Chicago Rivet & Machine (CVR) - 2025 Q2 - Quarterly Report

FORM 10-Q Filing Information This report details Chicago Rivet & Machine Co.'s 10-Q filing for Q2 2025, including registrant classification and common shares outstanding Registrant Information This report is Chicago Rivet & Machine Co.'s 10-Q quarterly filing for the period ended June 30, 2025, classifying the company as a non-accelerated and smaller reporting company with 966,132 common shares outstanding as of August 8, 2025 - The company is classified as a non-accelerated filer and a smaller reporting company[3] Company Basic Information | Metric | Details | | :--- | :--- | | Company Name | Chicago Rivet & Machine Co. | | Jurisdiction of Incorporation | Illinois | | Stock Symbol | CVR | | Registered Exchange | NYSE American (Trading Privileges Only) | | Common Shares Outstanding as of August 8, 2025 | 966,132 shares | PART I. FINANCIAL INFORMATION (Unaudited) Item 1. Financial Statements This section presents the company's unaudited condensed consolidated financial statements for the period ended June 30, 2025, including balance sheets, statements of operations, shareholders' equity, and cash flows, along with related notes Condensed Consolidated Balance Sheets The balance sheet shows a decrease in cash and short-term investments, a significant increase in accounts receivable, and a slight decrease in total shareholders' equity Condensed Consolidated Balance Sheets Key Data (As of June 30) | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and Cash Equivalents | $1,213,830 | $1,922,679 | | Short-Term Investments | — | $247,276 | | Accounts Receivable, Net | $4,840,856 | $3,094,911 | | Inventories, Net | $6,440,210 | $6,496,170 | | Assets Held for Sale | — | $348,400 | | Total Current Assets | $12,975,586 | $12,591,065 | | Property, Plant and Equipment, Net | $10,207,093 | $10,735,139 | | Total Assets | $23,640,332 | $23,370,174 | | Liabilities and Shareholders' Equity | | | | Accounts Payable | $847,130 | $1,233,147 | | Notes Payable | $500,000 | — | | Total Current Liabilities | $1,916,508 | $2,219,850 | | Total Liabilities | $3,659,806 | $3,337,722 | | Total Shareholders' Equity | $19,980,526 | $20,032,452 | - As of June 30, 2025, cash and cash equivalents decreased by approximately 36.8% from December 31, 2024, with short-term investments eliminated, while net accounts receivable significantly increased by approximately 56.4%, and assets held for sale were sold[9] - The company incurred $500,000 in new notes payable, leading to an approximate 9.6% increase in total liabilities, while total shareholders' equity slightly decreased by approximately 0.26%[9] Condensed Consolidated Statements of Operations The statements show a decline in net sales and a shift to operating loss in Q2 2025, but a return to net income for the first half due to asset sales and earlier performance Condensed Consolidated Statements of Operations Key Data (For the Three and Six Months Ended June 30) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (%) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Sales | $7,298,077 | $8,059,477 | -9.4% | $14,543,712 | $15,912,658 | -8.6% | | Cost of Sales | $6,323,015 | $6,644,031 | -4.8% | $11,910,909 | $13,752,650 | -13.4% | | Gross Profit | $975,062 | $1,415,446 | -31.1% | $2,632,803 | $2,160,008 | +21.9% | | Selling and Administrative Expenses | $1,392,493 | $1,307,887 | +6.5% | $2,980,060 | $2,955,752 | +0.8% | | Operating (Loss) Income | $(417,431) | $107,559 | -488.1% | $(347,257) | $(795,744) | +56.4% | | Other Income | $2,383 | $45,955 | -94.8% | $353,590 | $74,424 | +375.1% | | Net (Loss) Income | $(394,980) | $142,141 | -377.9% | $6,042 | $(555,863) | +101.1% | | Basic (Loss) Earnings Per Share | $(0.41) | $0.15 | -373.3% | $0.01 | $(0.58) | +101.7% | | Cash Dividends Per Share | $0.03 | $0.10 | -70.0% | $0.06 | $0.20 | -70.0% | - In Q2 2025, net sales decreased by 9.4% year-over-year, leading to a 31.1% decline in gross profit and a shift from profit to loss, though year-to-date net income turned to a slight profit due to strong early-year performance and the sale of the Albia manufacturing facility[12][66] - The company significantly reduced cash dividends per share by 70% in both Q2 and the first half of 2025[12] Condensed Consolidated Statements of Shareholders' Equity The statements reflect a notable decline in retained earnings and total shareholders' equity compared to the prior year, driven by ongoing operating losses and dividend payments Condensed Consolidated Statements of Shareholders' Equity Key Data (As of June 30) | Metric | June 30, 2025 | June 30, 2024 | March 31, 2025 | March 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | Retained Earnings | $22,317,394 | $27,554,668 | $22,741,358 | $27,509,140 | | Total Shareholders' Equity | $19,980,526 | $25,217,800 | $20,404,490 | $25,172,272 | | Net (Loss) Income (Three Months) | $(394,980) | $142,141 | $401,022 | $(698,004) | | Dividends (Three Months) | $(28,984) | $(96,613) | $(28,984) | $(96,613) | - As of June 30, 2025, both retained earnings and total shareholders' equity significantly decreased compared to the prior year, reflecting ongoing operating losses and dividend payments[14] Condensed Consolidated Statements of Cash Flows The statements indicate a substantial increase in cash outflow from operating activities, improved cash inflow from investing activities due to asset sales, and a shift to cash inflow from financing activities due to new debt Condensed Consolidated Statements of Cash Flows Key Data (For the Six Months Ended June 30) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Net Cash Provided by (Used in) Operating Activities | $(1,982,359) | $(35,218) | -5530.0% | | Net Cash Provided by (Used in) Investing Activities | $831,478 | $727,009 | +14.4% | | Net Cash Provided by (Used in) Financing Activities | $442,032 | $(193,226) | +328.8% | | Net Increase (Decrease) in Cash and Cash Equivalents | $(708,849) | $498,565 | -242.2% | | Cash and Cash Equivalents at End of Period | $1,213,830 | $1,885,640 | -35.7% | - In the first half of 2025, cash outflow from operating activities significantly increased, indicating deteriorating operations, while investing cash inflow rose due to asset sales, and financing cash flow shifted to inflow primarily from new debt[17][60][75] - Cash and cash equivalents at the end of the period significantly decreased by 35.7% year-over-year, reflecting a reduction in the company's overall liquidity[17] Notes to Condensed Consolidated Financial Statements These notes detail the company's significant accounting policies, credit risk, commitments, revenue recognition, income taxes, balance sheet specifics, leases, segment information, exit activities, debt, and liquidity concerns Note 1. Significant Accounting Policies This note outlines the basis of presentation, consolidation principles, use of accounting estimates, classification of assets held for sale, and lease accounting, with the company evaluating new accounting standards' impact on financial statements and disclosures - The company is evaluating FASB-issued ASU 2024-03 and ASU 2023-09, which are expected to primarily impact disclosures without significant effects on the consolidated financial statements[24][25][26] - The company entered a new office lease agreement on March 1, 2025, recognized as an operating lease under ASC 842, with a right-of-use asset and lease liability recorded[23][46] Note 2. Credit Risk The company extends credit primarily to automotive industry customers, concentrating credit risk within this sector and the U.S. Midwest, managing potential losses through an allowance for doubtful accounts based on management's assessment of customer financial condition and historical experience Note 3. Commitments and Contingencies The company is involved in litigation and environmental claims, having settled a customer claim regarding non-conforming fasteners manufactured by H&L Tool, agreeing to pay $1,100,000 over five years, with the first $177,000 payment made in January 2025 - The company settled a customer claim for non-conforming fasteners, agreeing to pay $1,100,000 over five years, with the initial $177,000 payment made in January 2025[31][32] Customer Settlement Liability Balances | Liability Type | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Other Accrued Liabilities (Current) | $220,000 | $177,000 | | Other Long-Term Liabilities | $660,000 | $880,000 | Note 4. Revenue The company recognizes revenue primarily from manufacturing and selling rivets, cold-formed fasteners, screw machine products, and automatic rivet setters with their parts and tools, typically upon transfer of control or service completion, or based on percentage-of-completion for certain assembly equipment transactions - The company operates in the fastener industry, with revenue primarily derived from rivets, cold-formed fasteners, screw machine products, and automatic rivet setters and related products[33] - As of June 30, 2025, the company held $19,907 in contract assets and anticipates recognizing $296,054 in remaining performance obligations during Q3 2025[34] Accrued Warranty Claims Liability | Date | Amount | | :--- | :--- | | June 30, 2025 | $880,000 | | December 31, 2024 | $1,057,000 | Note 5. Income Taxes The company's effective tax rate for the first half of 2025 was 4.6%, down from 7.4% in 2024, with management establishing a $1,775,433 valuation allowance against deferred tax assets due to the unlikelihood of realizing net operating loss carryforwards and other deferred tax benefits, while the new 'Beautiful Act of 2025' is not expected to have a material impact Effective Tax Rate | Period | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Effective Tax Rate | 4.6% | 7.4% | - The company has established a $1,775,433 valuation allowance against deferred tax assets, as management believes