<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to .
Commission File Number 0-1227
CHICAGO RIVET & MACHINE CO.
(Exact Name of Registrant as Specified in Its Charter)
Illinois
(State or Other Jurisdiction of
Incorporation or Organization)
36-0904920
(I.R.S. Employer
Identification No.)
901 Frontenac Road
Naperville, IL
(Address of Principal Executive Offices)
60563
(Zip Code)
Registrant's Telephone Number, Including Area Code: (708) 357-8500
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ------------------------------ ------------------------
<S> <C>
Common Stock--$2.00 Par Value American Stock Exchange
(Trading privileges
only,
not registered)
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None.
- --------------------------------------------------------------------------------
(Title of Class)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (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 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. [ X ]
STATE THE AGGREGATE MARKET VALUE OF THE VOTING 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, AS OF A SPECIFIED DATE WITHIN 60 DAYS PRIOR TO THE DATE OF FILING.
$14,528,786 AS OF FEBRUARY 14, 1996
COMMON SHARES OUTSTANDING AS OF FEBRUARY 14, 1996 WERE 585,748 ($2 PAR VALUE)
DOCUMENTS INCORPORATED BY REFERENCE
(1) PORTIONS OF THE COMPANY'S ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR
ENDED DECEMBER 31, 1995 (THE "1995 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 1996 ANNUAL MEETING OF SHAREHOLDERS ARE INCORPORATED BY REFERENCE IN
PART III OF THIS REPORT.
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PAGE 1 OF
EXHIBIT INDEX IS ON PAGE
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CHICAGO RIVET & MACHINE CO.
PERIOD ENDING DECEMBER 31, 1995
<TABLE>
<CAPTION>
Item Page
No. No.
- ---- ----
<S> <C> <C>
Part I
1. Business 3
2. Properties 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 7
6. Selected Financial Data 7
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7
8. Financial Statements and Supplementary Data 7
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 7
Part III
10. Directors and Executive Officers of the Registant 7
11. Executive Compensation 8
12. Security Ownership of Certain Beneficial Owners and Management 8
13. Certain Relationships and Related Transactions 8
Part IV
14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 8
</TABLE>
<PAGE> 3
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PART I
ITEM 1 - BUSINESS
The Company operates in the fastener industry in the United States,
producing and selling rivets, automatic rivet setting machines, parts and tools
for such machines, and the leasing of automatic rivet setting machines. For
further discussion regarding the Company's operations see Note 1 which appears
on page 8 of the Company's 1995 Annual Report to Shareholders, incorporated
herein by reference. The 1995 Annual Report is filed as an exhibit to this
report.
The principal market for the fastener industry operations is the
automotive and appliance industries within the United States. Sales are
generally solicited by independent sales representatives.
The industry in which the Company operates is 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 are heaviest to the
automotive and appliance industries. No material part of the business is
dependent upon a single customer. Information concerning backlog of orders is
not considered material to the understanding of the Company's business due to
relatively short delivery cycles. The level of business activity of the
Company's business is closely related to the overall index of industrial
activity in the United States.
On May 7, 1993, the Company acquired certain assets of Textron, Inc.'s
Townsend Automation division. Townsend Automation was a manufacturer of
customized fastener installation and automated assembly equipment, standard
rivet setting equipment and a line of specialty fasteners used primarily in the
fastener industry. The assets acquired consisted of inventories, machinery and
equipment, tooling, drawings and certain other intangible assets of the
division. The acquisition was financed from available funds and the total
price paid amounted to approximately $2 million, including legal and
professional fees and the cost of relocating the assets to existing company
facilities. This transaction has enhanced the Company's product lines and
expanded its customer base. For further information regarding the acquisition,
see Note 11 which appears on page 9 of the Company's 1995 Annual Report to
Shareholders, incorporated herein by reference. The 1995 Annual Report is
filed as an exhibit to this report.
The Company's business has historically been somewhat stronger during the
first half of the year.
In conformity with industry practice, the Company does not provide credit
terms in excess of thirty days.
<PAGE> 4
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The Company purchases raw materials, primarily wire materials used in the
manufacture of rivets, from large domestic metal product manufacturers.
There are numerous sources of raw materials, 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 problem in the availability of raw materials used in its
production.
Patents, trademarks, licenses, franchises and concessions are not of
significant importance to the business of the Company.
