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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.DC 20549
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FORM 10-K
(Mark One)
[x]FOR ANNUAL REPORTAND TRANSITION REPORTS
PURSUANT TO SECTIONSECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000,
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File Number:
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-1227
CHICAGO RIVET & MACHINE CO.
(Exact nameName of registrantRegistrant as specifiedSpecified in its charter)
Illinois 36-0904920
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
901 Frontenac Road, Naperville, IL 60563
(Address or principal executive offices)Its Charter)
Illinois 36-0904920
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
901 Frontenac Road, Naperville, Illinois 60563
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (630) 357-8500
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS
ON WHICH REGISTERED
------------------- ------------------------------------
Common Stock -- $1.00 Par Value
American Stock Exchange
(including Preferred Stock Purchase Rights)
NAME OF EACH EXCHANGE
ON WHICH REGISTERED
--------------------
American Stock Exchange
(Trading privileges only, not registered)
Securities registered pursuant to Section 12(g) of the Act: None
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(Title of Class)
INDICATE BY CHECK MARK WHETHER THE REGISTRANTREGISTRANT: (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [CHECK MARK] NO___X NO ____
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [ ]
STATEX
INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS
DEFINED IN EXCHANGE ACT RULE 12B-2). YES ____ NO X
THE AGGREGATE MARKET VALUE OF THE VOTINGCOMMON STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT. THE AGGREGATE MARKET VALUE SHALL BE COMPUTED BY REFERENCE TO
THE PRICE AT WHICH THE STOCK WAS SOLD, OR THE AVERAGE BID AND ASKED PRICES OF
SUCH STOCK,REGISTRANT AS OF A SPECIFIED DATE WITHIN 60 DAYS PRIOR TO THE DATE OF FILING.
$13,953,453JUNE 30, 2003 WAS $20,624,997.
AS OF JANUARY 31, 2001FEBRUARY 16, 2004, 966,132 SHARES OF THE REGISTRANT'S COMMON SHARES OUTSTANDING AS OF JANUARY 31, 2001STOCK WERE
967,132 ($1 PAR VALUE)OUTSTANDING.
DOCUMENTS INCORPORATED BY REFERENCE
(1) PORTIONS OF THE COMPANY'S ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR
ENDED DECEMBER 31, 20002003 (THE "2000"2003 REPORT") ARE INCORPORATED BY REFERENCE IN
PARTS I, II AND IV OF THIS REPORT.
(2) PORTIONS OF THE COMPANY'S DEFINITIVE PROXY STATEMENT WHICH IS TO BE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IN CONNECTION WITH THE
COMPANY'S 20012004 ANNUAL MEETING OF SHAREHOLDERS ARE INCORPORATED BY REFERENCE IN
PART III OF THIS REPORT.
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2
CHICAGO RIVET & MACHINE CO.
PERIOD ENDING DECEMBER 31, 20002003
Item Page
No. No.
- --- ---- ----
Part I
1. Business 3
2. Properties 4
3. Legal Proceedings 4
4. Submission of Matters to a Vote of Security Holders 4
3. Legal Proceedings 4
4. Submission of Matters to a Vote of Security Holders 5
Part II
5. Market for Registrant's Common Equity and Related
Stockholder Matters 6
6. Selected Financial Data 6
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
7a. Quantitative and Qualitative Disclosures About Market Risk 11
8. Financial Statements and Supplementary Data 11
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 11
9a. Controls and Procedures 11
8. Financial Statements and Supplementary Data 11
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 12
Part III
10. Directors and Executive Officers of the Registrant 12
11. Executive Compensation 12
12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters 12
13. Certain Relationships and Related Transactions 12
Part IV
14. Principal Accountant Fees and Services 13
Part IV
15. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 13
2
3
PART I
ITEM 1 - BUSINESS
Chicago Rivet & Machine Co. (the Company) was incorporated under the
laws of the State of Illinois in December 1927, as successor to the business of
Chicago Rivet & Specialty Co. The Company operates in two segments of the
fastener industry: Fastenersfasteners and Assembly Equipment.assembly equipment. The Fastenerfastener segment
consists of the manufacture and sale of rivets, cold-formed fasteners and parts
and screw machine products. The Assembly Equipmentassembly equipment segment consists primarily of
the manufacture of automatic rivet setting machines, automatic assembly
equipment, parts and tools for such machines, and the leasing of automatic rivet
setting machines. For further discussion regarding the Company's operations and
segments see Note 110 of the financial statements which appears on page 810 of the
Company's 20002003 Annual Report to Shareholders, incorporated herein by reference.Shareholders. The 20002003 Annual Report is filed as
an exhibit to this report.
The principal market for the fastener segment operationsCompany's products is the North American
automotive and appliance industries within the United States.industry. Sales are solicited by employees and by independent sales
representatives.
The segments in which the Company operates are characterized by active
and substantial competition. No single company dominates the industry. The
Company's competitors include both larger and smaller manufacturers, and
segments or divisions of large, diversified companies with substantial financial
resources. Principal competitive factors in the market for the Company's
products are quality, service, reliability and price.
The Company serves a wide variety of customers. Sales revenuesRevenues are primarily
derived from sales to customers involved, directly or indirectly, in the
manufacture of automobiles and appliances.automotive components. Information concerning
backlog of orders is not considered material to the understanding of the
Company's business due to relatively short production cycles. The level of
business activity for the Company is closely related to the overall level of
industrial activity in the United States. During 2000,2003, sales to two customers
exceeded 10% of the Company's consolidated revenues. Sales to TI Group
Automotive Systems Corporation accounted for approximately 19%13% of the Company's
consolidated revenues in 2000, 17%2003, 18% in 19992002 and 15%18% in 1998.2001. Sales to Fisher &
Company accounted for approximately 11%21%, 11%17% and 14% of the Company's
consolidated revenues in 2003, 2002, and 2001, respectively. Sales to Purchased
Parts Group accounted for approximately 10% of the Company's consolidated
revenues in 2000, 1999, and 1998, respectively.2001.
The Company's business has historically been somewhat stronger during the first
half of the year.
The Company generally does not provide credit terms in excess of thirty
days.
The Company purchases raw materialsmaterial from a number of sources, primarily
within the United States. There are numerous sources of raw materials,material, and the
Company does not have to rely on a single source for any of its requirements.
