EXHIBIT-13
[CHICAGO RIVET LOGO]
Chicago Rivet & Machine Co.
2006 Annual Report
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[CHICAGO RIVET LOGO]
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HIGHLIGHTS
<Table>
<Caption>
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2006 2005 2004
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NET SALES AND LEASE REVENUE.................... $40,369,977 $39,760,756 $39,232,866
NET INCOME (LOSS).............................. 1,120,627 (398,612) 1,523,434
NET INCOME (LOSS) PER SHARE.................... 1.16 (.41) 1.58
DIVIDENDS PER SHARE............................ .72 .87 .72
NET CASH PROVIDED BY OPERATING ACTIVITIES...... 2,036,841 693,152 2,320,060
EXPENDITURES FOR PROPERTY, PLANT AND
EQUIPMENT.................................... 1,451,756 647,162 1,359,582
WORKING CAPITAL................................ 15,242,183 14,839,923 15,222,262
TOTAL SHAREHOLDERS' EQUITY..................... 24,003,168 23,578,156 24,817,303
COMMON SHARES OUTSTANDING AT YEAR-END.......... 966,132 966,132 966,132
SHAREHOLDERS' EQUITY PER COMMON SHARE.......... 24.84 24.40 25.69
</Table>
ANNUAL MEETING
The annual meeting of shareholders
will be held on May 8, 2007 at 10:00 a.m. at
901 Frontenac Road
Naperville, Illinois
Chicago Rivet & Machine Co. - 901 Frontenac Road - P.O. Box 3061 - Naperville,
Illinois 60566 - www.chicagorivet.com
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MANAGEMENT'S REPORT
ON FINANCIAL CONDITION AND RESULTS OF OPERATIONS [CHIGAGO RIVET LOGO]
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TO OUR SHAREHOLDERS:
RESULTS OF OPERATIONS
The past year began on a positive note, as net sales for the first six
months increased 9% over the first half of 2005. This growth in sales
contributed to the return to profitability in the first two quarters of 2006.
However, the second half of the year proved to be more challenging. Net sales in
the third and fourth quarters each reflected declines of approximately 6%
compared to the same period a year earlier. This resulted in a total net sales
increase for 2006 of less than 2% compared to 2005. Despite the lower sales in
the second half of the year, we were able to maintain profitability due in part
to reductions in various expenditures throughout the year, finishing 2006 with
net income per share of $1.16, compared to a year earlier loss. Results in 2006
were adversely impacted by costs related to closing our Jefferson, Iowa fastener
manufacturing facility.
2006 COMPARED TO 2005
Net sales within the fastener segment increased $472,000, or 1.4%, during
2006 compared with 2005. The fastener segment started the year relatively strong
and reflected an increase in net sales of 11.4% after the second quarter.
However, the second half of the year was particularly weak, as sales in the
third and fourth quarter declined 8.4% compared to the prior year. The up and
down results were tied to changes in demand from our larger automotive
customers. Production cuts by domestic automotive companies, in response to high
inventory levels and reduced sales forecasts, were largely responsible for the
weakness we experienced in the second half of the year. Gross margins within
this segment improved by approximately $1,920,000 during 2006, aided by the net
increase in sales and the decline of two expense items that had large increases
in 2005. Tooling expense declined by more than $1 million during 2006, as cost
controls were emphasized and better tool life was achieved during the year, and
expediting costs declined by $130,000, returning to more normal levels.
Additionally, material cost of sales declined $396,000, primarily due to lower
average steel prices during 2006 compared with 2005.
Revenues within the assembly equipment segment increased by $137,116, or
2.4%, to $5,948,579 in 2006, compared with $5,811,463 in 2005. Most of the
increase was the result of an improved fourth quarter when net sales increased
11% compared with the fourth quarter of 2005. The improvement was primarily due
to an increase in the number of specialty machines shipped during the current
year and not the result of an overall improvement in the marketplace. Gross
margins for 2006 increased approximately $220,000, benefiting not only from the
increase in sales, but also a reduction in labor costs and labor related
expenses, due to headcount reductions.
Selling and administrative expenses declined $689,687 during 2006 compared
with 2005. Professional fees declined $334,000 in 2006 due to initial procedures
performed in 2005 related to compliance with the Sarbanes-Oxley Act of 2002.
Selling and administrative expenses incurred in 2005 also included $315,000 to
resolve a litigation matter. Expenses were further reduced by $103,000 due to
the absence of bankruptcy filings of certain customers in the current year.
Finally, salaries and related benefits declined by $84,000, primarily due to
turnover and headcount reductions during the year. The reduction in these
expense items was partially offset by the increase in profit sharing expense of
$100,000, due to the profitable operating results in 2006.
In May of 2006, a decision was made to close our Jefferson, Iowa fastener
operation and transfer production activities to our facility in Tyrone,
Pennsylvania, to better utilize manufacturing capacity. During the fourth
quarter, manufacturing activities in Jefferson concluded. We are currently in
the process of selling and or transferring the remaining assets of that
location, and anticipate having the building ready for sale in the first quarter
of 2007. As of December 31, 2006, a charge of $422,934 has been recorded related
to the plant closing. Additional costs associated with the relocation of
equipment and disposal of the facility are expected, but the amount and timing
of such costs are not known at this time, nor are they expected to be material.
2005 COMPARED TO 2004
During 2005, revenues within the fastener segment increased by nearly $1.5
million, or 4.5%, compared with the prior year. However, a change in product
mix, combined with ongoing competitive pressures within our markets, which
adversely impacted selling prices, contributed to a decline in gross margins
within this segment. Change in product mix was the primary factor causing
material costs to increase $1.3 million compared to 2004 and was also the main
factor contributing to a $757,000 increase in outside processing services. Labor
and fringe benefit costs increased approximately $350,000. Tooling costs
increased by approximately $518,000 compared to 2004, primarily due to costs
related to the manufacture of new parts used in a number of new automotive
platform launches. The Company also incurred an increase of $253,000 related to
costs associated with expedited delivery due to shortened customer lead-time
requirements.