The Company does not engage in basic 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.
At December 31, 1995, the Company employed 296 people.
The Company has no material foreign operations, and sales to foreign
customers are a minor portion of the Company's total sales.
The Company was incorporated in Illinois in 1927.
ITEM 2 - PROPERTIES
The Company conducts its fastener manufacturing and warehousing operations
in four plants, which are described below. All Company-owned properties are
held in fee and are used for the manufacture and warehousing of the Company's
products. All plants are considered suitable and adequate for their present
use. The Company also currently maintains a small sales office in Norwell,
Massachusetts in a leased facility.
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 shed.
Jefferson, Iowa Steel tapered beam construction.
Albia, Iowa Concrete block with prestressed concrete
roof construction.
ITEM 3 - LEGAL PROCEEDINGS
The Company is, from time to time, involved in litigation, including
environmental claims, in the normal course of business. With regard to
environmental claims, the Company, and a
<PAGE> 5
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former subsidiary, W.S. & W.C., Inc., have been named by state and/or federal
government agencies as "potentially responsible parties" with respect to
certain waste disposal sites. The specific sites in which the Company and/or
its former subsidiary are involved are as follows: the Industrial Solvents and
Chemicals Site in York County Pennsylvania, the government agency involved at
this site is the Pennsylvania Department of Environmental Protection and the
Company has been involved since November 1990; the Delta Chemicals Site,
Armstrong County, Pennsylvania, the government agency involved is the
Pennsylvania Department of Environmental Protection, and the Company has been
involved since November 1993; and the Ninth Avenue Site, Gary, Indiana. With
regard to the sites in Pennsylvania, the Company, along with other potentially
responsible parties, has entered into consent agreements with the Pennsylvania
Department of Environmental Protection providing for remediation of the sites.
For the Ninth Avenue Site, proceedings, instituted in December 1994, are
pending in The Ninth Avenue Remedial Group v. Allis Chalmers, et al in the
Northern District of Indiana. As a potentially responsible party, the Company,
or its former subsidiary, 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 remediation is presently unknown;
however, estimates currently available suggest that the cost of remediation at
these sites will be between $100 million and $133 million. Despite the joint
and several nature of liability, these proceedings are frequently resolved on
the basis of the quantity and type of waste disposed by the parties. The
actual amount of liability for the Company, and its former subsidiary, 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 liability will not be material to the
Company's financial condition. Nevertheless, it is unlikely that the Company
will not incur significant costs associated with these proceedings and,
accordingly, the Company has recorded a total liability of approximately
$639,000 related to these matters. The adequacy of this reserve will be
reviewed periodically as more definitive cost information becomes available.
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 1995.
Executive Officers of the Registrant
------------------------------------
The names, ages and positions of all executive officers of the Company, as
of March 28, 1996, 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.
<PAGE> 6
-6-
<TABLE>
<CAPTION>
Number of Years
Name and Age of Officer Position an Officer
- ----------------------- ----------------------- ------------------
<S> <C> <C> <C>
John A. Morrissey 60 Chairman, Chief
Executive Officer 16
John C. Osterman 44 President, Chief
Operating Officer
and Treasurer 12
Donald P. Long 44 Vice President - Sales 1
Stephen D. Voss 34 Assistant Treasurer and
Corporate Controller 7
Kimberly A. Kirhofer 37 Secretary 5
</TABLE>
- - 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. 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.
- - Mr. Voss has been Assistant Treasurer of the Company since May 1992 and has
been Controller of the Company since November 1988.
- - Mrs. Kirhofer has been Secretary of the Company since August 1991, and was
Assistant Secretary of the Company from February 1991 through August
1991. She has been employed by the Company for more than five years, during
which she held various administrative positions.
<PAGE> 7
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PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON STOCK AND
RELATED SECURITY HOLDER MATTERS
- -------------------------------------------------
The Company's common stock is traded on the American Stock Exchange
(trading privileges only, not registered). As of March 5, 1996 there were 547
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
11 of the 1995 Annual Report is incorporated herein by reference. The 1995
Annual Report is filed as an exhibit to this report.