The Company is not aware of any significant problemBeginning early in 2004, the availabilitycost of raw materials used in its production.the manufacture of
fasteners escalated sharply and some suppliers have indicated that global demand
may constrain material availability.
Patents, trademarks, licenses, franchises and concessions are not of
significant importance to the business of the Company.
3
4
The Company does not engage in basicsignificant research activities, but
rather in ongoing product improvement and development. The amounts spent on
product development activities in the last three years were not material.
3
At December 31, 2000,2003, the Company employed 366308 people.
The Company has no foreign operations, and sales to foreign customers
represent only a minor portion of the Company's total sales.
ITEM 2 - PROPERTIES
The Company conducts its manufacturing and warehousing operations at
five plants, which are described below. All five plants are owned by the Company
and considered suitable and adequate for their present use. The Company also
currently maintains a small sales office in Norwell, Massachusetts in a leased
facility.
Of the properties described below, the Jefferson, Iowa and the Madison
Heights, Michigan facilities are used entirely in the fastener segment. The
Albia, Iowa facility is used exclusively in the assembly equipment segment. The
Tyrone, Pennsylvania and the Naperville, Illinois facilites are utilized in both
operating segments.
Plant Locations and Descriptions
Naperville, Illinois Brick, concrete block and partial
metal construction with metal roof.
Tyrone, Pennsylvania Concrete block with small tapered
beam type warehouse.
Jefferson, Iowa Steel tapered beam construction.
Albia, Iowa Concrete block with prestressed
concrete roof construction.
Madison Heights, Michigan Concrete, brick and partial metal
construction with
Michigan metal roof.
ITEM 3 - LEGAL PROCEEDINGS
The Company is, from time to time involved in litigation, including
environmental claims, in the normal course of business. With regardWhile it is not possible
at this time to environmental claims,establish the Company has been named by state and/or federal
government agencies as a "potentially responsible party"ultimate amount of liability with respect to
certain
waste disposal sites. As a potentially responsible party, the Company may be
considered jointly and severally liable, along with other potentially
responsible parties, for the cost of remediation of these waste sites. The
actual cost of remediationcontingent liabilities, including those related to legal proceedings, management
is presently unknown. Despite the joint and several
nature of liability, these proceedings are frequently resolved on the basis of the quantity and type of waste disposed byopinion that the parties. The actualaggregate amount of liabilityany such liabilities, for the Company is unknown due to disagreement concerning the
allocation of responsibility, uncertainties regarding the amount of contribution
that will be available from other parties and uncertainties related to insurance
coverage. After investigation of the quantities and type of waste disposed at
these sites, it is management's opinion that any liabilitywhich
provision has not been made, will not behave a material toadverse effect on the
Company's financial condition. At a number of waste disposal sites, the
issues affecting the Company, have been favorably resolved, or are nearing
resolution, and accordingly, the Company has reduced the amount of reserves
recorded in connection with these sites. Nevertheless, it is likely that the
Company
4
5
will incur additional costs associated with the remaining proceedings and,
accordingly, the Company has recorded a total liability of $25,000 related to
these matters. The adequacy of this reserve will be reviewed periodically as
more definitive cost information becomes available.position.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company's shareholders during
the fourth quarter of 2000.2003.
4
Executive Officers of the Registrant
The names, ages and positions of all executive officers of the Company,
as of March 24, 2001,26, 2004, are listed below. Officers are elected annually by the
Board of Directors at the meeting of the directors immediately following the
Annual Meeting of Shareholders. There are no family relationships among these
officers, nor any arrangement or understanding between any officer and any other
person pursuant to which the officer was selected.
Number of years
Name and Age of Officer Position Years an Officer
- ----------------------- -------- -------------------------------
John A. Morrissey 6568 Chairman, Chief 2123
Executive Officer
John C. Osterman 4952 President, Chief 17
Operating 20
Officer and Treasurer
Nirendu Dhar 62 General Manager, 3
H & L Tool Company, Inc.
Donald P. Long 49 Vice-President Sales 652 Vice President-Sales 9
Kimberly A. Kirhofer 4245 Secretary 1013
Michael J. Bourg 3841 Controller 25
- - Mr. Morrissey has been Chairman of the Board of Directors of the
Company since November 1979, and Chief Executive Officer since August
1981. He has been a director of the Company since 1968.
- - Mr. Osterman has been President, Chief Operating Officer and Treasurer
of the Company since September 1987. He was Assistant Secretary from
November 1983 to May 1985 when he became Assistant Vice
President-Administration. He became Vice President-Administration in
May 1986 and was named Executive Vice President in May 1987. He has
been a director of the Company since May 1988.
- - Mr. Dhar has been employed as General Manager of the Company's
subsidiary, H & L Tool Company, Inc., since 1996. Mr. Dhar was employed
as Plant Manager and Chief Engineer of H & L Tool Company, Inc. prior
to the Company's acquisition of H & L Tool Company for more than five
years. He has been a director of the Company since May 2001.
- - Mr. Long has been Vice President-Sales of the Company since November
1994, and was Director of Sales and Marketing of the Company from March
1993 through November 1994. Prior to that, he was employed by Townsend
Engineered Products, a maker of rivets, cold-formed fasteners and rivet
setting equipment in various sales management positions for more than 5
years.
- - Mrs. Kirhofer has been Secretary of the Company since August 1991, and
was Assistant Secretary of the Company from February 1991 through
August 1991. Prior to that, she held various administrative positions
with the Company since May 1983.
5
6
- - Mr. Bourg has been Controller of the Company since December 1998. Prior
to that, he was Accounting Manager at Fuchs Lubricants Co., a
manufacturer of industrial lubricants, for two years and prior to that
was employed by the public accounting firm of McGladrey & Pullen, LLP
as a public accountant, for more than five years.
5
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED SECURITY HOLDERSTOCKHOLDER MATTERS
The Company's common stock is traded on the American Stock Exchange
(trading privileges only, not registered). As of December 31, 20002003 there were
374approximately 310 record holders of such stock. The information on the market
price of, and dividends paid with respect to, the Company's common stock, set
forth in the section entitled "Information on Company's Common Stock" which
appears on page 12 of the 20002003 Annual Report is incorporated herein by
reference. The 20002003 Annual Report is filed as an exhibit to this report. See
Item 7 - "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Dividends," for additional information about the
Company's dividend policy.