Weak demand continued to characterize the assembly equipment segment of our
business in 2005, contributing to a decline in revenues of $944,000, or 14%,
compared to the prior year. We were able to reduce most manufacturing costs in
direct proportion to the decline in revenues. Labor and fringe benefit costs
declined by $305,000, while raw material costs were $91,000 lower than the prior
year. Additionally,
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1
MANAGEMENT'S REPORT
(Continued)
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most other elements of cost declined as a result of lower volumes. However, the
net effect of lower volume was a decline of $491,000 in gross margins.
Selling and administrative expenses increased by $682,000 in 2005 compared
to 2004. The single largest factor affecting the change in total expenses in
this category between the two years is that during 2004, the Company received a
refund of the Michigan single business tax that amounted to $330,000. This
refund was the result of a successful appeal of the tax calculation for the
prior four years. Professional fees and expenses incurred, primarily related to
compliance with the Sarbanes-Oxley Act of 2002, increased by $359,000 during
2005. Legal fees increased approximately $140,000 in 2005, primarily due to
protracted litigation that was resolved that year. Bad debt expense increased
$73,000, primarily in connection with the bankruptcy of certain customers. These
increases were partially offset by reductions in a variety of other expenses;
the most significant being a reduction in profit sharing expense of $127,000,
due to the decrease in profitability, and lower depreciation of office equipment
of $57,000.
During the fourth quarter of 2005, the Company realized a gain of $256,660
from proceeds received due to the demutualization of an insurance provider.
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 of $.18 per share during 2006, for a total dividend
distribution of $.72 per share for the year. On February 19, 2007, your Board of
Directors declared a regular quarterly dividend of $.18 per share, payable March
20, 2007 to shareholders of record on March 5, 2007. This continues the
uninterrupted record of consecutive quarterly dividends paid by the Company to
its shareholders that extends over 73 years.
PROPERTY, PLANT AND EQUIPMENT
Capital expenditures during 2006 totaled $1,451,756, of which $1,374,009 was
invested in equipment for our fastener operations. Approximately $680,000 was
spent on cold-heading equipment that will expand our capabilities to make larger
parts and approximately $233,000 was spent on equipment for performing secondary
operations, such as grinding and shaving of parts. Additionally, approximately
$346,000 was spent on inspection equipment. The remaining additions were for
computer hardware and other equipment not specifically assigned to a single
segment.
Total capital expenditures in 2005 were $647,162. Of the total, $460,000 was
invested in building improvements, including $422,495 for new roofs at two
facilities. Fastener segment equipment additions amounted to $91,000, primarily
for equipment related to plating of parts and quality control. Assembly
equipment segment additions totaled $36,000, with approximately $32,000 expended
for equipment used to manufacture perishable tooling. The remaining additions
related primarily to computer equipment and other miscellaneous equipment
benefiting both operating segments.
Capital investments totaled $1.4 million during 2004. Capital expenditures
were concentrated within the fastener segment, where investment totaled $1.3
million. Of this total, $1.1 million was invested to purchase cold-heading
machinery and related equipment used in the manufacture of fasteners. The
remainder of the expenditures within the fastener segment was for various
building improvements, additional waste treatment equipment required to meet
environmental requirements, and material handling equipment. The balance of the
Company's 2004 capital expenditures covered a variety of smaller items,
including computers and other office equipment.
Depreciation expense amounted to $1,659,834 in 2006, $1,703,382 in 2005, and
$1,757,962 in 2004.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased approximately $.4 million between
December 31, 2005 and December 31, 2006. The Company's holdings in cash, cash
equivalents and certificates of deposit amounted to approximately $5.7 million
at the end of 2006, a slight increase compared with the prior year-end.
Inventories were reduced by nearly $.5 million, as higher than normal quantities
on hand during the last two years to guard against supply shortages were further
reduced. Accounts receivable increased $.5 million compared with the prior
year-end, primarily due to a change in the regular payment schedule for a
certain customer and not due to any specific collection concern. The accrual for
profit sharing contribution increased $.1 million compared to the prior year,
due to more profitable operations in 2006, while the remaining accrued expenses
decreased $.3 million as accrued plant closing expenses as of December 31, 2006
were offset by reductions in the liability for income taxes and customer
deposits. The Company's investing activities in 2006 primarily consisted of
capital expenditures of $1.3 million and the net investment in certificates of
deposit of $4.4 million. The only financing activity during 2006 was the payment
of $.7 million in dividends. The Company has a $1.0 million line of credit,
which expires May 31, 2007. This line of credit remains unused.
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2
MANAGEMENT'S REPORT
(Continued) [CHIGAGO RIVET LOGO]
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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 summary of the Company's contractual
obligations as of December 31, 2006:
<Table>
<Caption>
PAYMENTS DUE BY PERIOD
----------------------------------------------------
LESS MORE
CONTRACTUAL THAN 1 - 3 4 - 5 THAN
OBLIGATION TOTAL 1 YEAR YEARS YEARS 5 YEARS
- ----------- -------- -------- -------- -------- --------
Long-term Debt....... $ -- $ -- $ -- $ -- $ --
Capital Lease
Obligations......... -- -- -- -- --
Operating Leases..... 39,934 29,830 10,104 -- --
Purchase
Obligations......... 286,884 257,605 28,163 1,116 --
-------- -------- -------- -------- --------
Total................ $326,818 $287,435 $ 38,267 $ 1,116 $ --
======== ======== ======== ======== ========
</Table>
Management believes that current cash, cash equivalents, operating cash flow
and available line of credit will be sufficient to provide adequate working
capital for the foreseeable future.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of December 31, 2006, the Company did not have any outstanding debt. The
Company did not use any derivative financial instruments during 2006.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
The preparation of financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States
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. A summary of
critical accounting policies can be found in Note 1 of the financial statements.
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.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The firm of PricewaterhouseCoopers LLP served as the Company's independent
registered public accounting firm for the year ended December 31, 2004.
On February 28, 2005, the Company was notified by PricewaterhouseCoopers LLP
that they would not stand for re-election as the Company's independent
registered public accounting firm for the year ending December 31, 2005.