ITEM 6 - SELECTED FINANCIAL DATA
- --------------------------------
The section entitled "Selected Financial Data" which appears on page 10 of
the 1995 Annual Report is incorporated herein by reference. The 1995 Annual
Report is filed as an exhibit to this report.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ------------------------------------------------
The section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" which appears on pages 1 through 3 of the
1995 Annual Report is incorporated herein by reference. The 1995 Annual Report
is filed as an exhibit to this report.
ITEM 8 - FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
- ---------------------------------
See the sections entitled "Financial Statements" and "Financial Statement
Schedule" which appear on pages 11 through 13 of this report.
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.
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 3 through 6 of the Company's
1996 Proxy Statement, is incorporated herein by reference. The 1996 Proxy
Statement is to be filed with the Securities and Exchange Commission in
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connection with the Company's 1996 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."
ITEM 11 - EXECUTIVE COMPENSATION
- --------------------------------
The information set forth in the section entitled "Executive Compensation"
which appears on pages 7 through 9 of the Company's 1996 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 6 and 7 of the Company's
1996 Proxy Statement is incorporated herein by reference. The 1996 Proxy
Statement is to be filed with the Securities and Exchange Commission in
connection with the Company's 1996 Annual Meeting of Shareholders.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
- ---------------------------------------
The information set forth in the section entitled "Principal Shareholders"
on pages 2 and 3 of the Company's 1996 Proxy Statement and the information
with respect to security ownership of the Company's directors and officers set
forth in the section entitled "Election of Directors" on pages 3 through 6 of
the Company's 1996 Proxy Statement is incorporated herein by reference. The
1996 Proxy Statement is to be filed with the Securities and Exchange Commission
in connection with the Company's 1996 Annual Meeting of Shareholders.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
The information relating to the law firm of Morrissey & Robinson set forth
in the last sentence of footnote (2) on page 5 of the Company's 1996 Proxy
Statement is incorporated herein by reference. The 1996 Proxy Statement is to
be filed with the Securities and Exchange Commission in connection with the
Company's 1996 Annual Meeting of Shareholders.
PART IV
ITEM 14 - 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 "Financial Statements" which appears on page
11 of this report.
<PAGE> 9
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2. Financial statement schedule and supplementary information required to
be submitted.
See the section entitled "Financial Statement Schedule" which appears
on pages 12 and 13 of this report.
3. Exhibits:
See the section entitled "Exhibits".
(b) Reports on Form 8-K
The Company was not required to file Form 8-K during the last
quarter or year ended December 31, 1995.
<PAGE> 10
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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 John C. Osterman
------------------------------
John C. Osterman, President and
Chief Operating Officer
Date March 28, 1996
--------------
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:
John A. Morrissey Chairman of the Board of
- ----------------- Directors, Chief Executive
John A. Morrissey Officer and Member of the
Executive Committee March 28, 1996
--------------
John C. Osterman President, Chief Operating
---------------- Officer, Treasurer (Chief
John C. Osterman Financial Officer), Member of the
Executive Committee and Director March 28, 1996
--------------
Robert K. Brown Director and Member of
- ------------------- the Executive Committee March 28, 1996
Robert K. Brown --------------
Walter W. Morrissey Director, Member of
- ------------------- Executive Committee
Walter W. Morrissey and Member of Audit
Committee March 28, 1996
--------------
Stephen D. Voss Assistant Treasurer and
- --------------- Controller (Principal Accounting
Stephen D. Voss Officer) March 28, 1996
--------------
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CHICAGO RIVET & MACHINE CO.
FINANCIAL STATEMENTS
The financial statements, together with the notes thereto and the report
thereon of Price Waterhouse LLP dated March 1, 1996, appearing on pages 4 to 10
of the accompanying 1995 Annual Report, and the section entitled "Quarterly
Financial Data (Unaudited)" appearing on page 11 of the accompanying 1995
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 7 herein, the 1995 Annual Report is not to be deemed filed as part of this
Form 10-K Annual Report.
Financial Statements from 1995 Annual Report (Exhibit 13 hereto):
Page
----
Balance Sheets (pages 4 & 5 of 1995 Annual Report)
Statements of Operations (page 6 of 1995 Annual Report)
Statements of Retained Earnings (page 6 of 1995 Annual
Report)
Statements of Cash Flows (page 7 of 1995 Annual Report)
Notes to Financial Statements (pages 8 and 9 of 1995 Annual
Report)
Report of Independent Accountants (page 10 of 1995 Annual Report
Quarterly Financial Data (Unaudited)
(page 11 of 1995 Annual Report)
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FINANCIAL STATEMENT SCHEDULE
1995, 1994 AND 1993
-------------------
The following financial statement schedule should be read in conjunction
with the financial statements and the notes thereto in the 1995 Annual Report.