ITEM 6 - SELECTED FINANCIAL DATA
The section entitled "Selected Financial Data" which appears on page 11
of the 20002003 Annual Report is incorporated herein by reference. The 20002003 Annual
Report is filed as an exhibit to this report.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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, among other things, our ability to maintain our
relationships with our significant customers; increased global competition;
increases in the prices of, or limitations on the availability of, our primary
raw materials; or a downturn in the automotive industry, upon which we rely for
sales revenue, and which is cyclical and dependent on, among other things,
consumer spending, international economic conditions and regulations and
policies regarding international trade. 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.
In addition to the disclosures contained herein, readers are also urged
to carefully review and consider any risks and uncertainties contained in other
documents filed by the Company with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
The long running economic expansionpast year was extremely difficult for the Company. After a
relatively auspicious start, which fostered an optimistic outlook for the
balance of the year, our business weakened considerably as production of
domestic automobiles trailed prior year levels and domestic manufacturing
activity, in general, remained weak. In addition, our customers continued to
demand price concessions, while simultaneously raising the bar with respect to
quality and service requirements. In response to these conditions, we relied on
the time-tested approach of cost containment and cost reductions. In retrospect,
it is clear that these actions were insufficient to offset the U.S. economy has enjoyed
appearscombined impact
of lower volumes, lower prices and increased service expectations.
6
2003 COMPARED TO 2002
Reduced revenues were the dominant factor contributing to have run its course. Though there may be some debate asreduced
margins within the fastener segment during 2003. Fastener segment revenues
declined abruptly late in the first quarter and remained weak for the balance of
the year. For the year 2003, fastener segment revenues declined 11.3% compared
to 2002, totaling a disappointing $31,024,036. Reductions in North American
production of domestic automobiles and trucks contributed to the extentweakness in our
business as did continuing competitive pressures which contributed to the loss
of some business, as we were unable to meet the slowdownprice concessions demanded by
certain customers. In addition, some high margin parts were lost in connection
with design changes that accompanied the new model year. Reductions in
manufacturing staff failed to keep pace with the decline in business activity,
and the resultant inefficiencies are reflected in disproportionately higher
labor costs in 2003, compared to 2002. In addition, margins were adversely
affected by increases in the overall economy, there is little doubt thatcost of employee health insurance and higher
tooling expenses incurred in connection with the manufacturing sector slowed dramatically during 2000. Despite record automobile
sales, companies operating within
6
7
thatinitial production of a variety
of new parts.
Within the assembly equipment segment, of the economy generally posted weaker results than in the prior
year. Thisrevenues declined 10.6% compared
to 2002. As was the case for Chicago Rivet. The softness in new orders that we
reported early in 2000 continued to characterize our markets throughout the year, and the softening accelerated during the second half. In view of these
conditions, whichfastener segment, lower volumes contributed to
both lower revenuessignificantly reduced operating efficiencies that were manifested in
disproportionately high labor and reduced incomebenefit costs compared with prior years. Other
factors impacting margins within this segment were increases in the cost of raw
materials, offset in part, by a decrease in depreciation expense.
Selling and administrative expenses for 2003 were 5.9% below those for
2002. A $302,000 reduction in profit sharing expense was the largest single
factor contributing to the record performancedecrease in 1999, our results forthis expense category, followed by
reductions of $145,000 in bonus expense, and $96,000 in commission expense due
to lower sales in the yearcurrent year. These reductions were respectable.
2000partially offset by a
$74,000 expense related to an early retirement program and an increase in the
cost of employee health insurance.
Net interest income increased by approximately $45,000 during 2003,
primarily as a result of lower interest expense related to lower balances on a
note payable, which was paid in full in December.
2002 COMPARED TO 1999
Conditions in our major markets tended to weaken as the year
progressed. As a result, net2001
Net sales and lease revenues declinedimproved approximately 6% compared with
2001 and totaled $43,012,766 in 2002. As discussed below, revenue gains were
achieved in both the fastener and assembly equipment segments and the increased
volume, coupled with successful efforts to $45,423,263hold the line on costs, translated
into improvements in 2000. Ongross margins, which amounted to $10,585,563 for 2002,
compared with $9,187,046 recorded in 2001.
Within the fastener segment, revenues increased 7%, to $34,991,758,
reflecting an overall basis, this represents a decline of 7.5% comparedincrease in automobile production. However, it should be
noted that our volumes did not increase across our entire customer base.
Instead, our overall gain was due to the
record level of $49,080,257 recordedincreases in 1999. Revenuesbusiness with certain key
customers, bolstered by revenues related to new customers and new products from
existing customers.
Gross margins within the fastener segment improved to 21.1% in 2002,
compared with 19.9% recorded in 2001. This improvement was largely attributable
to the effects of higher volumes and increases in efficiency associated with
those higher volumes. A number of other factors impacted operations during the
year. While we benefited
7
from reductions in tooling costs, those savings were offset by increases in the
cost of materials and by a substantial increase in the cost of employee health
insurance.
Activity levels within the assembly equipment segment remained well
below historical levels. While revenues within the segment improved to
$8,021,008 in 2002, compared with $7,738,868 in 2001, the change is attributable
to a few large orders and not due to any significant improvement in the market
for equipment, which began 2000 atremained adversely affected by a slightly stronger pace thanpersistent decline in the
broad manufacturing sector and the related restraint on capital spending.
Nevertheless, gross margins within this segment improved to approximately 40% in
2002 compared with 35% for 2001. This improvement is primarily attributable to
higher volumes and reduced labor expense.
Selling and administrative expenses increased approximately 3.7%
compared with 2001. Both profit sharing and sales commissions increased as a
result of higher sales and increased profits. Other factors contributing to the
increase include higher salary expense and increased health insurance costs,
partially offset by a decrease in the provision for bad debt expense, which was
unusually high in the prior year endeddue to the year at $35,735,699,bankruptcy filing of a declinecertain
customer.
The Company recorded net interest income during 2002 of 4.7%$4,214,
compared with net interest expense of $114,607 in 2001, as a result of lower
prevailing interest rates and reduced debt levels.
