ITEM4 –- Mine Safety Disclosures

Not applicable.

Information about our Executive Officers of the Registrant

The names, ages and positions of all executive officers of the Company, as of March 19, 2018,15, 2023, 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 theseThe Company’s bylaws provide that officers, norwhen elected, shall hold office for the period of one year and thereafter until their respective successors shall have been duly elected, and shall have qualified (provided that officers shall be subject to removal at any arrangement or understanding between any officer and any other person pursuant to whichtime by the officer was selected.affirmative vote by a majority of the Board of Directors).

-Mr. Walter Morrissey was Chairman of the Board of Directors of the Company and Chief Executive Officer of the Company from May 2020 until he passed away in December 2022.  He was a director of the Company from 1972. 

PART II

As a Smaller Reporting Company as defined in Rule12b-2 of the Exchange Act and in item 10(f)(1) of RegulationS-K, we have elected scaled disclosure reporting obligations with respect to this item and therefore are not required to provide the information requested by this Item 6.

ITEM 7 – Management’s- Management's Discussion and Analysis of

Financial Condition and Results of Operations

Forward-Looking Statements

This discussion contains certain “forward-looking statements”"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 above under “Risk Factors” and elsewhere in this Form10-K.  As stated elsewhere in this filing, such factors include, among other things: risk related to the COVID-19 pandemic and its related adverse effects, 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 awith major customer,customers, risks related to export sales, the price and availability of raw materials, supply chain disruptions, labor relations issues, losses related to product liability, warranty and recall claims, costs relating to environmental laws and regulations, information systems disruptions and the loss of the services of our key employees.  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.

RESULTS OF OPERATIONS

Financial

Operating results for 2017 were positive, although2022 did not as strong as those reported in 2016.meet our expectations.  Net sales grew in the first half of the year, but stalled in the third quarter and declined in the fourth quarter as overall demand softened amid recessionary fears and rising interest rates.  At the same time, we had difficulties meeting the requirements of certain customers due to staffing shortages.  In addition, higher raw material prices and inflationary pressures also negatively impacted our margins.  Fourth quarter sales were $35,764,714 in 2017$6,857,154 compared to $37,022,378 in 2016, a decline of $1,257,664, or 3.4%. Net income for 2017 was $2,079,082, or $2.15 per share, compared to $2,356,980, or $2.44 per share, in 2016.

2017 Compared to 2016

Fastener segment revenues were $7,658,239$7,749,488 in the fourth quarter of 2017,2021, a decline of $73,195,$892,334, or 0.9%, from $7,731,434 reported11.5%.  The decline in sales, combined with high raw material prices, record-high inflation and the tight labor market contributed to reporting a net loss in the fourth quarter of 2016.$1,312,648, or $1.36 per share, compared to net income of $81,178, or $0.08 per share, in the fourth quarter of 2021.  For the full year, net sales were $33,646,033 compared to $33,974,558 in 2021, a decline of $328,525, or 1.0%.  Net income for the full year was $2,867,629, or $2.97 per share, compared to $1,113,472, or $1.15 per share in 2021.  The positive figure for 2022 includes a pre-tax gain on the sale of our Naperville, Illinois property of $4,738,394 that was reported in the third quarter. 

2022 Compared to 2021

Fastener segment revenues were $6,272,480 in the fourth quarter of 2022 compared to $6,988,047 in the fourth quarter of 2021, a decline of $715,567, or 10.2%.  We experienced a general slow-down in demand in the fourth quarter compared to earlier in the year, but at the same time, were unable to meet the requirements of certain automotive customers, where demand remained steady, due to insufficient production staff.  During the quarter, sales to automotive customers increased fractionally to $4,185,600 from $4,163,004 in the year earlier quarter.  That increase was more than offset by a decline in sales to non-automotive customers, which were $2,086,880 in the fourth quarter of 2022 compared to $2,825,043 a year earlier, a decline of $738,163, or 26.1%.  The abrupt decline in sales and production challenges due to staffing shortages resulted in reporting a gross loss in the fourth quarter of $555,641 compared to gross profit of $1,072,310 in the year earlier quarter.  Fastener segment revenues for the full year 2022 were $31,977,964$30,291,547 compared to $29,831,388 in 20172021, an increase of $460,159, or 1.5%.  For the full year 2022, sales to automotive customers were $18,454,238 compared with $33,126,599to $17,573,104 in 2016,2021, an increase of $881,134, or 5.0%.  Sales to non-automotive customers in 2022 were $11,837,309 compared to $12,258,284 in 2021, a decline of $1,148,635,$420,975, or 3.5%3.4%.  OurThe modest increase in fastener segment relies on the automotive sector for the majority of its revenues. Domestic automobile and light truck sales declined approximately 2% during 2017, which negatively impacted our sales. During 2017, fastener segment margins were pressured due to greater quality related expenses and a reversal of the favorablewas more than offset by higher costs as raw material prices experienced in 2016. These factors contributed toremained elevated and general inflation reached record levels.  Difficulty achieving proper staffing further negatively impacted margins as operational efficiency suffered.  As a net reduction inresult, gross margin for the fastener segment of $103,117was $3,167,104 in the fourth quarter and $1,128,434 for the full year of 20172022 compared to 2016.$5,185,956 in 2021. 