Financial statement schedules not included herein have been omitted because
they are not applicable or the required information is shown in the financial
statements or notes thereto.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Financial statement schedule:
Valuation and Qualifying Accounts (Schedule VIII) 13
Report of Independent Accountants on
Financial Statement Schedule 14
</TABLE>
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CHICAGO RIVET & MACHINE CO.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Additions
Balance charged to Balance
at beginning costs and Other at end
Classification of year expenses Deductions adjustments of year
- --------------------- ------------ ---------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
1995
Allowance for doubtful
accounts, returns and
allowances $120,000 $64,000 $17,366 (1) $ $166,634
======== ======= ======= ======== ========
1994
Allowance for doubtful
accounts, returns and
allowances $80,000 $52,468 $12,468 (1) $120,000
======= ======= ======= ========= ========
1993
Allowance for doubtful
accounts, returns and
allowances $50,000 $48,894 $18,894 (1) $ $80,000
======= ======= ======= ========= =======
</TABLE>
(1) Accounts receivable written off, net of recoveries.
<PAGE> 14
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Report of Independent Accountants on
Financial Statement Schedule
To the Board of Directors
of Chicago Rivet and Machine Co.
Our audits of the financial statements referred to in our report dated
March 1, 1996 appearing on page 10 of the 1995 Annual Report to Shareholders of
Chicago Rivet and 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) 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 financial statements.
PRICE WATERHOUSE LLP
Chicago, Illinois
March 1, 1996
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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.
3.1 Article 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, dated February
20, 1989. Incorporated by reference to
Company's report on Form 10-K for the
year ended December 31, 1988.
*13 Annual Report to Shareholders for the year
ended December 31, 1995.
27.1 Financial Data Schedule.
* Only the portions of this exhibit which are specifically incorporated herein
by reference shall be deemed to be filed herewith.
<PAGE> 1
CHIGAGO RIVET LOGO
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HIGHLIGHTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES AND LEASE REVENUE.................... $23,717,410 $23,012,730 $20,390,304
NET INCOME..................................... 2,235,215 1,908,881 1,402,845
NET INCOME PER SHARE........................... 3.81 3.25 2.39
DIVIDENDS DECLARED PER SHARE................... 1.75 1.55 1.30
EXPENDITURES FOR PLANT AND EQUIPMENT........... 231,340 383,354 1,088,841
DEPRECIATION FOR PLANT AND EQUIPMENT........... 646,456 653,748 601,017
NET WORKING CAPITAL............................ 12,710,825 10,968,607 9,434,565
TOTAL SHAREHOLDERS' EQUITY..................... 16,883,109 15,702,000 14,716,949
COMMON SHARES OUTSTANDING AT YEAR END.......... 585,748 586,648 587,148
SHAREHOLDERS' EQUITY PER COMMON SHARE.......... 28.82 26.77 25.07
APPROXIMATE NUMBER OF SHAREHOLDERS OF RECORD... 550 591 627
</TABLE>
REGISTRAR
First Chicago Trust Company of New York
TRANSFER AGENT
First Chicago Trust Company of New York
ANNUAL MEETING
The annual meeting of shareholders
will be held on May 14, 1996 at 10:00 a.m. at
901 Frontenac Road
Naperville, Illinois 60566
Chicago Rivet & Machine Co. - 901 Frontenac Road - P.O. Box 3061 -
Naperville, Illinois 60566 - Telephone: (708) 357-8500
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<PAGE> 2
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CHIGAGO RIVET LOGO
- --------------------------------------------------------------------------------
TO OUR SHAREHOLDERS:
RESULTS OF OPERATIONS
1995 marked the Company's seventy-fifth year in business. We are pleased to
report that 1995 was also a very successful year for the Company. Revenues
increased for the fourth consecutive year, and although the rate of sales growth
did not match the rapid pace of 1994, the level of revenues for 1995 was the
highest enjoyed by the company in over a decade. Earnings also improved for the
fourth consecutive year, with net income surpassing $2 million.