DIVIDENDS
In determining to 1999, aspay dividends, the Board considers current
profitability, the outlook for longer-term profitability, known and potential
cash requirements and the overall financial condition of the Company. The
Company paid four regular quarterly dividends of $.18 per share during 2003. In
addition, an extra dividend of $.25 per share was paid during the second quarter
of 2003, bringing the total dividend distribution to $.97 per share. On February
16, 2004, your Board of Directors determined that an extra dividend would not be
declared or paid in the second quarter of 2004; however, the Board did declare a
regular quarterly dividend of $.18 per share, payable March 19, 2004 to
shareholders of record on March 5, 2004. This continues the uninterrupted record
of consecutive quarterly dividends paid by the Company to its shareholders that
extends over 70 years.
PROPERTY, PLANT AND EQUIPMENT
During 2003, capital expenditures amounted to $641,715, of which
$535,268 was invested within the fastener segment, $89,379 was invested within
the assembly equipment segment and the remainder was expended for building
improvements that cannot be allocated between segments. Within the fastener
segment, approximately $317,000 was invested in a new solvent based parts
cleaning system. This system, installed during the second half of the year, was characterized by business levels thatis
expected to yield reductions in supply and waste disposal costs. Other
expenditures were sharply lower
thanapproximately $92,000 for vehicles, including $68,000 for a
new delivery truck; $32,000 for in-line wire drawing equipment; some $21,000 for
equipment related to quality control; with the preceding six months. This downturn is attributable to a decline in the
level of activity within the motor vehiclebalance expended for smaller
tools and automotive parts sector of the
economy upon which we depend for the majority of our fastener revenues.equipment and building improvements. Within the assembly equipment
segment, demandapproximately $86,000 was comparatively soft early in the year,
and became weaker as the year progressed. As a result, revenuesexpended for the full
year declined approximately 16% comparedpurchase of new equipment
related to 1999, totaling $9,687,564 during
2000.
Given the reduced operating levels, gross margins withinmanufacture of perishable tooling that is sold to customers. The
balance was expended for building improvements and office equipment.
Investments in machinery and equipment totaled $886,009 in 2002. The
majority of this investment was related to the fastener segment declinedof our
operations. Approximately $567,000 was invested in new equipment directly
related to the manufacture of fasteners, with an additional $123,000 expended
for equipment related to quality control and finishing operations for the
fastener segment. The balance
8
was expended for a variety of items, including material handling, data
processing and other equipment.
The Company invested approximately $1.4 million in machinery, equipment
and building improvements during 2001. The majority of these expenditures were
related to the fastener segment of our operations. Specifically, a total of $1.1
million was expended for the purchase of equipment used directly in the
manufacture of fasteners and $88,000 was invested in new equipment related to
the quality control process in fastener manufacturing. $129,000 was expended in
connection with data processing and data communications equipment, $61,000 was
spent for building improvements, primarily related to the fastener segment of
our business, and the balance was expended for a variety of smaller machinery
and equipment, including the manufacture of automatic rivet setting equipment
that is leased to our customers.
Depreciation expense amounted to $1,861,600 in 2003, $1,915,726 in 2002
and $1,921,703 in 2001.
LIQUIDITY AND CAPITAL RESOURCES
The Company's holdings in cash, cash equivalents and certificates of
deposits amounted to nearly $6.0 million at December 31, 2003, an increase of
approximately $.6 million compared with the end of 2002. Accounts receivable
balances decreased approximately $.4 million, reflecting lower sales during the
latter part of 2003, compared to the prior year. However, there were other
significant factors that impacted gross margins. Among them were increasessame period in wage2002. Inventory levels, necessaryat
the end of 2003, are also less than at the end of 2002 due to retain skilled laborefforts taken to
reduce inventories in the face of very tight labor
markets, increasesresponse to continued weakness in the cost of tooling and supplies used in manufacturing,
significantly higher costsdemand for health insurance and higher depreciation expense
associated with recent investments in new manufacturing equipment. While
competitive situations continued to hamper our ability to recover the higher
costs outlined above, favorable conditions in the market for raw materials
enabled us to negotiate modest reductions in the prices paid for certain raw
materials. Overall, however, the combination of lower volume and generally
higher manufacturing costs caused gross margins within the fastener segment to
fall to 22.3% compared to 23.9% in the prior year.
During 2000, revenues within the assembly equipment segment declined
approximately 16% compared to 1999. Most of this decline was a function of
reduced unit sales, as demand was comparatively weak throughout the year. Gross
margins declined from approximately 45% in 1999 to 42% in 2000, due in part to a
continued shift toward lower priced and lower margin equipment, and also
reflects the impact of higher health insurance costs. Most other costs of
manufacturing were reduced to levels consistent with the lower operating levels.
Selling and administrative expenses declined 3.6% compared with 1999.
Costs incurred inproducts.
In connection with the implementation of new data processing
systems declined substantially compared with 1999, but still remained at higher
than normal levels for most of the current year. Both commission expense and
profit sharing expense declined in proportion with the decline in sales and
profits, respectively. Offsetting these changes were professional fees incurred
in connection with the Company'sa "Dutch auction" tender offer higher health
insurance costs, and increases in salary expense.
Interest expense increased approximately $123,000 due primarilyApril 2000, the
Company obtained, on an unsecured basis, a financing commitment that provided
borrowing capacity of up to additional$9.0 million plus a $1.0 million line of credit. The
new borrowing in connection withwas used to finance the tender offerunpaid balance of a 1996 loan related to
the acquisition of H & L Tool Company, Inc. ($2.7 million) and to fund the
purchase of stock under the terms of the "Dutch auction." At December 31, 2003,
the indebtedness under the term loan had been extinguished. The line of credit
was extended through May 31, 2004 and remained unused at December 31, 2003.
Off-Balance Sheet Arrangements
The Company has not entered into, and has no current plans to enter
into, any off-balance sheet financing arrangements.
The following table presents a lesser
extent, higher interest rates.
7summary of the Company's contractual
obligations as of December 31, 2003:
Payments Due By Period
-------------------------------------------------------
Less Than 1 - 3 4 - 5 More Than
Cotractual Obligation Total 1 Year Years Years 5 Years
- --------------------- -------- -------- -------- ------- ---------
Long-term Debt $ -- $ -- $ -- $ -- $ --
Capital Lease Obligations -- -- -- -- --
Operating Leases 36,657 27,493 9,164 -- --
Purchase Obligations 378,686 160,750 200,256 17,680 --
-------- -------- -------- ------- ----
Total $415,343 $188,243 $209,420 $17,680 $ --
======== ======== ======== ======= ====
Management believes that current cash, cash equivalents and operating
cash flow will be sufficient to provide adequate working capital for the
foreseeable future.