PricewaterhouseCoopers LLP agreed, however, to continue to serve as the
Company's independent registered public accounting firm until completion of its
procedures on the financial statements of the Company for the year ended
December 31, 2004. On March 21, 2005, PricewaterhouseCoopers LLP completed its
procedures on the financial statements of the Company for the year ended
December 31, 2004, and ceased serving as the Company's independent registered
public accounting firm.
On March 23, 2005, the Audit Committee engaged Grant Thornton LLP to serve
as the Company's independent registered public accounting firm for the year
ended December 31, 2005.
The report of PricewaterhouseCoopers LLP on the Company's financial
statements for the year ended December 31, 2004 did not contain an adverse
opinion or a disclaimer of opinion and is not qualified or modified as to
uncertainty, audit scope or accounting principle. During the year ended December
31, 2004 and through March 21, 2005, there were no disagreements with
PricewaterhouseCoopers LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of PricewaterhouseCoopers
LLP, would have caused PricewaterhouseCoopers LLP to make reference thereto in
its report on the Company's financial statements for that year. During the year
ended December 31, 2004 and through March 21, 2005, there were no "reportable
events" (as defined in SEC Regulation S-K Item 304(a)(1)(v)).
Between January 1, 2003 and the engagement of Grant Thornton LLP on March
23, 2005, neither the Company nor anyone acting on behalf of the Company
consulted with Grant Thornton LLP regarding either (i) the application of
accounting principles to a specified completed or contemplated transaction or
the type of audit opinion that might be rendered on the Company's financial
statements; as such, no written or oral advice was provided or (ii) any matter
that was either the subject of a disagreement with PricewaterhouseCoopers LLP or
a "reportable event."
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3
MANAGEMENT'S REPORT
(Continued)
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PERSONNEL
On May 9, 2006, the Board of Directors elected Michael J. Bourg to the
positions of President, Chief Operating Officer and Treasurer of the Company,
replacing John C. Osterman who had announced on November 21, 2005 his intention
to retire from the Company.
OUTLOOK FOR 2007
While we are certainly pleased to report a return to profitable operations
in 2006, many challenges are evident as we begin the new year. Automotive
industry conditions continue to be challenging domestically due to overcapacity,
high retiree benefits costs and intense competition. Due to our heavy reliance
upon the domestic auto market we are impacted by these conditions. We expect
these conditions to continue for the foreseeable future as end-users of our
products continue to look for cost savings in their own operations. The domestic
"Big Three" automakers are at varying stages of well-publicized restructurings
and the effects of these restructurings on their suppliers remain unclear. At
the same time, customer demand for higher quality and lower prices continues
unabated. While we have obtained sales from customers that supply the import
brands, we will need to further penetrate that market to offset production cuts
of the domestic brands. Our ability to increase revenues as well as diversifying
our customer base will be a significant factor in our future growth.
Although we reported higher revenues and profits in the assembly equipment
segment during 2006, our volume of activity measured in units sold actually
declined. Given industrial output data currently available, we have no reason to
expect any significant improvement in this segment in the near-term. The
increase reported in 2006 was primarily due to specialty equipment sales, which
although providing higher revenue opportunities, are also less predictable in
nature.
We will continue our efforts to increase our sales revenues in all markets
by emphasizing value over price and will focus on more complex products used by
customers for which our expertise, service and unsurpassed quality are important
factors in making purchasing decisions. At the same time, we will continue to
pursue solutions that help improve our operations at all levels while continuing
our efforts to control operating costs.
Our future success is dependent on how we anticipate, and respond to, many
ever-changing factors. We believe that the valuable contributions of our
employees, whose dedicated efforts allowed for the turnaround achieved in 2006,
and our sound financial condition, will help us face the challenges ahead in
2007. We also wish to thank our customers and our shareholders for their
continued support.
Respectfully,
<Table>
/s/ J. A. MORRISSEY /s/ MICHAEL J. BOURG
John A. Morrissey Michael J. Bourg
Chairman President
</Table>
March 20, 2007
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, those disclosed under "Risk Factors" in our
Annual Report on Form 10-K and in the other filings we make with the United
States Securities and Exchange Commission. These factors, include among other
things: conditions in the domestic automotive industry, upon which we rely for
sales revenue, the intense competition in our markets, the concentration of our
sales to two major customers, the price and availability of raw materials, labor
relations issues, losses related to product liability, warranty and recall
claims, costs relating to environmental laws and regulations, 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.
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4
[CHICAGO RIVET LOGO]
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CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
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December 31 2006 2005
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ASSETS
Current Assets
Cash and Cash Equivalents................................. $ 367,581 $ 4,730,837
Certificates of Deposit................................... 5,405,000 1,005,000
Accounts Receivable -- Less allowances of $150,000 and
$210,000, respectively................................. 5,902,628 5,370,611
Inventories............................................... 5,481,309 5,971,695
Deferred Income Taxes..................................... 499,191 560,191
Prepaid Income Taxes...................................... 118,914 --
Other Current Assets...................................... 294,593 232,142
----------- -----------
Total Current Assets...................................... 18,069,216 17,870,476
Net Property, Plant and Equipment........................... 9,837,260 10,051,508
----------- -----------
Total Assets................................................ $27,906,476 $27,921,984
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable.......................................... $ 1,431,468 $ 1,452,314
Accrued Wages and Salaries................................ 693,442 680,969
Accrued Profit Sharing Plan Contribution.................. 225,000 125,000
Accrued Plant Closing Expense............................. 217,443 --
Other Accrued Expenses.................................... 259,680 772,270
----------- -----------
Total Current Liabilities................................. 2,827,033 3,030,553
Deferred Income Taxes....................................... 1,076,275 1,313,275
----------- -----------
Total Liabilities......................................... 3,903,308 4,343,828
----------- -----------
Commitments and Contingencies (Note 10)..................... -- --
Shareholders' Equity
Preferred Stock, No Par Value, 500,000 Shares Authorized:
None Outstanding....................................... -- --
Common Stock, $1.00 Par Value, 4,000,000 Shares
Authorized: 1,138,096 Shares Issued.................... 1,138,096 1,138,096
Additional Paid-in Capital................................ 447,134 447,134
Retained Earnings......................................... 26,340,036 25,915,024
Treasury Stock, 171,964 Shares at cost.................... (3,922,098) (3,922,098)
----------- -----------
Total Shareholders' Equity................................ 24,003,168 23,578,156
----------- -----------
Total Liabilities and Shareholders' Equity.................. $27,906,476 $27,921,984
=========== ===========
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
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5
[CHICAGO RIVET LOGO]
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CONSOLIDATED STATEMENTS OF INCOME
<Table>
<Caption>
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For the Years Ended December 31 2006 2005 2004
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Net Sales and Lease Revenue....................... $40,369,977 $39,760,756 $39,232,866
Cost of Goods Sold and Costs Related to Lease
Revenue......................................... 32,529,465 34,060,469 30,954,797
----------- ----------- -----------
Gross Profit...................................... 7,840,512 5,700,287 8,278,069
Selling and Administrative Expenses............... 6,033,699 6,723,386 6,041,045
Plant Closing Expenses............................ 422,934 -- --
----------- ----------- -----------
Operating Profit (Loss)........................... 1,383,879 (1,023,099) 2,237,024
Other Income, net................................. 264,748 418,487 78,410
----------- ----------- -----------
Income (Loss) Before Income Taxes................. 1,648,627 (604,612) 2,315,434
Provision for Income Taxes........................ 528,000 (206,000) 792,000
----------- ----------- -----------
Net Income (Loss)................................. $ 1,120,627 $ (398,612) $ 1,523,434
=========== =========== ===========
Net Income (Loss) Per Share....................... $ 1.16 $ (.41) $ 1.58
=========== =========== ===========
</Table>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<Table>
<Caption>
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For the Years Ended December 31 2006 2005 2004
- -----------------------------------------------------------------------------------------------
Retained Earnings at Beginning of Year............ $25,915,024 $27,154,171 $26,326,352
Net Income (Loss)................................. 1,120,627 (398,612) 1,523,434
Cash Dividends Paid, $.72 Per Share in 2006, $.87
Per Share in 2005 and $.72 Per Share in 2004.... (695,615) (840,535) (695,615)
----------- ----------- -----------
Retained Earnings at End of Year.................. $26,340,036 $25,915,024 $27,154,171
=========== =========== ===========
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
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6
[CHIGAGO RIVET LOGO]
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CONSOLIDATED STATEMENTS OF CASH FLOWS
<Table>
<Caption>
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For the Years Ended December 31 2006 2005 2004
- ---------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net Income (Loss)..................................... $ 1,120,627 $ (398,612) $ 1,523,434
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided by Operating Activities:
Depreciation and Amortization....................... 1,659,834 1,703,382 1,757,962
Net (Gain) Loss on the Sale of Properties........... (16,830) 38,088 2,148
Gain from Demutualization........................... -- (256,660) --
Deferred Income Taxes............................... (176,000) (244,000) 19,000
Changes in Operating Assets and Liabilities:
Accounts Receivable, net.......................... (532,017) (502,996) (318,447)
Inventories....................................... 490,386 270,775 (1,008,682)
Other Current Assets.............................. (181,365) (12,645) (937)
Accounts Payable.................................. (145,120) 81,239 40,501
Accrued Wages and Salaries........................ 12,473 (25,732) (47,693)
Accrued Profit Sharing Plan Contribution.......... 100,000 (127,312) 119,069
Other Accrued Expenses............................ (295,147) 167,625 233,705
----------- ----------- -----------
Net Cash Provided by Operating Activities.... 2,036,841 693,152 2,320,060
----------- ----------- -----------
Cash Flows from Investing Activities:
Capital Expenditures................................ (1,327,482) (643,308) (1,342,906)
Proceeds from the Sale of Properties................ 23,000 500 2,730
Proceeds from Demutualization....................... -- 256,660 --
Proceeds from Certificates of Deposit............... 13,425,000 1,035,000 665,000
Purchases of Certificates of Deposit................ (17,825,000) (1,235,000) (1,015,000)
----------- ----------- -----------
Net Cash Used in Investing Activities.......... (5,704,482) (586,148) (1,690,176)
----------- ----------- -----------
Cash Flows from Financing Activities:
Cash Dividends Paid................................. (695,615) (840,535) (695,615)
----------- ----------- -----------
Net Cash Used in Financing Activities.......... (695,615) (840,535) (695,615)
----------- ----------- -----------
Net Decrease in Cash and Cash Equivalents............. (4,363,256) (733,531) (65,731)
Cash and Cash Equivalents:
Beginning of Year................................... 4,730,837 5,464,368 5,530,099
----------- ----------- -----------
End of Year......................................... $ 367,581 $ 4,730,837 $ 5,464,368
=========== =========== ===========
Cash Paid During the Year for:
Income Taxes........................................ $ 1,015,091 $ -- $ 573,307
Supplemental Schedule of Non-cash Investing
Activities:
Capital Expenditures in Accounts Payable............ $ 124,274 $ 3,854 $ 16,676
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
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7
(CHIGAGO RIVET LOGO)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1--NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS--The Company operates in the fastener industry and is in the
business of producing and selling rivets, cold-formed fasteners, screw machine
products, automatic rivet setting machines, parts and tools for such machines,
and the leasing of automatic rivet setting machines.
A SUMMARY OF THE COMPANY'S SIGNIFICANT ACCOUNTING POLICIES FOLLOWS:
PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include the
accounts of Chicago Rivet & Machine Co. and its wholly-owned subsidiary, H & L
Tool Company, Inc. (H & L Tool). All significant intercompany accounts and
transactions have been eliminated.
REVENUE RECOGNITION--Revenues from product sales are recognized upon shipment
and an allowance is provided for estimated returns and discounts based on
experience in accordance with SEC Staff Accounting Bulletin No. 104. Cash
received by the Company prior to shipment is recorded as deferred revenue. The
Company experiences a certain degree of sales returns that varies over time. In
accordance with Statement of Financial Accounting Standards No. 48 ("FAS 48"),
"Revenue Recognition When Right of Return Exists," the Company is able to make a
reasonable estimation of expected sales returns based upon history and as
contemplated by the requirements of FAS 48. The Company records all shipping and
handling fees billed to customers as revenue, and related costs as cost of
sales, when incurred, in accordance with Emerging Issues Task Force "EITF"
Abstract 00-10, "Accounting for Shipping and Handling Fees and Costs."
