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CVR > SEC Filings for CVR > Form 10-Q on 6-Nov-2012All Recent SEC Filings

Show all filings for CHICAGO RIVET & MACHINE CO



Quarterly Report

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

Results for the third quarter of 2012, as well as those of the current year to date, reflect a continuation of the improvement reported in recent quarters compared to year earlier periods. Net sales for the third quarter this year totaled $8,537,639, an increase of $716,033, or 9.2%, compared with the third quarter of 2011. As of September 30, 2012, year to date sales totaled $26,167,158, an improvement of $2,397,080, or 10.1%, compared with the first three quarters of 2011. The increase in revenue helped to improve net income for the third quarter to $463,342, or $0.48 per share, compared with $317,640, or $0.33 per share, in the third quarter of 2011. Net income for the current year to date, which has benefited from the revenue growth achieved during the first three quarters as well as ongoing efficiency initiatives, was $1,397,508, or $1.45 per share, compared with $1,022,183, or $1.06 per share, reported in 2011.

During the third quarter, fastener segment revenues improved to $7,841,672 from $6,913,898 in the year earlier quarter, an increase of $927,774, or 13.4%. This marks three years of consecutive quarterly increases in fastener segment sales compared with the year earlier period. For the first three quarters of the year, fastener segment revenues have increased $2,451,214, or 11.5%, to $23,781,773 in the current year from $21,330,559 in 2011. While the majority of this segment's revenues are derived from the automotive industry, current year sales for this segment have exceeded the growth seen in domestic automotive production. We experienced lower raw material prices in the third quarter this year compared to a year earlier, which combined with higher sales resulted in a fastener segment gross margin of $1,708,174 compared to $1,404,704 in the third quarter of 2011. For the first three quarters of 2012, the fastener segment gross margin has improved to $5,077,261, from $4,292,349 a year earlier, primarily due to higher sales in the current year, as the higher material prices incurred in the first half of the year have been offset by reductions we have seen in recent months.

Revenues within the assembly equipment segment were $695,967 in the third quarter of 2012, a decrease of $211,741, or 23.3%, compared to the third quarter of 2011, when revenues were $907,708. Sales for this segment can fluctuate due to large orders which do not necessarily follow a predictable pattern. Current year to date revenues of $2,385,385 represent a modest decline of $54,134, or 2.2%, compared to the $2,439,519 reported in 2011. While the lower sales in the third quarter this year resulted in a drop in gross margin to $216,619 from $341,614 in the third quarter a year ago, by maintaining manufacturing costs at levels near or below the prior year, gross margins for the assembly equipment segment declined less than 1% to $821,870 for the first three quarters, from $827,161 in the same period in 2011.

Selling and administrative expenses for the third quarter of 2012 were $1,263,236, a decline of $25,636, or 2%, compared to the year earlier quarter total of $1,288,872. The decrease is due in part to lower payroll related expenses of approximately $27,000 and office supplies expenses of approximately $23,000, which are returning to normal levels after last year's computer system upgrades. These savings were partially offset by an increase in profit sharing of $20,000 related to improved profitability. For the first three quarters of the year, selling and administrative expenses have increased $102,492, or 2.7%, from $3,832,380 in 2011 to $3,934,872 in 2012. Profit sharing expense has increased by $61,000 for the year due to improved profitability, compared to last year, while the remaining net increase includes various smaller items. Selling and administrative expenses as a percentage of net sales for the first three quarters of 2012 declined to 15% from 16.1% in 2011.

A slight decline in other income was reported in the third quarter of 2012 compared to the same period of 2011, and gains from the disposal of property and equipment were approximately $132,000 lower in the first three quarters of 2012 compared to the same period of 2011 due to the sale of our Jefferson, Iowa property in the second quarter of 2011.

Working capital at September 30, 2012 was $16.1 million, an increase of approximately $1.1 million from December 31, 2011. Most of the net improvement relates to an increase in accounts receivable balances of more than $1 million, related to greater sales during the quarter compared to the seasonally lower sales late in the fourth quarter of 2011. Partially offsetting this change are increases in accounts payable and accrued payroll totaling $.7 million that reflect the increased level of operations. The net result of these changes and other cash flow items, including a $.4 million reduction in capital expenditures during the first three quarters of the current year compared to last year, on cash, cash equivalents and certificates of deposit leaves such total balances at $7.4 million, up from $6.6 million at the beginning of the year. Management believes that current cash, cash equivalents and operating cash flow will provide adequate working capital for the foreseeable future.

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We are pleased to report results for both the third quarter and the current year to date that reflect our successful efforts to increase sales and net income. This success has allowed us to maintain a strong financial position and make prudent investments in our operations in an effort to position the company for further success. Even though the recovery in the domestic economy has been tentative due to high unemployment and weak confidence, we will continue to pursue opportunities to profitably grow our revenues and improve our bottom line, while maintaining the high level of product quality and reliability of service our customers demand.

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.

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