9
8APPLICATION OF CRITICAL ACCOUNTING POLICIES
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 at the
date of the financial statements and the amounts of revenue and expenses during
the reporting period. During interim periods, the Company uses estimated gross
profit rates to determine the cost of goods sold for a portion of its
operations. Actual results can vary from these estimates, and these estimates
are adjusted, as necessary, when actual information is available. During the
fourth quarterThe effect of
2000, net income included net favorable adjustments to
inventory, accruals and allowances aggregating $.10 per share. Similar
adjustmentsthese estimates is described in the fourth quarter of 1999 and 1998 amounted to $.09 per share
and $.05 per share, respectively.
1999 COMPARED TO 1998
The Company's net sales and lease revenues increased approximately 9%,
totaling $49,080,257 in 1999, compared with $44,938,184 recorded in 1998.
Revenues within the fastener segment improved 10.5%, reflecting the strengthNote 11 of the automotive industry, which represents the Company's largest market. While
revenue from sales within the assembly equipment segment improved 6.4%, lease
revenues in that segment declined compared to the prior year, which resulted in
a net increase in sales and lease revenues within the assembly equipment segment
of 5.3%. Overall, gross margins improved to $13,361,375, an increase of
approximately 5%, despite a charge of $910,000 associated with a product recall.
Selling and administrative expenses increased significantly, primarily due to
expenditures for information technology, and net income increased to $3,454,291.
The fastener segment produced the most dramatic changes compared with
1998. Revenues within this segment increased 10.5% to $37,486,536. This increase
was largely a reflection of very strong growth in the economy in general and
record levels of production within the automotive industry. The increased volume
levels contributed to generally higher margins as fixed costs, with the
exception of depreciation, remained relatively constant compared with 1998. The
strength of the employment market contributed to increases in wage levels that
slightly exceeded the overall inflation level, and the limited availability of
skilled labor necessitated an increase in overtime expense in order to meet
increased demand within this segment of our operations. Despite the strong
market conditions prevalent throughout the year, our markets remained extremely
price competitive, and our ability to obtain price relief continued to be
limited. Fortunately, efforts to control manufacturing costs in other areas
continued to be successful, and the Company also benefited from negotiated
reductions in the costs of certain raw materials. While the fundamental
performance within this segment of our business was very successful, that
success was tarnished by a charge incurred in connection with a recall of
vehicles that contained certain non-conforming parts which were manufactured by
the Company. As previously reported, a settlement was successfully negotiated,
but total costs incurred in connection with this incident amounted to $944,000
before taxes, of which $910,000 was charged to cost of goods sold, offsetting a
portion of the positive improvements recognized in operations.
Revenues within the assembly equipment segment, as a whole, also
improved compared with 1998. However, competitive conditions caused the Company
to occasionally accept margins below those that were enjoyed in the past, and,
as a result, the increase in revenues was slightly biased toward products with
lower margins. In addition, increases in costs of raw materials and other
manufacturing expenses nearly offset the increase in revenues. As a result, the
margin increase within this segment was minimal.
Selling and administrative expenses increased approximately 8% compared
to the prior year. Costs incurred in connection with implementation of new data
processing systems, including efforts related to mitigating the impact of any
potential Y2K issues, amounted to nearly $500,000 during the year and represent
the primary factor contributing to the increased level of selling and
administrative expense. Increases in data communications expense and
depreciation related to the new information system added an additional $103,000
to administrative expenses and profit sharing expense increased by $123,000. Bad
debt expense was reduced by $94,000 and travel expense declined by $50,000.
Increases in salary expense were partially offset by a reduction in commission
expense as a larger percentage of sales was handled by Company employees.
Interest expense during 1999 decreased approximately $120,000 compared
with 1998 as the effect of higher interest rates was offset by a lower
outstanding balance on the loan. Interest income was approximately $51,000 lower
than that recorded in the prior year due to a reduction in the level of funds
available for investment in interest- bearing accounts.
8
9
DIVIDENDS
The Company paid four regular quarterly dividends of $.18 per share
during 2000. In addition, an extra dividend of $.35 per share was paid during
the second quarter of 2000, bringing the total dividend payout to $1.07 per
share. On February 19, 2001 the Board of Directors declared a regular quarterly
dividend of $.18 per share, payable March 20, 2001 to shareholders of record
March 5, 2001. These dividends continued the uninterrupted record of consecutive
quarterly dividends paid by the Company to its shareholders that extends over 67
years. At that same meeting, the Board declared an extra dividend of $.25 per
share, payable April 20, 2001 to shareholders of record, April 5, 2001.
MACHINERY AND EQUIPMENT
Capital investments totaled approximately $2.1 million during 2000.
Slightly over $1.9 million of this total was invested in new equipment related
to the production of fasteners. Of the amount expended within the fastener
segment, $1.5 million was invested in new cold heading and thread-forming
equipment and certain support equipment. This equipment will be utilized to
expand our capacity to manufacture certain specialty products for which demand
has exceeded our capacity. Certain obsolete heat treating equipment was replaced
at a cost of $276,000. The balance was expended for various smaller projects,
including new quality control equipment and building improvements. Within the
assembly equipment segment, capital expenditures totaled $150,372, primarily for
the replacement of machine tools used in the manufacture of perishable tooling
that is sold to our customers. The balance was expended for data processing
equipment and various office equipment.
Investments in machinery and equipment totaled $1,709,527 during 1999.
Investments in new equipment related to the manufacture of fasteners accounted
for the majority of these investments and amounted to $994,000 during the year.
Investments in hardware and software related to improved information management
technology totaled $267,000. A total of $181,000 was expended for the purchase
of a variety of test and inspection equipment related to quality control
initiatives. Investments in new machine tools used in the manufacture of
assembly equipment totaled $108,000. Approximately $41,000 was invested in new
telephone equipment and the balance was expended for the purchase, or repair, of
various, smaller machine tools and building repairs.
The Company made a number of significant investments in both equipment
and building improvements during 1998. Capital expenditures totaled nearly
$2,700,000. Expenditures related to new data processing systems, including
computer hardware and software, amounted to approximately $542,000. Expenditures
for the purchase of new equipment used in the manufacture of fasteners amounted
to $1,430,000. The Company also purchased a variety of new machine tools,
material handling equipment and inspection equipment valued at approximately
$313,000. Building improvements, which included the installation of new
9
10
air compressors at one facility and a new roof at another facility, amounted to
approximately $252,000. Investment in both new equipment and rebuilding of
existing equipment used to plate and heat treat fasteners amounted to $63,000. A
total of $51,000 was expended for the construction of new automatic rivet
setting equipment that is leased to customers. The balance was expended for a
variety of smaller office equipment and for the construction of new rivet
setting machines that will be used for demonstration purposes.