LEASE INCOME--Automatic rivet setting machines are available to customers on
either a sale or lease basis. The leases are generally for a quarterly or
one-year term, are cancelable at the option of the Company or the customer and
are accounted for under the operating method, whereby the Company recognizes
lease revenue over the term of the lease. Rentals are billed in advance, and
revenues attributable to future periods are included in unearned revenue in the
consolidated balance sheets. Costs related to lease revenue, other than the cost
of the machines, are expensed as incurred.
CREDIT RISK--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. The Company
has established an allowance for accounts that may become uncollectible in the
future. This estimated allowance is based primarily on management's evaluation
of the financial condition of the customer and historical experience. The
Company monitors its accounts receivable and charges to expense an amount equal
to its estimate of potential credit losses. The Company considers a number of
factors in determining its estimates, including the length of time its trade
accounts receivable are past due, the Company's previous loss history and the
customer's current ability to pay its obligation. Accounts receivable balances
are charged off against the allowance when it is determined that the receivable
will not be recovered.
CASH AND CASH EQUIVALENTS--The Company considers all highly liquid investments,
including certificates of deposit, with a maturity of three months or less when
purchased to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The carrying amounts reported in the
consolidated balance sheets for cash and cash equivalents and certificates of
deposit approximate fair value.
INVENTORIES--Inventories are stated at the lower of cost or net realizable
value, cost being determined by the first-in, first-out method.
PROPERTY, PLANT AND EQUIPMENT--Properties are stated at cost and are depreciated
over their estimated useful lives using the straight-line method for financial
reporting purposes. Accelerated methods of depreciation are used for income tax
purposes. Direct costs related to developing or obtaining software for internal
use are capitalized as property and equipment. Capitalized software costs are
amortized over the software's useful life when the software is placed in
service. The estimated useful lives by asset category are:
<Table>
<Caption>
Asset category Estimated useful life
- -----------------------------------------------------------------
Land improvements.......................... 15 to 25 years
Buildings and improvements................. 10 to 35 years
Machinery and equipment.................... 7 to 15 years
Automatic rivet setting machines on
lease.................................... 10 years
Capitalized software costs................. 3 to 5 years
Other equipment............................ 3 to 15 years
</Table>
The Company reviews the carrying value of property, plant and equipment for
impairment whenever events and circumstances indicate that the carrying value of
an asset may not be recoverable from the estimated future cash flows expected to
result from its use and eventual disposition. In cases where undiscounted
expected future cash flows are less than the carrying value, an impairment loss
is recognized equal to an amount by which the carrying value exceeds the fair
value of assets.
When properties are retired or sold, the related cost and accumulated
depreciation are removed from the respective accounts, and any gain or loss on
disposition is recognized in current operations. Maintenance, repairs and minor
betterments that do not improve the related asset or extend its useful life are
charged to operations as incurred.
INCOME TAXES--Deferred income taxes are determined under the asset and liability
method in accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Deferred income taxes arise from temporary
differences between the income tax basis of assets and liabilities and their
reported amounts in the financial statements.
SEGMENT INFORMATION--The Company reports segment information in accordance with
Statement of Financial Accounting Standards No. 131 ("FAS 131"), "Disclosures
about Segments of an Enterprise and Related Information." FAS 131 requires that
segments be based on the internal structure and reporting of the Company's
operations.
NET INCOME PER SHARE--Net income per share of common stock is based on the
weighted average number of shares outstanding of 966,132 in 2006, 2005 and 2004.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and the accompanying notes. Significant items subject to estimates
and assumptions include deferred taxes and valuation allowances for accounts
- --------------------------------------------------------------------------------
8
(CHIGAGO RIVET LOGO)
- --------------------------------------------------------------------------------
receivable and inventory obsolescence. Actual results could differ from those
estimates.
RECENT ACCOUNTING PRONOUNCEMENTS--In July 2006, the Financial Accounting
Standards Board ("FASB") issued Interpretation No. 48 "Accounting for
Uncertainty in Income Taxes" ("FIN 48"), to create a single model to address
accounting for uncertainty in tax positions. FIN 48 clarifies the accounting for
income taxes by prescribing a minimum recognition threshold a tax position is
required to meet before being recognized in the financial statements. FIN 48
also provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosures and transition. FIN 48 is effective
for fiscal years beginning after December 15, 2006. The Company will adopt FIN
48 as of January 1, 2007, as required. The Company has estimated that its
potential impact to retained earnings will not be material.
In September 2006, the SEC issued Staff Accounting Bulletin No. 108 ("SAB 108"),
to address diversity in practice in quantifying financial statement
misstatements. SAB 108 requires that the Company quantify misstatements based on
their impact on each of its financial statements and related disclosures. SAB
108 is to become effective for fiscal years ending after November 15, 2006. The
Company has adopted SAB 108 effective as of December 31, 2006. The adoption of
this bulletin did not have a material impact on its financial position and
results of operations.
In September 2006, the FASB issued Statement of Financial Accounting Standards
No. 157 ("FAS 157"), "Fair Value Measurements." FAS 157 defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements.
This statement applies under other accounting pronouncements that require or
permit fair value measurements and, accordingly, FAS 157 does not require any
new fair value measurements. The Company is currently evaluating the impact this
standard will have on its operating income and statement of financial position.
This statement is effective for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. The Company will adopt FAS 157 as
of January 1, 2008, as required.