the benefits of net operating loss (NOL) carryforwards and other deferred tax assets may not be realized[41] - The 'Beautiful Act of 2025,' enacted by the U.S. government on July 4, 2025, is not expected to have a material impact on the company's operating results[42][43] Note 6. Balance Sheet Details This note provides a detailed breakdown of inventories and other accrued liabilities, showing a slight decrease in net inventories and an increase in current accrued liabilities related to customer settlements as of June 30, 2025 Inventory Composition (As of June 30) | Inventory Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Raw Materials | $2,205,157 | $2,569,277 | | Work-in-Process | $2,036,744 | $1,605,994 | | Finished Goods | $2,657,397 | $2,864,549 | | Total Inventory | $6,899,298 | $7,039,820 | | Valuation Allowance | $(459,088) | $(543,650) | | Inventories, Net | $6,440,210 | $6,496,170 | Other Accrued Liabilities (As of June 30) | Liability Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Customer Settlement - Current | $220,000 | $177,000 | | All Other Items | $33,271 | $107,497 | | Total | $253,271 | $284,497 | Note 7. Leases The company entered a new 66-month headquarters office lease on November 30, 2024, effective March 1, 2025, classified as an operating lease, recognizing a $435,149 right-of-use asset and a $426,787 long-term lease liability, with lease costs recognized in selling and administrative expenses - The company commenced a new 66-month headquarters office lease on March 1, 2025, recognizing a right-of-use asset and a lease liability[46] Lease Costs | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Lease Costs | $34,666 | $28,200 | $71,288 | $56,400 | Expected Annual Minimum Lease Payments for Operating Lease Liabilities (As of June 30, 2025) | Fiscal Year | Amount | | :--- | :--- | | 2025 (July-December) | $41,823 | | 2026 | $103,725 | | 2027 | $107,375 | | 2028 | $111,025 | | 2029 | $114,675 | | Thereafter | $68,896 | | Total Undiscounted Minimum Lease Payments | $547,519 | | Less: Present Value Discount | $(108,511) | | Lease Liability | $439,008 | | Discount Rate - Operating Leases | 8.5% | | Weighted Average Remaining Lease Term | 61 months | Note 8. Segment Information The company operates in two reportable segments: Fasteners and Assembly Equipment; Fasteners segment sales declined due to weak automotive demand but saw growth in non-automotive customers, while Assembly Equipment sales decreased but improved gross margin due to Albia plant integration - The company is organized into two business segments, Fasteners and Assembly Equipment, with segment performance evaluated by the chief operating decision maker based on gross profit, segment operating (loss) income less depreciation, and capital expenditures[50][51] Segment Net Sales (For the Three and Six Months Ended June 30) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (%) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Fasteners | $6,397,215 | $6,909,550 | -7.4% | $12,556,186 | $13,633,404 | -7.9% | | Assembly Equipment | $900,862 | $1,149,927 | -21.7% | $1,987,526 | $2,279,254 | -12.8% | | Consolidated Total | $7,298,077 | $8,059,477 | -9.4% | $14,543,712 | $15,912,658 | -8.6% | Net Sales by End Market (For the Three and Six Months Ended June 30) | End Market | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (%) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Fasteners Segment | | | | | | | | Automotive | $3,849,079 | $4,842,415 | -20.5% | $7,647,737 | $9,471,706 | -19.3% | | Non-Automotive | $2,548,136 | $2,067,135 | +23.3% | $4,908,449 | $4,161,698 | +17.9% | | Assembly Equipment Segment | | | | | | | | Automotive | $108,530 | $108,043 | +0.4% | $150,641 | $156,709 | -3.9% | | Non-Automotive | $792,332 | $1,041,884 | -23.9% | $1,836,885 | $2,122,545 | -13.5% | - Non-automotive customer sales in the Fasteners segment grew by 17.9% in the first half of 2025, reflecting the sales team's strategic expansion into industrial, construction, and consumer product markets[68] - The Assembly Equipment segment's gross margin increased in the first half of 2025, primarily due to cost savings and efficiency gains from integrating Albia operations into the Tyrone manufacturing facility[69] Note 9. Exit and Disposal The company announced the closure of its Albia, Iowa manufacturing facility on July 1, 2024, completing the sale of its remaining assets and real estate on February 25, 2025, generating approximately $678,000 in net cash proceeds and recognizing a $339,520 one-time gain - The company sold the remaining assets and real estate of its Albia manufacturing facility on February 25, 2025, generating approximately $678,000 in net cash proceeds and recognizing a $339,520 one-time gain[56][60][71][75] - Albia plant operations were integrated into the Tyrone manufacturing facility in October 2024, aiming to improve economies of scale and enhance profitability through cost reductions[60][75] Note 