Depreciation expense amounted to $1,889,849 in 2000, $1,711,721 in 1999
and $1,498,302 in 1998.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at year-end amounted to $12.0 million. Although this is
a slight decline from the prior year-end, the change is not unexpected given the
significant expenditures for new equipment made during the year. The decline in
accounts receivable balance at year-end reflects the fact that sales during the
latter portion of 2000 were substantially lower than during the same period in
the prior year. This sudden change in demand resulted in an opposite change in
inventory levels, which increased $280,000 compared to the end of 1999.
Production activity has been adjusted to compensate for the lower sales
activity, and we expect that inventories will be reduced to a level consistent
with current sales. In connection with a "Dutch auction" tender offer in April
2000, the Company obtained, on an unsecured basis, a financing commitment that
provided borrowing capacity of up to $9.0 million plus a $1.0 million line of
credit. The new borrowing was used to finance the unpaid balance of a 1996 loan
related to the acquisition of H & L Tool Company, Inc. ($2.7 million) and to
fund the purchase of stock under the terms of the "Dutch auction". At year-end,
the indebtedness under the term loan was approximately $5.2 million. Under the
terms of the note, the Company is scheduled to repay the principal in quarterly
installments of $450,000, plus interest computed on the unpaid balance at a
variable rate that is calculated under one of two methods, selected at the
option of the Company: the London Inter-Bank Offering Rate (LIBOR) plus an
applicable margin; or the lender's prime rate, less an applicable margin. The
applicable margin is based upon the funded debt ratio and, for any portion of
the loan that bears interest at the prime rate, this margin is up to 50 basis
points, and for any portion that bears interest at the LIBOR rate, it is up to
130 basis points. This rate is adjusted quarterly. At year-end 2000, the rate
was approximately 7.5%. Management believes that current cash, cash equivalents
and the available line of credit will be sufficient to provide adequate working
capital for the foreseeable future.financial statements.
NEW ACCOUNTING STANDARDS
The Company's financial statements and financial condition were not,
and are not expected to be, materially impacted by any new, or proposed, accounting
standards.
STOCK PURCHASE PROGRAM
Terms of a stock repurchase authorization originally approved by the
Board of Directors in February of 1990, and subsequently amended to permit the
repurchase of an aggregate of 200,000 shares, provide forpermit purchases of the Company's
common stock to be made from time to time, in the open market or in private
transactions, at prices deemed reasonable by management. Purchases underThe company did not
purchase any of its shares during 2003. During 2002, the current repurchase authorization have amounted to 161,996company purchased 1,000
shares at an average price of $15.58$26.98 per share. This includesCumulative purchases under the
purchase of 11,400repurchase authorization have amounted to 162,996 shares
during 2000 at an average price of
$19.75$15.66 per share.
ItOUTLOOK FOR 2004
The anticipated improvement in economic activity has not yet generated
a meaningful increase in orders for our products. While we are encouraged by the
fact that we have been awarded contracts for a number of new parts in the
fastener segment, we are concerned about conditions within the assembly
equipment segment, which remains very weak. Domestic competition remains intense
and foreign competition, which affects us directly through the increase of
imported fasteners and indirectly through the import of products that were
previously assembled domestically, is management's
intentiona growing concern. These conditions
increase the risk that our markets will not only become even more price
competitive due to imports, but will shrink in size as domestic assembly
operations are supplanted by imports of products that were traditionally
assembled domestically, utilizing domestic fasteners and domestic assembly
equipment.
As mentioned above, we are pleased that we have been awarded new
business within the fastener segment, but, in many instances, production volumes
related to this new business will not reach significant levels until later in
2004. We will continue soliciting additional business from our current customers
as well as from new customers. We face challenges in the form of recent and
significant increases in the cost of raw materials utilized in the production of
fasteners. While we have not experienced shortages of raw material, some of our
suppliers report that increases in global demand may constrain availability of
raw materials later this program, providedyear. Our success in maintaining supply and recovering
these higher costs, without losing market conditions are favorable and
funding for repurchases is available.
In additionshare, will be a critical determinant
of our success in the coming year.
Cost reduction will be another critical factor influencing future
results. As previously reported, we have already taken actions to the purchases described above, the Company purchased
159,564 shares at a price of $23.00 per share pursuant to a "Dutch auction"
tender offer completed inreduce our
manufacturing costs,
10
11
April 2000. Funding forbut the purchases was provided through additional borrowing
described above.
YEAR 2000 COMPLIANCEcost reductions realized have not fully offset the impact of lower
volumes. We are pleasedwill continue exploring alternatives that will yield positive
changes in our cost structure and our ability to report that no significant Y2K disruptions were
incurred bycompete. Margins, at least in
the Company.
OUTLOOK FOR 2001
As this is written,near term, will remain under pressure from the economic outlook for the balancecombination of 2001 is
uncertain. While experts continue to debate whether the economy is headed for a
recession, there is mounting evidencerising costs
and increasing foreign competition.
We gratefully acknowledge that the so-called old economy has been in
recession forCompany's success, both past and
future, would not be possible without: the past several months. Certainly, we have seen demand inconscientious efforts of our
markets soften dramatically overemployees, who consistently demonstrate their dedication to meeting the
formidable and ever-changing challenges that time period. While in many years our first
quarter is often our strongest quarter, bookings for the first quarter of 2001
are well below the levels that we would consider satisfactory. Anecdotal
evidence suggests that our situation is far from unique - especially in the
segment of the economy in which we operate. While we anticipate that conditions
will improve, when that improvement will be manifested is uncertain, and depends
in large measure upon factors over which we have little or no control.
In the interim, we have taken appropriate actions to adjust operating
levels to match the reduced level of demand that is prevalent in our markets.
Spending will be closely controlled, and every opportunity to reduce costs will
be evaluated. During 2000, we began a program to expand our capacity in certain
products where demand outpaced our capacity. We anticipate that program, which
should be completed in the second quarter of 2001, will have a positive impact
on both revenues and profits. However, the timing and magnitude of its
contribution to revenues and profits will depend, in part, upon a recovery in
thecharacterize today's manufacturing
sector of the economy.