1995 COMPARED TO 1994
Net sales and lease revenues increased to a total of $23,717,410 during
1995. This represents an increase of approximately 3.1% over the prior year and
marks the fourth consecutive year of revenue growth. The strong demand for the
Company's products that existed throughout 1994 continued during the first half
of 1995. That demand, coupled with a high backlog of orders booked in 1994,
allowed the company to post very strong revenue gains during the first half of
1995. Historically, first half sales revenues tend to exceed those of the second
half of the year, and while the traditional pattern held, the difference between
first half and second half was more pronounced in 1995. Demand for fasteners
weakened considerably during the third and fourth quarters as most of the
Company's major customers reduced their production requirements. The market for
rivet setting machines and related tooling also weakened in the latter half of
the year, but the change was not as pronounced as it was for fasteners.
Gross margins again showed improvement over the prior period. Two major
factors contributed to this improvement; a more favorable product mix was the
most significant factor, followed by the contribution from ongoing cost
reduction programs. Cost reduction efforts, at all facilities, continued to be
critical to our success as costs of raw materials, supplies and labor have
generally continued to increase, while our customers have consistently resisted
any form of price relief. This is particularly true with regard to fasteners
sold to automotive customers, and less so for automatic assembly equipment and
related parts. We have been more successful in obtaining price relief in our
market for tools and assembly equipment.
An increase in the funds available for investment produced sharply higher
interest income in spite of lower prevailing interest rates. Selling and
administrative expenses increased approximately 6% during 1995 as a result of
higher commissions paid on increased sales, and due to higher pension, profit
sharing expense and salary expense.
1994 COMPARED TO 1993
Net sales and lease revenues advanced for the third consecutive year. During
1994, net sales and lease revenues amounted to $23,012,730, compared with
$20,390,304 recorded during 1993. Revenues from the sale of automatic rivet
setting equipment, tools and parts accounted for the majority of the increased
revenues and revenues attributable to product lines acquired in connection with
the Company's May 1993 purchase of Textron's Townsend Automation division, were
the dominant factor. Overall, revenues from the sale and lease of automatic
rivet setting equipment, tools and parts increased approximately 19% compared
with 1993. Revenue from the sale of rivets and cold-formed fasteners increased
approximately 7% compared with 1993.
Operating profits increased appreciably compared with 1993, largely due to
the effect of higher sales volumes as well as an overall improvement in
manufacturing efficiencies. Partially offsetting the gain from improved
efficiencies were increases in the cost of raw materials and supplies. In
addition to higher wage rates, labor costs reflected the cost of training new
employees as well as an increase in overtime expense required to meet customer
delivery requirements throughout the year.
While the Company's 1994 sales were favorably impacted by increased product
demand that accompanied robust levels of automobile production, capacity in our
industry continued to exceed aggregate demand. Major customers continued to take
advantage of this excess capacity by staunchly refusing to consider price
increases while vigorously pursuing lower prices from the supply base. These
conditions had the effect of limiting our success in achieving long overdue
price relief. Even though our competitive position has improved substantially as
a result of successful cost reduction programs, certain costs are beyond our
direct control and margins continue to be under pressure, especially in the
fastener segment.
Selling and administrative expenses increased approximately 9% over prior
year levels, with increases in commission expense associated with increased
sales volume, and higher profit sharing expense accounting for the majority of
the change. The combination of generally higher interest rates and increases in
the Company's cash position resulted in an increase, before taxes, of
approximately $37,000 in interest income compared with 1993.
1993 COMPARED TO 1992
Net sales and lease revenues improved to $20,390,304 during 1993. This
constituted an increase of approximately 29% over 1992 sales and lease revenues
of $15,757,704. While this increase was not restricted to any single product
category, shipments of automatic rivet setting equipment, and related tools and
parts, exhibited the greatest growth. Although revenues for this product
category were up sharply, rebounding after two years of relatively weak demand,
the most significant factor accounting for this increase was the additional
revenue associated with the Company's acquisition, in May 1993, of the former
Townsend Automation division of Textron Inc. The combination of stronger demand
and a stronger presence in this market resulted in an increase in revenues of
over 45% compared with the year earlier period. Revenues from the sale of rivets
and other cold-formed parts increased by approximately 17% during 1993. The
improvements in this market segment reflect a combination of increased
automobile production, a slight gain in market share and the addition of a new
product associated with the previously mentioned acquisition. Revenues from the
lease of rivet setting machines increased approximately 17% over
- --------------------------------------------------------------------------------
1
<PAGE> 3
MANAGEMENT'S DISCUSSION
(Continued)
- --------------------------------------------------------------------------------
1992 levels, primarily due to the addition of new leases
acquired in connection with the aforementioned acquisition.