10. Debt On March 6, 2025, the company entered a one-year, $3,000,000 operating credit agreement, comprising a $2,500,000 revolving credit facility and a $500,000 non-revolving credit facility; as of June 30, 2025, $500,000 had been borrowed, and all financial covenants were met - The company entered a $3,000,000 operating credit agreement on March 6, 2025, consisting of a $2,500,000 revolving credit facility and a $500,000 non-revolving credit facility[57][60][75] - As of June 30, 2025, the company had borrowed $500,000 and was in compliance with all financial covenants, including minimum profitability and minimum tangible net worth requirements[57][58][77] Note 11. Liquidity Risk and Going Concern The company faces substantial doubt about its ability to continue as a going concern due to ongoing operating losses, declining revenue, and reduced liquidity; strategic actions include asset sales, sales team enhancements, and a new credit agreement, but uncertainties remain - The company faces substantial doubt about its ability to continue as a going concern due to ongoing operating losses, declining revenue, negative operating cash flow, and continued reduction in liquidity[59][74] - The company has undertaken several strategic actions to improve liquidity, including the sale of Albia real estate, strengthening the sales team (e.g., hiring James T. Tanner as SVP of Sales and Marketing), and securing a new $3,000,000 operating credit agreement[60][75] - Despite these actions, significant uncertainty remains regarding the company's ability to successfully increase sales, obtain additional financing or liquidity, comply with loan covenants, or achieve projected cost savings, thus maintaining substantial doubt about its going concern ability[61][62][75] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses the company's financial condition and operating results for the period ended June 30, 2025, focusing on declining sales, gross margin changes, net losses, and liquidity challenges, with strategic measures being implemented and a cautiously optimistic outlook for 2025 Results of Operations The company experienced declining sales in both Q2 and the first half of 2025, primarily due to weak automotive customer demand; Q2 gross profit and net income turned to losses, but year-to-date net income became profitable due to strong early-year performance and asset sales, with efforts underway to improve profitability through pricing, operational efficiency, and customer expansion - Q2 2025 sales decreased by 9.4%, and first-half sales by 8.6%, primarily due to reduced automotive customer volumes, soft consumer demand, tariff impacts, and global economic uncertainty[64] - Q2 2025 gross profit declined by 31.1%, mainly due to lower production volumes reducing operating leverage and fixed cost absorption, while first-half gross profit increased by 21.9%, benefiting from early-year performance and a one-time gain from the Albia plant sale[65][66] - Fastener segment automotive customer sales decreased by 19.3% in the first half of 2025, but non-automotive customer sales grew by 17.9%, reflecting the sales team's strategic expansion into industrial, construction, and consumer product markets[68] - Assembly Equipment segment sales decreased by 12.8% in the first half of 2025, yet gross margin improved, primarily attributed to efficiency gains and cost reductions from the Albia operations integration[69] - Other income significantly increased by 375.1% in the first half of 2025, primarily due to a $339,520 one-time gain from the sale of the Albia manufacturing facility[71] Liquidity and Capital Resources The company faces substantial doubt about its ability to continue as a going concern due to ongoing operating losses, declining revenue, and reduced liquidity; strategic actions include selling Albia real estate, strengthening the sales team, securing a new $3,000,000 operating credit agreement, and evaluating other financing sources, though uncertainties about successful mitigation remain - As of June 30, 2025, working capital increased by 6.6% to $11,059,078[73] - The company has substantial doubt about its ability to continue as a going concern due to ongoing operating losses, declining revenue, and reduced liquidity[74] - The company has implemented strategic actions, including the sale of Albia real estate (generating approximately $678,000 in cash), strengthening the sales team (including hiring a new Senior Vice President of Sales and Marketing), and entering a $3,000,000 operating credit agreement[75] - As of June 30, 2025, the company had borrowed $500,000 and was in compliance with all financial covenants of its credit agreement[77] Outlook for 2025 The company anticipates a challenging economic environment in 2025, despite improved order volumes in Q2, and will continue proactive customer engagement, efficiency improvements, pricing adjustments, and new sales opportunities to