The rapidly changing nature of the competitive arena will continue to
present new challenges and new opportunities. We believe that the Company can
continue to meet the challenges presented and take advantage of opportunities as
they arise. We recognize that success depends upon many factors and take this
opportunity to express our gratitude forenvironment; the loyalty of our customers, many of whom face the same set of
challenges; and, for
the continuedcontinuing support of our shareholders. We also take this opportunity to
acknowledge the efforts of our dedicated and skilled workforce. Their
contributions are essential to the Company's success - both past and future.
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Over time, the Company is exposed to market risks arising from changes
in interest rates. The Company has not historically used derivative financial
instruments.
As of December 31, 2000, $5.232003, the Company did not have any outstanding debt,
compared to $1.6 million of floating-rateoutstanding debt at the prior year end, that was
exposed to changes in interest rates comparedrates. During 2003 the Company did not use
derivative financial instruments relating to $3.15 million at the prior
year-end. This exposure was primarily linked to the London Inter-Bank Offering
Rate and the lender's primethis interest rate under the Company's term loan. A hypothetical
10% change in these rates would not have had a material effect on the Company's
annual earnings.exposure.
ITEM 8 - FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
See the sections entitled "Consolidated Financial Statements" and
"Financial Statement Schedule" which appear on pages 15 through 18 of this
report.
11
12
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no changes in or disagreements with accountants
requiring disclosure herein.
ITEM 9A - CONTROLS AND PROCEDURES
(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 the
reports that it files or submits under the Exchange Act.
(b) 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
fiscal quarter to which this report relates that have materially affected, or
are reasonably likely to materially affect, the Company's internal control over
financial reporting.
11
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information with respect to the Board of Directors' nominees for
directors that is not related to security ownership, which is set forth in the
section entitled "Election of Directors" on pages 4 through 87 of the Company's
20012004 Proxy Statement, is incorporated herein by reference. The information with
respect to the audit committee, its financial expert and the independence of its
members, which is set forth in the second paragraph of the section entitled
"Additional Information Concerning the Board of Directors and Committees" on
page 7 of the Company's 2004 Proxy Statement, is incorporated herein by
reference. The information with regard to compliance with Section 16 (a) of the
Exchange Act, which is set forth at the end ofin the section entitled "Additional Information Concerning the Board
of Directors and Committees""Section 16(a)
Beneficial Ownership Reporting Compliance" on pages 7 and 8page 10 of the 20012004 Proxy
Statement, is incorporated herein by reference. The 20012004 Proxy Statement is to
be filed with the Securities and Exchange Commission in connection with the
Company's 20012004 Annual Meeting of Shareholders. The information called for with
respect to executive officers of the Company is included in Part I of this
Report on Form 10-K under the caption "Executive Officers of the Registrant."
The Company has adopted a code of ethics for its principal executive
officer, chief operating officer and senior financial officers. A copy of this
code is included as Exhibit 14 to this report on Form 10-K.
ITEM 11 - EXECUTIVE COMPENSATION
The information set forth in the section entitled "Executive
Compensation" which appears on pages 911 through 1215 of the Company's 20012004 Proxy
Statement and the information relating to compensation of directors set forth in
the last paragraph of the section entitled "Additional Information Concerning
the Board of Directors and Committees" which appears on pages 7 and 8through 10 of
the Company's 20012004 Proxy Statement is incorporated herein by reference. The 20012004
Proxy Statement is to be filed with the Securities and Exchange Commission in
connection with the Company's 20012004 Annual Meeting of Shareholders.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS
The information set forth in the section entitled "Principal
Shareholders" on page 3 of the Company's 20012004 Proxy Statement and the
information with respect to security ownership of the Company's directors and
officers set forth in the section entitled "Election"Security Ownership of Directors"Management" on
pages 45 through 87 of the Company's 20012004 Proxy Statement is incorporated herein
by reference. The 20012004 Proxy Statement is to be filed with the Securities and
Exchange Commission in connection with the Company's 20012004 Annual Meeting of
Shareholders.
The Company does not have any equity compensation plans or
arrangements.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information relating to the law firm of Morrissey & Robinson set
forth in the penultimatelast sentence of footnote (2) on page 6 of the Company's 20012004 Proxy
Statement is incorporated herein by reference. The 20012004 Proxy Statement is to be
filed with the Securities and Exchange Commission in connection with the
Company's 20012004 Annual Meeting of Shareholders.
12
13ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information set forth in section entitled "Independent Certified
Public Accountants" on pages 17 and 18 of the Company's 2004 Proxy Statement is
incorporated herein by reference. The 2004 Proxy Statement is to be filed with
the Securities and Exchange Commission in connection with the Company's 2004
Annual Meeting of Shareholders.
PART IV
ITEM 1415 - EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this
report:
1. Financial Statements:
See the section entitled "Consolidated Financial
Statements" which appears on page 15 of this report.
2. Financial statement schedule and supplementary
information required to be submitted.
See the section entitled "Financial Statement
Schedule" which appears on pages 16 through 18 of
this report.
3. Exhibits:
See the section entitled "Exhibits" which appears on
page 19 of this report.
(b) Reports on Form 8-K
1. The Company did not file any reports on Form 8-K
during the quarter ended December 31, 2000.2003.
13
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Chicago Rivet & Machine Co. has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Chicago Rivet & Machine Co.
By /s/John C. Osterman
-------------------------------------------------
John C. Osterman, President
Andand Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
/s/John A. Morrissey Chairman of the Board of
- -------------------- Directors, Chief Executive
John A. Morrissey Directors, Chief Executive Officer and Member of the
Executive Committee
March 29, 20012004
/s/John C. Osterman President, Chief Operating
- ------------------- Officer, Treasurer (Chief
John C. Osterman Officer, Treasurer (Chief
Financial Officer, Principal
Accounting Officer), Member
of the Executive Committee
and Director
March 29, 20012004
/s/John R. Madden Director, Member of the
- ------------------ John R. Madden Executive Committee and Member
John R. Madden of the Audit Committee
March 29, 20012004
/s/Walter W. Morrissey Director, Member of Executive
- ---------------------- Committee
Walter W. Morrissey Committee
March 29, 20012004
/s/Michael J. Bourg Controller (Principal Accounting
- ------------------- Officer)
Michael J. Bourg March 29, 2004
14
15
CHICAGO RIVET & MACHINE CO.