Assembly equipment segment revenues were $800,884$584,674 in the fourth quarter of 2017, a decline of $218,661, or 21.4%,2022, compared to the strong results$761,441 in the fourth quarter of 2016, when revenues were $1,019,545.2021, a decline of $176,767, or 23.2%.  For the full year 2017,2022, assembly equipment segment revenues were $3,786,750,$3,354,486, compared to $4,143,170 reported in 2021, a decline of $109,029,$788,684, or 2.8%,19.0%.  While the decline in sales was significant, it should be noted that 2021 assembly equipment sales were the highest annual total since 2007.  The decline in sales, combined with high inflation and some delivery delays for machine parts, resulted in a gross loss of $51,543 for the fourth quarter of 2022 compared to $3,895,779 reported in 2016. The decrease in fourth quarter and full year sales was primarily due to a reduction in the numbergross profit of rivet setting machines shipped compared to the prior year periods. These declines were partially offset by an increase in machine parts and tool sales during 2017. The net decline in assembly equipment segment sales was the primary cause of the $83,200 reduction in segment margins$195,237 in the fourth quarter of 2017, however through effective cost controls,2021.  For the full year 2022, assembly equipment segment gross margins for the year were relatively unchanged.declined to $648,220 from $1,279,136 in 2021. 

Selling and administrative expenses were $5,548,541$4,992,521 in 20172022 compared to $5,559,436$5,106,177 in 2016,2021, a declinedecrease of $10,895,$113,656, or 0.2%2.2%.  Profit sharingWe incurred an increase in outside consulting of $42,498, primarily related to hiring fees to fill certain positions, and rent expense declined $118,000 for the year due to lower operating profit and payroll expense declined $83,000 due to reduced headcount. Largely offsetting these reductions wasof approximately $167,000 in expenses$33,387, primarily related to the implementationlease agreement entered into upon the sale of the Naperville facility.  These, and other smaller increases, were offset by a new ERP system at onereduction in salaries of our locations.$135,714, related to positions that remained unfilled for an extended period of time during the year, and reductions in commissions and director fees of $44,126 and $43,739, respectively.  The remaining net change relates to various smaller items.  As a percentage of net sales, selling and administrative expenses were 15.5%14.8% in 2022 compared to 15%15.0% in 2016.2021.

As previously disclosed in a Current Report on Form 8-K filed on September 30, 2022, we sold our Naperville, Illinois facility in which the Company’s headquarters and warehouse space is located for a selling price of $5,350,000 in cash, less customary closing costs.  Concurrently with the completion of the sale, the Company entered into a lease agreement with the purchaser pursuant to which the Company leased the warehouse portion of the Naperville facility from the purchaser until December 31, 2022 and will lease the office portion until June 30, 2023.  The monthly rent payable by the Company under the Lease was $12,500 for the period from the closing until December 31, 2022 and is $8,500 for the period from January 1, 2023 to June 30, 2023.  The sale was undertaken in order to take advantage of favorable market conditions and to reduce the occupancy space devoted to administrative functions.

Other income was $100,901$91,433 in 20172022 compared to $65,255$55,557 in 2016.2021.  Other income is primarily comprised of interest income which increased during the year due to risinghigher interest rates and greater amounts invested in certificates of deposit compared to the prior year.balances. 

The Company’s effective income tax rates were 15.7%21.5% and 33.6%21.3% in 20172022 and 2016,2021, respectively. The rate was lower than the U.S. federal statutory rate in 2017 primarily due to the enactment of the Tax Cuts and Jobs Act (“the Act”) in December 2017. Among other changes, the Act reduced the maximum corporate tax rate from 35% to 21% beginning in 2018. Although the lower tax rate takes effect in 2018, deferred tax assets and liabilities should be measured using the enacted tax rate expected to apply in the years in which they are expected to be settled. The Company recorded aone-time net income tax benefit of $432,000 in the fourth quarter of 2017 as a result of the revaluation of the Company’s deferred tax assets and liabilities to reflect the lower future U.S. corporate tax rates. The 2016 rate was lower than the U.S. federal statutory rate primarily due to the Domestic Production Activities Deduction allowed under Internal Revenue Code Section 199.