2--BALANCE SHEET DETAILS
<Table>
<Caption>
2006 2005
------------ ------------
Inventories:
Raw materials................. $ 1,333,857 $ 1,586,744
Work in process............... 1,907,653 2,218,774
Finished goods................ 2,239,799 2,166,177
----------- -----------
$ 5,481,309 $ 5,971,695
=========== ===========
Net Property, Plant and
Equipment:
Land and improvements......... $ 1,029,035 $ 1,029,035
Buildings and improvements.... 6,321,609 6,251,144
Machinery and equipment,
leased machines and other... 29,411,746 29,163,667
----------- -----------
36,762,390 36,443,846
Accumulated depreciation...... 26,925,130 26,392,338
----------- -----------
$ 9,837,260 $10,051,508
=========== ===========
Other Accrued Expenses:
Property taxes................ $ 116,250 $ 115,799
Unearned revenue and customer
deposits.................... 104,676 339,943
All other items............... 38,754 316,528
----------- -----------
$ 259,680 $ 772,270
=========== ===========
</Table>
3--LEASED MACHINES--Lease revenue amounted to $100,948 in 2006, $107,298 in 2005
and $107,976 in 2004. Future minimum rentals on leases beyond one year are not
significant. The cost and carrying value of leased automatic rivet setting
machines at December 31 were:
<Table>
<Caption>
2006 2005
--------- ---------
Cost.................................. $232,499 $246,965
Accumulated depreciation.............. 221,356 233,873
-------- --------
Carrying value........................ $ 11,143 $ 13,092
======== ========
</Table>
4--INCOME TAXES--The provision for income tax expense (benefit) consists of the
following:
<Table>
<Caption>
2006 2005 2004
---------- ---------- -----------
Current:
Federal................ $ 699,000 $ 38,000 $ 766,000
State.................. 5,000 -- 7,000
Deferred................. (176,000) (244,000) 19,000
---------- ---------- -----------
$ 528,000 $ (206,000) $ 792,000
========== ========== ===========
</Table>
The deferred tax liabilities and assets consist of the following:
<Table>
<Caption>
2006 2005
------------ ------------
Depreciation and amortization... $(1,076,275) $(1,319,998)
----------- -----------
Inventory....................... 292,133 307,912
Accrued vacation................ 152,993 176,076
Allowance for doubtful
accounts...................... 51,960 72,700
Other, net...................... 2,105 10,226
----------- -----------
499,191 566,914
----------- -----------
$ (577,084) $ (753,084)
=========== ===========
</Table>
The following is a reconciliation of the statutory federal income tax rate to
the actual effective tax rate:
<Table>
<Caption>
2006 2005 2004
----------------- ----------------- -----------------
AMOUNT % Amount % Amount %
----------------- ----------------- -----------------
Expected tax at U.S.
Statutory rate........... $560,000 34.0 $(206,000) (34.0) $787,000 34.0
Permanent differences..... (35,000) (2.1) -- -- -- --
State taxes, net of
federal benefit.......... 3,000 .1 -- -- 5,000 .2
--------- ----- --------- ----- ---------- ----
Income tax expense
(benefit)................ $528,000 32.0 $(206,000) (34.0) $792,000 34.2
========= ===== ========= ===== ========== ====
</Table>
5--NOTE PAYABLE--The Company has a $1 million line of credit, which expires May
31, 2007, and remained unused at December 31, 2006. The line is unsecured and
bears interest at a variable rate that is based upon, at the election of the
Company, Bank of America's prime rate less an applicable margin or the London
Inter-Bank Offering Rate plus an applicable margin.
6--PROFIT SHARING PLAN--The Company has a noncontributory profit sharing plan
covering substantially all employees. Total expenses relating to the profit
sharing plan amounted to approximately $225,000 in 2006, $125,000 in 2005 and
$252,000 in 2004.
7 -- OTHER INCOME, NET -- consists of the following:
<Table>
<Caption>
2006 2005 2004
-------- -------- --------
Interest income.............. $249,618 $148,049 $ 64,488
Gain from demutualization.... -- 256,660 --
Other........................ 15,130 13,778 13,922
-------- -------- --------
$264,748 $418,487 $ 78,410
======== ======== ========
</Table>
During 2005, the Company realized a gain of $256,660 from proceeds received due
to the demutualization of an insurance provider.
- --------------------------------------------------------------------------------
9
(CHIGAGO RIVET LOGO)
- --------------------------------------------------------------------------------
8--SEGMENT INFORMATION--The Company operates, primarily in the United States, in
two business segments as determined by its products. The fastener segment, which
comprises H & L Tool and the parent company's fastener operations, includes
rivets, cold-formed fasteners and screw machine products. The assembly equipment
segment includes automatic rivet setting machines, parts and tools for such
machines and the leasing of automatic rivet setting machines. Information by
segment is as follows:
<Table>
<Caption>
ASSEMBLY
FASTENER EQUIPMENT OTHER CONSOLIDATED
----------- ------------ ---------- ------------
YEAR ENDED DECEMBER 31, 2006:
Net sales and lease revenue..... $34,421,398 $5,948,579 $ -- $40,369,977
Depreciation.................... 1,467,984 101,210 90,640 1,659,834
Segment profit.................. 2,454,068 1,493,852 -- 3,947,920
Selling and administrative
expenses....................... (2,125,977) (2,125,977)
Plant closing expenses.......... (422,934) -- -- (422,934)
Interest income................. 249,618 249,618
------------
Income before income taxes...... 1,648,627
------------
Capital expenditures............ 1,374,009 -- 77,747 1,451,756
Segment assets:
Accounts receivable............ 5,363,451 539,177 -- 5,902,628
Inventory...................... 3,877,545 1,603,764 -- 5,481,309
Property, plant and
equipment.................... 7,712,639 1,182,414 942,207 9,837,260
Other assets................... -- -- 6,685,279 6,685,279
------------
27,906,476
------------
Year Ended December 31, 2005:
Net sales and lease revenue..... $33,949,293 $5,811,463 $ -- $39,760,756
Depreciation.................... 1,519,971 104,968 78,443 1,703,382
Segment profit.................. 180,156 1,249,094 -- 1,429,250
Selling and administrative
expenses....................... (2,438,571) (2,438,571)
Interest income................. 148,049 148,049
Gain from demutualization....... 256,660 256,660
------------
Loss before income taxes........ (604,612)
------------
Capital expenditures............ 451,601 35,555 160,006 647,162
Segment assets:
Accounts receivable............ 4,758,839 611,772 -- 5,370,611
Inventory...................... 4,113,081 1,858,614 -- 5,971,695
Property, plant and
equipment.................... 7,807,711 1,283,624 960,173 10,051,508
Other assets................... -- -- 6,528,170 6,528,170
------------
27,921,984
------------
Year Ended December 31, 2004:
Net sales and lease revenue..... $32,477,800 $6,755,066 $ -- $39,232,866
Depreciation.................... 1,513,978 112,868 131,116 1,757,962
Segment profit.................. 2,884,308 1,648,034 -- 4,532,342
Selling and administrative
expenses....................... (2,281,396) (2,281,396)
Interest income................. 64,488 64,488
------------
Income before income taxes...... 2,315,434
------------
Capital expenditures............ 1,332,122 19,774 7,686 1,359,582
Segment assets:
Accounts receivable............ 4,318,921 548,694 -- 4,867,615
Inventory...................... 4,313,907 1,928,563 -- 6,242,470
Property, plant and
equipment.................... 8,912,268 1,355,437 878,611 11,146,316
Other assets................... -- -- 7,043,056 7,043,056
------------
29,299,457
------------
</Table>
The Company does not allocate certain selling and administrative expenses for
internal reporting, thus, no allocation was made for these expenses for segment
disclosure purposes. Segment assets reported internally are limited to accounts
receivable, inventory and long-lived assets. Long-lived assets of one plant
location are allocated between the two segments based on estimated plant
utilization, as this plant serves both fastener and assembly equipment
activities. Other assets are not allocated to segments internally and to do so
would be impracticable. Sales to two customers in the fastener segment accounted
for 28, 24 and 22 percent and 13, 13 and 13 percent of consolidated revenues
during 2006, 2005 and 2004, respectively. The accounts receivable balances for
these customers accounted for 37 and 22 percent of consolidated accounts
receivable for the larger customer and 13 and 17 percent for the other customer,
as of December 31, 2006 and 2005, respectively.