The market for rivets and cold-formed parts continued to be very competitive
and, in spite of the increases in demand, price relief remained difficult to
obtain. This was particularly true within the automotive sector where vigorous
competitive bidding practices proliferated. Similar obstacles were not as common
in our markets for automatic rivet setting machines and parts; however, the
market for perishable tools has become somewhat more competitive in recent
years. While these conditions have restrained our ability to obtain price
relief, the increase in demand mitigated the effects, to some extent, and in
many areas, the Company was successful in passing on higher costs of
manufacture.
In addition to the modest price relief, earnings continued to reflect
positive results from successful internal efforts to reduce manufacturing costs.
While these factors contributed to the improvement in earnings recorded for
1993, higher volumes, and the greater manufacturing efficiencies that resulted,
were the most significant factor contributing to a 38% increase in gross profit.
A considerable portion of the increase in sales volume was attributable to
new products and new customer orders received as a result of the Company's
acquisition of the Townsend Automation division. As a result of this
acquisition, the Company's product offerings have been enhanced and while these
enhancements contributed to the increase in both sales revenues and gross
profit, the relative complexity of these new products necessitated an investment
in engineering and product support resources beyond the levels historically
associated with our products. This additional support was reflected in the
higher levels of selling and administrative expense recorded during 1993. During
1993, the impact of these higher expense levels was fully offset by the
increases in gross profit realized from the sale of related products. Selling
and administrative expenses for 1993 also reflect increases in commissions and
other direct sales expenses that are consistent with the increases in sales
activity during the year.
The use of funds to finance the acquisition and additional capital
equipment, combined with lower available interest rates resulted in a reduction
in interest income, before taxes, of approximately $123,000 compared to 1992.
Goodwill amortization of $16,664 also affected earnings during 1993. Despite
these reductions in non-operating income, net income improved approximately 47%
over 1992 to $1,402,845.
DIVIDENDS
During 1995, the Company paid four regular quarterly dividends of 30 cents
per share and an extra dividend of 55 cents per share, for a total of $1.75 per
share. On February 19, 1996, your Board of Directors declared a regular
quarterly dividend of 30 cents per share payable March 20, 1996, to shareholders
of record March 5, 1996. At the same meeting, the Board declared an extra
dividend of 60 cents per share, payable April 20, 1996, to shareholders of
record April 4, 1996.
MACHINERY AND EQUIPMENT
Capital investments during the past year were $231,340, with the major
portion of that total invested in cold-heading equipment. Of the balance,
$32,531 was invested in new automatic rivet setting machines manufactured by the
Company and leased to its customers.
Capital expenditures totaled $383,354 during 1994. In addition to $42,422
expended for automatic rivet setting machines manufactured by the Company and
leased to its customers, significant investments were made in new machine tools
related to the manufacture of automatic rivet setting machines. Other
significant purchases included telecommunications equipment, and computer aided
design equipment and software.
During 1993, investments in new equipment totaled $603,253. This total
included $138,022 for new automatic rivet setting machines manufactured by the
Company and leased to its customers. Most of this amount was expended for the
purchase of high speed cold-headers used in the production of cold-formed
fasteners. The Company also acquired a variety of machinery and equipment in
connection with its acquisition of the former Townsend Automation division of
Textron, details of which are discussed in subsequent sections of this report.
Depreciation expense amounted to $646,456 in 1995, $653,748 in 1994 and
$601,017 during 1993.
LIQUIDITY AND CAPITAL RESOURCES
At year end 1995, working capital totaled approximately $12.7 million. This
represents an increase of approximately $1.7 million compared with year end
1994. The ratio of current assets to current liabilities at year end 1995
improved to 4.7, well above the norm for our industry. Inventories were reduced
by approximately 5.5% during the year after increases in the two prior years.