DIVIDENDS

In determining to pay 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 in 2022 totaling $.80 per share during 2017. In addition, an extra dividend of $.35 per share was paid during the first quarter, bringing the total distribution for the year to $1.15$0.88 per share.  On February 19, 2018,20, 2023, the Board of Directors declared a regular quarterly dividend of $.21$0.22 per share, an increase of 5% from the prior quarter, payable March 20, 20182023 to shareholders of record on March 5, 2018.3, 2023.  This continues the uninterrupted record of consecutive quarterly dividends paid by the Company to its shareholders that extends over 8489 years. At that same meeting, the Board also declared an extra dividend of $.30 per share payable March 20, 2018 to shareholders of record on March 5, 2018.

PROPERTY, PLANT AND EQUIPMENT

Capital

Total capital expenditures during 2017 totaled $1,337,941. The fastenerin 2022 were $969,943.  Fastener segment additions accounted for $1,093,539$868,654 of the total, including $904,312$92,880 for production equipment. Coldcold heading and screw machine equipment, additions were $303,992, quality control equipment additions were $281,983, additions$208,028 for equipment to perform secondary operations onand inspection of parts were $261,143 and $57,194 was expended$215,540 for general plant equipment. The remainderremaining $352,206 of the fastener segment additions relaterelated to building improvements and technology equipment. Assembly equipment segment additions totaled $178,761, primarily for production equipment. Additional investments of $65,641 were made in 2017 for building improvements that benefit both operating segments.

Total capital expenditures in 2016 were $2,027,860. Fastener segment additions accounted for $1,683,953 of the total, including $758,467 for the substantial completion of the H & L Tool building expansion that was begun in 2015. Cold heading and screw machine equipment additions totaled $180,818 while secondary processing equipment totaled $301,932. Inspection equipment comprised $247,330 of the fastener segment additions and the remaining additions of $195,406 were for various general plant equipment.improvements.  Assembly equipment segment additions in 20162022 were $189,568,$3,207 for productionIT equipment.  Investments for the benefit of both operating segments, primarily for building improvements, totaled $154,339$98,082 during 2016.2022.

Capital expenditures during 2021 were $670,898.  Of the total, $493,564 related to fastener segment activities, including cold heading equipment additions of $62,600, secondary processing equipment of $360,588 and general plant equipment additions of $70,376.  Additional investments of $177,334 were made in 2021 for facilities improvements that benefit both the assembly equipment segment and the fastener segment.

Depreciation expense amounted to $1,231,546was $1,279,870 in 20172022 and $1,242,357$1,318,554 in 2016.2021.

LIQUIDITY AND CAPITAL RESOURCES

Working capital at December 31, 20172022 was approximately $17 million,$20,073,089, an increase of $.6 million$2,651,504 from the beginning of the year.  The most significant factorimprovement was primarily due to the gain realized on the sale of our Naperville property during the third quarter. While working capital also improved due to a decline in net accounts receivable during the change wasyear of $672,847, an increase in inventory of $601,450, due to higher material prices and elevated quantities on hand to minimize supply disruptions, and a $585,190 increase in other current assets, had a negative impact on working capital.  The Company’s investing activities in 2022 included the proceeds from the sale of property and equipment of $5,043,240 and the net increase in cash andmaturities of certificates of deposit as a result of continued profitable operations in 2017 and the reduction in$50,000 less capital expenditures compared toof $969,943.  The only financing activity during 2022 was the prior year. The Company’s holdingspayment of $850,196 in dividends.  These changes and other cash flow activity resulted in a balance of cash, cash equivalents and certificates of deposit amounted to $9 millionof $6,736,101 at the end of 2017, an increase2022 compared to $4,777,954 as of $.6 million. The Company’s investing activities in 2017 consisted primarilythe beginning of capital expenditures of $1.3 million. The only financing activity during 2017 was the payment of approximately $1.1 million in dividends.year. 

Management believes that current cash, cash equivalents and operating cash flow will be sufficient to provide adequate working capital for the next twelve months.

Off-Balance Sheet Arrangements

The Company has not entered into, and has no current plans to enter into, anyoff-balance sheet financing arrangements.

APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America 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.  We base our estimates and assumptions on historical experience, current trends and on various other assumptions that are believed to be reasonable under the circumstances.  We evaluate our estimates and judgments required by our policies on an ongoing basis and update them as appropriate based on changing conditions.  A summary of critical accounting policies can be found in Note 1 of the financial statements.

Critical accounting estimates are those that require application of management’s most difficult, subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods.  We have reviewed our accounting estimates, and none were deemed to be considered critical for the accounting periods presented.  While we apply our judgment based on assumptions believed to be reasonable under the circumstances, actual results could vary from these assumptions. Additionally, future facts and circumstances could change and impact our estimates and assumptions.

NEW ACCOUNTING STANDARDS

The Company’s financial statements and financial condition were not, and are not expected to be, materially impacted by new, or proposed, accounting standards.  A summary of recent accounting pronouncements can be found in Note 1 of the financial statements.

OUTLOOK FOR 20182023

We started 2018 with a more cautious outlook than a

Operating results for 2022 were negatively impacted by numerous factors.  Although demand early in the year ago. U.S. auto and light truck sales, not unexpectedly, declined from their recent peaks during 2017 and are forecast to decline further in 2018. With the majority of our fastener segment revenues coming from the automotive sector, revenue growth may be more difficult as a result. During 2017, we did add a number ofnon-automotive customers inwas steady for both the fastener segment which should help offset any shortfalls related to lower domestic automobile production. Additionally, we experienced increases inand the cost of our primary raw materials during 2017 and have seen further increases in early 2018. Increases in costs can be difficult to recover in some of the markets we serve as certain customers expect prices of their parts to be held constant over the multi-year life of that part. Both of these factors will contribute to a more challenging environment for our fastener segment operations. The assembly equipment segment, reported resultsas the year progressed, we experienced a softening in 2017demand which led to a significant drop in sales in the fourth quarter.  The tight labor market made maintaining an optimal workforce difficult and those challenges intensified as the year progressed.  We endured extended periods where important positions remained unfilled, resulting in inefficiencies and higher costs.  We are committed to overcoming these challenges as part of an overall strategic review that were comparableis underway and have made investments in the new year in an effort to those of the prior year, however we entered 2018 with less of a machine order backlog than a year ago which will make achieving similar results for that segment more difficult.

The recently enacted tax reform and the expected increase in interest rates are two more variables that will impact results in 2018. In anticipation ofaddress the challenges ahead,of maintaining efficient operations with a smaller, less experienced workforce. We are also reviewing, and seeking to adjust, our pricing in light of higher operating costs related to the current economic and labor market environment.  As always, we will continue to look for additional areas for improvement while pursuing opportunities to increase sales by emphasizing value over price and focusing on our effortsabilities to improve operational efficiencymake more complex parts for which our experience, quality and service are important factors in purchasing decisions.

We were saddened to report the passing of Walter W. Morrissey in December 2022.  Mr. Morrissey had served as a meansDirector of improving margins.the Company since 1972 and as Chairman of the Board and Chief Executive Officer since May 2020.  His contributions to the success of the Company over the years will be missed.  Director James W. Morrissey was named non-executive Chairman of the Board until the Annual Meeting of Shareholders on May 9, 2023.  The search for a new Chief Executive Officer is currently underway.

Notwithstanding the difficult environment we are operating in, we believe that our sound financial condition and long history of success in a variety of challenging circumstances will provide the basis for improved operating activities in the future.  We increased our capital expenditures in 2022 over the previous year and expect to make further investments in 2023.  We will also continue our efforts to develop new customer relationships and build on existing ones in all the markets we serve by emphasizing our experience, product quality and customer service in a very competitive global marketplace.

Over  We are grateful for the last five years, we have invested $10.7 million in equipment and facilities upgrades in order to increase our capabilities, expand production capacity and improve operating efficiency. These investments, which we feel are necessary to remain competitive, have been made possible by our consistent profitability during that period. That profitability has also allowed us to pay dividends of $4.7 million over the same period and declare an additional special dividend of $.3 million, to be paid in the first quarter of 2018.

The positive results in the past year would not have been possible without the conscientious effortscontributions of our dedicated employees who consistently strive to meetin what was a uniquely challenging year as well as for the challenges that characterize today’s manufacturing environment. We are grateful for their contributions towards meeting our customers’ expectations related to quality, price and service. We also take this opportunity to thankloyalty of our customers for havingand the confidence in us to be a partsupport of their success and our shareholders for their continued support.