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Accounting Policies (Policies)
 3 Months Ended
Mar. 31, 2018
Policies  
Accounting Policies

1.  In the opinion of the Company, the accompanying unaudited interim financial statements contain all adjustments necessary to present fairly the financial position of the Company as of March 31, 2018 (unaudited) and December 31, 2017 (audited) and the results of operations and changes in cash flows for the indicated periods.  Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted from these unaudited financial statements in accordance with applicable rules. Please refer to the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  The results of operations for the three month period ended March 31, 2018 are not necessarily indicative of the results to be expected for the year.

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” which is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services.  The guidance in this ASU supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition,” and most industry-specific guidance.  In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” (“ASU 2016-12”), which updated ASU 2014-09.  ASU 2016-12 clarifies certain core recognition principles including collectability, sales tax presentation, noncash consideration, contract modifications and completed contracts at transition and disclosures no longer required if the full retrospective transition method is adopted.  ASU 2014-09 and ASU 2016-12 are effective for annual reporting periods after December 15, 2017 and interim periods within those reporting periods, and are to be applied using either the modified retrospective or full retrospective transition methods.  Effective January 1, 2018, the Company adopted the standard using the full retrospective method.  The adoption of this standard did not impact the timing of revenue recognition for our customer sales.  The adoption did not result in the recognition of a cumulative adjustment to beginning retained earnings, nor did it have a material impact on the condensed consolidated financial statements.  For the Company, the most significant impact of the new standard is the addition of required disclosures within the notes to the financial statements.
Risks and Uncertainties

2.  The Company extends credit on the basis of terms that are customary within our markets to various companies doing business primarily in the automotive industry.  The Company has a concentration of credit risk primarily within the automotive industry and in the Midwestern United States.
Commitments and Contingencies

3.  The Company is, from time to time, involved in litigation, including environmental claims and contract disputes, in the normal course of business.  While it is not possible at this time to establish the ultimate amount of liability with respect to contingent liabilities, including those related to legal proceedings, management is of the opinion that the aggregate amount of any such liabilities, for which provision has not been made, will not have a material adverse effect on the Company's financial position.
Revenue

4.  Revenue—On January 1, 2018, the Company adopted ASC Topic 606, “Revenue from Contracts with Customers” using the modified retrospective method.  The adoption of Topic 606 did not have a material effect on the Company’s financial position or results of operations.

 

The Company operates in the fastener industry and is in the business of manufacturing and selling rivets, cold-formed fasteners and parts, screw machine products, automatic rivet setting machines and parts and tools for such machines.  Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to receive in exchange for those goods or services.  Sales taxes we may collect concurrent with revenue producing activities are excluded from revenue.  Revenue is recognized net of certain sales adjustments to arrive at net sales as reported on the statement of income.  These adjustments primarily relate to customer returns and allowances.  The Company records a liability and reduction in sales for estimated product returns based upon historical experience.  If we determine that our obligation under warranty claims is probable and subject to reasonable determination, an estimate of that liability is recorded as an offset against revenue at that time.  As of March 31, 2018, and December 31, 2017 reserves for warranty claims were not material.  Cash received by the Company prior to shipment is recorded as unearned revenue.

 

Shipping and handling fees billed to customers are recognized in net sales, and related costs as cost of sales, when incurred.

 

Sales commissions are expensed when incurred because the amortization period is less than one year.  These costs are recorded within selling and administrative expenses

in the statement of income.
Income Taxes

5.  The Company’s effective tax rates were approximately 22.4% and 33.7% for the first quarter of 2018 and 2017, respectively.  The lower rate in 2018 is due to the enactment of the Tax Cuts and Jobs Act in December 2017 that reduced the maximum corporate tax rate from 35% to 21% beginning in 2018.  The effective rate was lower than the U.S. federal statutory rate in 2017 primarily due to the Domestic Production Activities Deduction allowed under Internal Revenue Code Section 199.

 

The Company’s federal income tax returns for the 2014 through 2017 tax years are subject to examination by the Internal Revenue Service (“IRS”).   While it may be possible that a reduction could occur with respect to the Company’s unrecognized tax benefits as an outcome of an IRS examination, management does not anticipate any adjustments that would result in a material change to the results of operations or financial condition of the Company.  No statutes have been extended on any of the Company’s federal income tax filings.  The statute of limitations on the Company’s 2014 through 2017 federal income tax returns will expire on September 15, 2018 through 2021, respectively.

 

The Company’s state income tax returns for the 2014 through 2017 tax years remain subject to examination by various state authorities with the latest closing period on October 31, 2021.  The Company is not currently under examination by any state authority for income tax purposes and no statutes for state income tax filings have been extended.
Inventory

6.  Inventories are stated at the lower of cost or net realizable value, cost being determined by the first-in, first-out method. 

Segment Reporting

7.  Segment Information—The Company operates in two business segments as determined by its products.  The fastener segment includes rivets, cold-formed fasteners and parts and screw machine products.  The assembly equipment segment includes automatic rivet setting machines and parts and tools for such machines.