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements, together with the notes thereto
and the report thereon of PricewaterhouseCoopers LLP dated March 2, 2001,February 25, 2004,
appearing on pages 5 to 11 of the accompanying 20002003 Annual Report, and the
section entitled "Quarterly Financial Data (Unaudited)" appearing on page 12 of
the accompanying 20002003 Annual Report are incorporated herein by reference. With
the exception of the aforementioned information and the information incorporated
in Items 1, 3, 5, 6 and 78 herein, the 20002003 Annual Report is not to be deemed filed
as part of this Form 10-K Annual Report.
Consolidated Financial Statements from 20002003 Annual Report (Exhibit 13 hereto):
Consolidated Balance Sheets (page 5 of 20002003 Annual Report)
Consolidated Statements of Income (page 6 of 20002003 Annual Report)
Consolidated Statements of Retained Earnings (page 6 of 20002003 Annual Report)
Consolidated Statements of Cash Flows (page 7 of 20002003 Annual Report)
Notes to Consolidated Financial Statements (8,(pages 8, 9, and 10 of 20002003 Annual
Report)
Report of Independent AccountantsAuditors (page 11 of 20002003 Annual Report)
Quarterly Financial Data (Unaudited) (page 12 of 20002003 Annual
Report)
15
16
FINANCIAL STATEMENT SCHEDULE
2000, 19992003, 2002 AND 19982001
The following financial statement schedule should be read in
conjunction with the consolidated financial statements and the notes thereto in
the 20002003 Annual Report. Financial statement schedules not included herein have
been omitted because they are not applicable or the required information is
shown in the consolidated financial statements or notes thereto.
Page
----
Financial Statement Schedule:
Valuation and Qualifying Accounts (Schedule II) 17
Report of Independent Accountants
Page
----
Financial Statement Schedule:
Valuation and Qualifying Accounts (Schedule II) 17
Report of Independent Auditors on Financial Statement Schedule 18
16
17
CHICAGO RIVET & MACHINE CO.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 19992003, 2002 AND 19982001
Balance at Additions Balance
atBeginning Charged to Balance
Beginning Costs and Other At endat End
Classification of yearYear Expenses Deductions AdjustmentsDeductions(1) of yearYear
- -------------- ---------- ---------- ------------ ----------- ---------------
20002003
Allowance for doubtful accounts, Returnsreturns
and allowances $ 80,000240,000 $ 58,99310,174 $ 48,993 (1) $ - $ 90,000
199930,174 $220,000
2002
Allowance for doubtful accounts,
Returnsreturns and allowances $240,000 $ 70,0007,067 $ 47,679 $ 37,679 (1) $ - $ 80,000
19987,067 $240,000
2001
Allowance for doubtful accounts,
Returnsreturns and allowances $123,022 $ 141,447 $141,447 (1) $(53,022)(2)90,000 $172,728 $ 70,00022,728 $240,000
(1) Accounts receivable written off, net of recoveries.
(2) Balance sheet reclassification.
17
18
Report of Independent AccountantsAuditors on
Financial Statement Schedule
To the Board of Directors
of Chicago Rivet & Machine Co.
Our audits of the consolidated financial statements referred to in our report
dated March 2, 2001February 25, 2004 appearing in the 20002003 Annual Report to Shareholders of
Chicago Rivet & Machine Co. (which report and financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the Financial Statement Schedule listed in Item 14(a)15(a)(2) of this Form
10-K. In our opinion, this Financial Statement Schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Chicago, Illinois
March 2, 2001February 25, 2004
18
19
CHICAGO RIVET & MACHINE CO.
EXHIBITS
INDEX TO EXHIBITS
Exhibit
Number Page
- ------ ----
2.1 Purchase and Sale Agreement dated February 18,
1993. Incorporated by reference to Company's
Current Report on Form 8-K, dated May 7, 1993.
2.2 Purchase and Sale Agreement dated September 18,
1996. Incorporated by reference from Company's
Current Report on Form 8-K, dated December 16,
1996.
Exhibit
Number Page
- ------ -------
3.1 Articles of Incorporation and Charter.
Incorporated by reference to Company's
report on Form 10, dated March 30, 1935.
3.2 Certified copy of articles of Amendment to
Articles of Incorporation, dated November 4,
1959. Incorporated by reference to Company's
report on Form 8-A, dated April 30, 1965.
3.3 Amendment of Articles of Incorporation
creating a class of 500,000 shares of no
par value preferred stock. Incorporated by
reference to Company's report on Form 10-K,
dated April 30, 1972.
3.4 Amended and Restated By-Laws, as amended
February 16, 2004. 21 - 46
3.5 Articles of Incorporation, as amended by the amendment to the
Articles of Incorporation, dated August 18, 1997. Incorporated
by reference to the Company's report on Form 10-K, dated March
27, 1998.
4.1 Rights Agreement, dated November 22, 1999,
between the Company and First Chicago Trust Company
of New York as Rights Agent. Incorporated
by reference to the Company's report on
Form 10-K, dated March 29, 2000.
13* Annual Report to Shareholders for the year
ended December 31, 2003. 47 - 63
14 Code of Ethics for Principal Executive and Senior
Financial Officers 64 - 66
21 Subsidiaries of the Registrant. 67
31.1 Certification of CEO Pursuant to Rule 13a-14(a)
or 15d-14(a) as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002. 68
31.2 Certification of CFO Pursuant to Rule 13a-14(a)
or 15d-14(a) as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002. 69
19
2001. 20 through 38
3.5 Articles of Incorporation, as amended by the
amendment to the Articles of Incorporation,
dated August 18, 1997. Incorporated by reference
to the Company's report on Form 10-K, dated
March 27, 1998.
4.1 Rights Agreement, dated November 22, 1999,
between the Company and First Chicago Trust
Company of New York as Rights Agent.
Incorporated by reference to the Company's
report on Form 10-K, dated March 29, 2000.
*13 Annual Report to Shareholders for the year
ended December 31, 2000. 39 through 55
21 Subsidiaries of the Registrant. 56
32.1 Certification of CEO Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. 70
32.2 Certification of CFO Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. 71
* Only the portions of this exhibit which are specifically incorporated herein
by reference shall be deemed to be filed herewith.
1920