The increase in 1993 was directly related to purchases of inventory in
connection with the aforementioned acquisition, while the 1994 increase was
related to higher levels of work in process consistent with increased
manufacturing activity.
ACQUISITION
As previously reported, on May 7, 1993, the Company acquired certain assets
of the Townsend Automation division of Textron Inc. Townsend Automation was a
manufacturer of customized fastener installation and automated assembly
equipment, standard rivet setting equipment and a line of specialty fasteners
used primarily in the footwear industry. The assets acquired consisted of
inventories, machinery and equipment, tooling, drawings and certain other
intangible assets of the division. The acquisition was financed from available
funds and the total price paid amounted to approximately $2 million, including
legal and professional fees and the cost of relocating the assets to existing
Company facilities.
CONTINGENCIES
The Company is, from time to time, involved in litigation, including
environmental claims, in the normal course of business. With regard to
environmental claims, the Company, and
- --------------------------------------------------------------------------------
2
<PAGE> 4
MANAGEMENT'S DISCUSSION
(Continued) CHIGAGO RIVET LOGO
- --------------------------------------------------------------------------------
a former subsidiary, W.S. & W.C., Inc., have been named by state and/or federal
government agencies as "potentially responsible parties" with respect to certain
waste disposal sites. As a potentially responsible party, the Company, or its
former subsidiary, 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 remediation is presently unknown; however,
estimates currently available suggest that the cost of remediation at these
sites will be between $100 million and $133 million. Despite the joint and
several nature of liability, these proceedings are frequently resolved on the
basis of the quantity and type of waste disposed by the parties. The actual
amount of liability for the Company, and its former subsidiary, 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 liability will not be material to the Company's financial condition.
Nevertheless, it is unlikely that the Company will not incur significant costs
associated with these proceedings and, accordingly, the Company has recorded a
total liability of approximately $639,000 related to these matters. The adequacy
of this reserve will be reviewed periodically as more definitive cost
information becomes available.
NEW ACCOUNTING STANDARDS
In December 1991, the FASB issued Statement No. 107, "Disclosures about Fair
Value of Financial Instruments." This Statement became effective for the
Company's year ended December 31, 1995. The adoption of this Statement has no
effect on the Company.
In March 1995, the FASB issued Statement No. 121 "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of"
effective for the Company's year ending December 31, 1996. The adoption of this
Statement is not expected to have a significant effect upon the Company's
financial condition.
In October 1995, the FASB issued Statement No. 123, "Accounting for
Stock-Based Compensation" effective for the Company January 1, 1996. The
adoption of this Statement will not have any effect upon the Company since the
Company does not offer stock-based compensation to any employees or directors.
STOCK PURCHASE PROGRAM
In 1989, the stock repurchase authorization that was approved by the Board
of Directors in August 1984 was fulfilled. At its February 19, 1990 meeting, the
Board of Directors authorized the additional purchase of up to an aggregate of
50,000 shares of the Company's outstanding common stock, with such purchases to
be made from time to time, in the open market or in private transactions, at
prices deemed reasonable by management. During 1990, 24,180 shares were
purchased at an average price of $21.00 per share.
The repurchase authorization was subsequently increased to allow the
repurchase of an aggregate of 100,000 shares. During 1991, a total of 32,600
shares were purchased under the terms of the current authorization at an average
price of $23.73 per share. During 1992, a total of 118 shares were purchased at
an average price of $27.12 per share. A total of 300 shares were purchased
during 1993 at an average cost of $26.67 per share. An additional 500 shares
were purchased during 1994 at an average cost of $27.50 per share. During 1995,
a total of 900 shares were purchased at an average cost of $30.76 per share.
Financing for all of these purchases was entirely from internally generated
Company funds. It is management's intent to continue this program, provided
market conditions remain favorable.
OUTLOOK FOR 1996
After two very successful years, activity in our markets slowed considerably
beginning in the second half of 1995. During the latter half of 1995, our
backlogs declined as shipments outpaced incoming orders. As the year ended,
production levels were gradually adjusted to more closely match the level of
incoming orders. The effect of these changes was evident in our third and fourth
quarter results and we anticipate that revenues throughout 1996 will more
closely track the second half of 1995 rather than the robust levels reported
during the first half of 1995. Forecasting economic conditions is always
difficult, and the task is only made more complex by the fact that 1996 is an
election year; however, at this point in time, we do not expect that 1996
results will match the outstanding results achieved by the Company in 1995. Our
past success would not have been possible without the dedication and
conscientious efforts of employees at each of our facilities, and we take this
opportunity to acknowledge their contributions to the Company's success. We also
wish to express our appreciation for the continued support of our shareholders
and our customers.