address tariffs and market uncertainties for improved future operating results - The company anticipates a challenging economic environment in 2025, though Q2 order volumes improved compared to Q4 2024[79] - The company will continue proactive customer engagement, seeking efficiency improvements, appropriate pricing adjustments, and actively pursuing new sales opportunities to address tariffs and market uncertainties[79] Item 4. Controls and Procedures Management assessed the company's disclosure controls and procedures as ineffective at the end of the reporting period due to a material internal control weakness related to inventory valuation; a remediation plan is being designed and implemented, but the deficiency is not yet fully corrected, though management believes the financial statements are fairly presented in all material respects Disclosure Controls and Procedures Management concluded that the company's disclosure controls and procedures were ineffective at the end of the reporting period due to a material internal control weakness concerning inventory valuation - Management concluded that the company's disclosure controls and procedures were ineffective as of the end of the reporting period due to a material internal control weakness related to inventory valuation[80][82] Material Weakness in Internal Control Over Financial Reporting The company identified a material internal control weakness related to inventory valuation, specifically the failure to design and maintain effective review controls for inventory valuation - The company identified a material internal control weakness related to inventory valuation as of December 31, 2023, and December 31, 2024, specifically the failure to design and maintain effective review controls for inventory valuation[82] Remediation Plans for Material Weakness Relating to Inventory Valuation The company is designing and implementing a remediation plan for the inventory valuation weakness, including timely review of new accounting standards and subsequent account reconciliation, though the deficiency is not yet fully corrected - The company is designing and implementing a remediation plan, including timely review and update of new accounting standards and guidance applicable to inventory valuation, along with subsequent variance account review and reconciliation[83] - This material weakness is not yet considered remediated, pending completion of the remediation plan by management and confirmation of control effectiveness through testing[84] Management's Conclusion on Financial Statements Despite the identified material weakness, management believes the unaudited interim consolidated financial statements fairly present the company's financial position, results of operations, and cash flows in all material respects - Despite the material weakness, management believes the unaudited interim consolidated financial statements fairly present the company's financial position, results of operations, and cash flows in all material respects[85] Changes in Internal Control Over Financial Reporting No significant changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, other than the material weakness disclosed - No significant changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, other than the material weakness disclosed above[86] PART II. OTHER INFORMATION This section covers additional information, including the company's newly adopted insider trading policy and a list of all exhibits filed with the report Item 5. Other Information In May 2025, the company adopted an insider trading policy, applicable to all directors, officers, employees, and certain advisors/contractors, to ensure compliance with insider trading laws and promote ethical conduct, including blackout periods, pre-clearance requirements, prohibitions on short sales and derivatives, and quarterly compliance processes - The company adopted an insider trading policy in May 2025, its first such policy, aimed at ensuring compliance with insider trading laws and promoting ethical conduct[87] - The policy includes blackout periods, pre-clearance requirements, prohibitions on short sales, derivatives, hedging, and pledging transactions, along with mandatory Rule 10b5-1 trading plan agreements and quarterly certifications[87] Item 6. Exhibits This section lists the exhibits filed with the report, including the company's insider trading policy, CEO and CFO certifications, and XBRL data files Exhibit List | Exhibit Number | Description | | :--- | :--- | | 19.1 | Chicago Rivet and Machine Co. Insider Trading Policy | | 31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | 31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | 32.1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 | | 32.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 | | 101.INS | Inline XBRL Instance Document | | 101.SCH | Inline XBRL Taxonomy Extension Schema | | 104 | Cover Page Interactive Data File |