | $2,049,679 | $2,983,315 | | Total Net Sales | $19,325,234 | $25,686,034 | - The COVID-19 pandemic had a significant negative impact on the company, particularly affecting automotive customers who idled operations[41] - In response to the pandemic, the company reduced expenses, delayed capital expenditures, and cut dividend payments[41] - The CARES Act allowed for the carryback of net operating losses, resulting in an effective tax rate of approximately (32.7)% for the nine months ended September 30, 2020, compared to 22.5% in the prior year period[36] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 24.8% YTD decline in net sales and net loss to COVID-19's impact on automotive demand, with capital conservation measures Results of Operations Net sales declined 6.6% in Q3 and 24.8% YTD due to COVID-19, impacting Fastener and Assembly Equipment segments, with significant revenue declines Net Sales Performance | Period | 2020 | 2019 | Change (%) | | :--- | :--- | :--- | :--- | | Q3 | $7,645,259 | $8,188,905 | -6.6% | | YTD (9 Months) | $19,325,234 | $25,686,034 | -24.8% | - The Fastener segment's YTD revenues declined by 23.9% ($5.4 million), with sales to automotive and non-automotive customers down 25.5% and 21.2%, respectively[46] - The Assembly Equipment segment's YTD sales declined by 31.3% ($0.9 million) due to the pandemic and the inclusion of high-value machine orders in 2019[47] Liquidity and Capital Resources Working capital decreased to $16.2 million as of September 30, 2020, with capital conservation efforts including reduced dividends and capex - The quarterly dividend was reduced from $0.22 to $0.10 per share in the second quarter to conserve capital[52] - Capital expenditures were significantly reduced to $375,657 for the first nine months of 2020, compared to $1,562,784 in the same period of 2019[52] - Cash, cash equivalents, and certificates of deposit stood at $7.5 million as of September 30, 2020, down from $8 million at the beginning of the year[52] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The Chief Executive Officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[57] - No changes occurred in the company's internal control over financial reporting during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, these controls[58] PART II. OTHER INFORMATION Item 6. Exhibits This section lists exhibits filed with the quarterly report, including Sarbanes-Oxley Act certifications and the Interactive Data File (XBRL) - The exhibits filed with this report include certifications pursuant to Rule 13a-14(a) and 18 U.S.C. Section 1350 (Sarbanes-Oxley Act Sections 302 and 906)[59] - An Interactive Data File (XBRL) is included, containing the Condensed Consolidated Balance Sheets, Statements of Income, Stockholders' Equity, Cash Flows, and Notes to Financial Statements[59]