9--SHAREHOLDER RIGHTS AGREEMENT--On November 22, 1999, the Company adopted a
shareholder rights agreement and declared a dividend distribution of one right
for each outstanding share of Company common stock to shareholders of record at
the close of business on December 3, 1999. Each right entitles the holder, upon
occurrence of certain events, to buy one one-hundredth of a share of Series A
Junior Participating Preferred Stock at a price of $90, subject to adjustment.
The rights may only become exercisable under certain circumstances involving
acquisition of the Company's common stock, including the purchase of 10 percent
or more by any person or group. The rights will expire on December 2, 2009
unless they are extended, redeemed or exchanged.
10--COMMITMENTS AND CONTINGENCIES--The Company recorded rent expense aggregating
approximately $48,000, $38,000 and $44,000 for 2006, 2005 and 2004,
respectively. Total future minimum rentals at December 31, 2006 are not
significant.
The Company is, from time to time involved in litigation, including
environmental claims, 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.
11--PLANT CLOSING--The Company recorded various charges during 2006 related to
the closure of its Jefferson, Iowa facility. The facility had been operating
below capacity, and the Company determined to transfer production activities to
Tyrone, Pennsylvania as part of its cost savings efforts. The Jefferson facility
ceased operations in December 2006. As a result of the closure, the Company
recorded plant closing expenses of $422,934. Additional expenses may be incurred
in preparing the facility for sale.
The following is a summary of liabilities recorded on the accompanying balance
sheet as accrued plant closing expenses at December 31, 2006:
<Table>
<Caption>
SEVERANCE FACILITY
AND CLOSURE
BENEFITS COSTS TOTAL
---------- --------- ----------
Balance at January 1,
2006..................... $ -- $ -- $ --
Charge................... 347,929 75,005 422,934
Payments................. (170,855) (34,636) (205,491)
Non-cash reduction....... -- -- --
---------- --------- ----------
Balance at December 31,
2006..................... $ 177,074 $ 40,369 $ 217,443
========== ========= ==========
</Table>
Future cash outlays related to the closure are anticipated to be $217,443 in
fiscal year 2007.
12--SUBSEQUENT EVENT--On February 19, 2007, the Board of Directors declared a
regular quarterly dividend of $.18 per share, payable March 20, 2007 to
shareholders of record on March 5, 2007.
- --------------------------------------------------------------------------------
10
[CHIGAGO RIVET LOGO]
- --------------------------------------------------------------------------------
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS
To the Board of Directors and Shareholders of Chicago Rivet & Machine Co.
We have audited the accompanying consolidated balance sheets of Chicago
Rivet & Machine Co. (an Illinois corporation) and subsidiary as of December 31,
2006 and 2005, and the related consolidated statements of income, retained
earnings and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The consolidated financial statements of Chicago Rivet & Machine Co.
and subsidiary as of and for the year ended December 31, 2004, were audited by
other auditors. Those auditors expressed an unqualified opinion on those
financial statements in their report dated March 21, 2005.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Chicago
Rivet & Machine Co. and subsidiary as of December 31, 2006 and 2005, and the
results of their operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.
- -s- Grant Thornton LLP
Chicago, Illinois
March 20, 2007
To the Board of Directors and Shareholders of Chicago Rivet & Machine Co.
In our opinion, the consolidated statements of income, retained earnings
and cash flows for the year ended December 31, 2004 present fairly, in all
material respects, the results of operations and cash flows of Chicago Rivet &
Machine Co. and its subsidiary for the year ended December 31, 2004, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
- -s- PricewaterhouseCoopers LLP
Chicago, Illinois
March 21, 2005
- --------------------------------------------------------------------------------
11
[CHICAGO RIVET LOGO]
- --------------------------------------------------------------------------------
QUARTERLY FINANCIAL DATA (UNAUDITED)
<Table>
<Caption>
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ---------- ----------
2006
Net Sales and Lease
Revenue............. $10,940,951 $11,057,366 $9,132,463 $9,239,197
Gross Profit......... 2,155,170 2,677,842 1,779,827 1,227,673
Net Income........... 389,284 468,526 238,179 24,638
Per Share Data:
Net Income Per
Share............. .40 .49 .24 .03
Average Common
Shares
Outstanding....... 966,132 966,132 966,132 966,132
2005
Net Sales and Lease
Revenue............. $10,082,862 $10,064,392 $9,718,361 $9,895,141
Gross Profit......... 1,602,439 1,417,751 1,459,759 1,220,338
Net Income (Loss).... (76,765) (152,487) (169,780) 420
Per Share Data:
Net Income (Loss)
Per Share......... (.08) (.16) (.17) .00
Average Common
Shares
Outstanding....... 966,132 966,132 966,132 966,132
2004
Net Sales and Lease
Revenue............. $10,168,964 $10,237,556 $9,324,695 $9,501,651
Gross Profit......... 2,022,406 2,230,568 2,154,471 1,870,624
Net Income........... 290,988 386,276 601,615 244,555
Per Share Data:
Net Income Per
Share............. .30 .40 .62 .26
Average Common
Shares
Outstanding....... 966,132 966,132 966,132 966,132
</Table>
INFORMATION ON COMPANY'S COMMON STOCK
The Company's common stock is traded on the American Stock Exchange (trading
privileges only, not registered.) The ticker symbol is: CVR.
At December 31, 2006, there were approximately 250 shareholders of record.
The transfer agent and registrar for the Company's common stock is:
Computershare Trust Company, N.A.
P.O. Box 43078
Providence, Rhode Island 02940-3078
The following table shows the dividends declared and the quarterly high and low
prices of the common stock for the last two years.
<Table>
<Caption>
Dividends
Declared Market Range
----------------------------------------------------
Quarter 2006 2005 2006 2005
- --------------------- ---- ---- ---------------- ----------------
First................ $.18 $.33* $21.00 $17.50 $32.69 $27.40
Second............... .18 .18 $24.25 $19.45 $32.25 $28.60
Third................ .18 .18 $24.89 $22.00 $29.25 $24.20
Fourth............... .18 .18 $24.55 $20.29 $24.37 $20.00
</Table>
- ---------------
* Includes an extra dividend of $.15 per share.
SELECTED FINANCIAL DATA
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------------------
2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------------------------------------------------
Net Sales and Lease Revenue $40,369,977 $39,760,756 $39,232,866 $38,190,908 $43,012,766
- -------------------------------------------------------------------------------------------------------------------------------
Income (Loss) Before Income Taxes 1,648,627 (604,612) 2,315,434 1,242,527 3,961,075
- -------------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) 1,120,627 (398,612) 1,523,434 817,527 2,604,075
- -------------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) Per Share 1.16 (.41) 1.58 .85 2.69
- -------------------------------------------------------------------------------------------------------------------------------
Dividends Per Share .72 .87 .72 .97 .87
- -------------------------------------------------------------------------------------------------------------------------------
Average Common Shares Outstanding 966,132 966,132 966,132 966,132 966,537
- -------------------------------------------------------------------------------------------------------------------------------
Working Capital 15,242,183 14,839,923 15,222,262 14,020,185 12,874,182
- -------------------------------------------------------------------------------------------------------------------------------
Total Assets 27,906,476 27,921,984 29,299,457 28,138,380 30,088,173
- -------------------------------------------------------------------------------------------------------------------------------
Total Debt -- -- -- -- 1,632,760
- -------------------------------------------------------------------------------------------------------------------------------
Shareholders' Equity 24,003,168 23,578,156 24,817,303 23,989,484 24,109,105
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
12
[CHICAGO RIVET LOGO]
- --------------------------------------------------------------------------------
STOCK PERFORMANCE GRAPH
The graph set forth below shows the cumulative total return to shareholders
for the five-year period ended December 31, 2006 for the Company's common stock,
as compared to the Total Return Index for the American Stock Exchange (US) and
the Dow Jones US Auto Parts Index. The graph assumes $100 was invested on
December 31, 2001, in Chicago Rivet & Machine Co., in the American Stock
Exchange (US) and the Dow Jones US Auto Parts Index. Cumulative total
shareholder return assumes all dividends are reinvested. The values shown in the
graph are as of the end of each period indicated.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among Chicago Rivet & Machine Co., the Total Return Index for the American Stock
Exchange
(US) and the Dow Jones US Auto Parts Index
(LINE GRAPH)
<Table>
<Caption>
- --------------------------------------------------------------------------------------------
12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06
- --------------------------------------------------------------------------------------------
Chicago Rivet &
Machine Co. ...... 100 104 129 133 101 110
- --------------------------------------------------------------------------------------------
Dow Jones US Auto
Parts Index....... 100 90 128 135 114 122
- --------------------------------------------------------------------------------------------
Amex Total Return
US................ 100 82 111 128 138 160
- --------------------------------------------------------------------------------------------
</Table>
BOARD OF DIRECTORS
MICHAEL J. BOURG(e)
President of the Company
EDWARD L. CHOTT(a)(c)(n)
Chairman of the Board and
Chief Executive Officer of
The Broaster Co.
Beloit, Wisconsin
KENT H. COONEY(a)
Chief Financial Officer of
Heldon Bay Limited Partnership
Bigfork, Montana
NIRENDU DHAR
General Manager of
H & L Tool Company, Inc.
WILLIAM T. DIVANE, JR.(a)(c)(n)
Chairman of the Board and
Chief Executive Officer of
Divane Bros. Electric Co.
Franklin Park, Illinois
GEORGE P. LYNCH(c)
Attorney at Law
George Patrick Lynch, Ltd.
Lisle, Illinois
JOHN R. MADDEN(a)(c)(e)(n)
Chairman of the Board of
First National Bank
of La Grange
La Grange, Illinois
JOHN A. MORRISSEY(e)
Chairman of the Board
of the Company
President and Director of
Algonquin State Bank
Algonquin, Illinois
WALTER W. MORRISSEY(e)
Attorney at Law
Morrissey & Robinson
Oakbrook Terrace, Illinois
(a) Member of Audit Committee
(c) Member of Compensation Committee
(e) Member of Executive Committee
(n) Member of Nominating Committee
CORPORATE OFFICERS
JOHN A. MORRISSEY
Chairman, Chief
Executive Officer
MICHAEL J. BOURG
President, Chief Operating
Officer and Treasurer
NIRENDU DHAR
General Manager of
H & L Tool Company, Inc.
KIMBERLY A. KIRHOFER
Secretary
Chicago Rivet & Machine Co. - 901 Frontenac Road - P.O. Box 3061 - Naperville,
Illinois 60566 - www.chicagorivet.com
- --------------------------------------------------------------------------------
[CHICAGO RIVET GRAPHIC & LETTERHEAD]
- --------------------------------------------------------------------------------