Respectfully,
<TABLE>
<S> <C>
J. A. Morrissey John C. Osterman
John A. Morrissey John C. Osterman
Chairman President
</TABLE>
March 1, 1996
- --------------------------------------------------------------------------------
3
<PAGE> 5
CHIGAGO RIVET LOGO
- --------------------------------------------------------------------------------
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
December 31 1995 1994
--------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash and Cash Equivalents (Note 1)........................ $ 1,349,093 $ 2,225,445
Certificates of Deposit................................... 4,568,212 2,126,240
U.S. Government Securities (Note 1)....................... 2,703,533 1,631,975
Accounts Receivable--Less allowances
of $166,634 and $120,000, respectively................. 2,379,497 2,872,562
Inventories (Notes 1 and 2)............................... 4,102,406 4,344,536
Deferred Income Taxes (Note 3)............................ 806,227 683,064
Other Current Assets...................................... 231,957 310,103
----------- -----------
Total Current Assets...................................... 16,140,925 14,193,925
----------- -----------
Goodwill, net of amortization (Note 11)..................... 33,344 58,340
----------- -----------
Property, Plant and Equipment (Notes 1 and 7)
Land and Improvements..................................... 347,676 346,542
Buildings and Improvements................................ 3,715,915 3,704,730
Production Equipment, Leased Machines and Other........... 14,233,135 14,179,089
----------- -----------
18,296,726 18,230,361
Less Accumulated Depreciation............................. 13,115,856 12,559,541
----------- -----------
Net Property, Plant and Equipment......................... 5,180,870 5,670,820
----------- -----------
Total Assets................................................ $21,355,139 $19,923,085
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
4
<PAGE> 6
CHIGAGO RIVET LOGO
- --------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
December 31 1995 1994
--------------------------------------------------------------------------------------------
<S> <C> <C>
Current Liabilities
Accounts Payable.......................................... $ 877,871 $ 1,144,529
Contributions Due Profit Sharing and
Pension Plans (Note 4)................................. 572,864 322,309
Wages and Salaries........................................ 623,790 638,565
Other Accrued Expenses (Note 5)........................... 744,410 602,194
Unearned Lease Revenue (Note 1)........................... 70,120 105,352
Federal and State Income Taxes (Note 3)................... 541,045 412,369
----------- -----------
Total Current Liabilities................................. 3,430,100 3,225,318
Deferred Income Taxes (Note 3).............................. 1,041,930 995,767
----------- -----------
Total Liabilities......................................... 4,472,030 4,221,085
----------- -----------
Shareholders' Equity
Preferred Stock, No Par Value--Authorized
500,000 Shares--None Outstanding....................... -- --
Common Stock, $2.00 Par Value:
Authorized 2,000,000 Shares
Issued and Outstanding
585,748 and 586,648 Shares,
respectively (Note 6).................................. 1,171,496 1,173,296
Additional Paid-in Capital................................ 460,252 460,959
Retained Earnings, Per Accompanying Statement............. 15,251,361 14,067,745
----------- -----------
Total Shareholders' Equity................................ 16,883,109 15,702,000
----------- -----------
Commitments and Contingencies (Note 9)
Total Liabilities and Shareholders' Equity.................. $21,355,139 $19,923,085
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
5
<PAGE> 7
CHIGAGO RIVET LOGO
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
For the Years Ended December 31 1995 1994 1993
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales and Lease Revenue (Notes 1 and 7)....... $23,717,410 $23,012,730 $20,390,304
Cost of Goods Sold and Costs Related to Lease
Revenue......................................... 15,036,303 14,952,716 13,697,499
----------- ----------- -----------
Gross Profit...................................... 8,681,107 8,060,014 6,692,805
Selling and Administrative Expenses............... 5,347,049 5,034,472 4,630,508
Other Income, Net of Other Expenses (Note 8)...... 311,157 214,339 229,548
----------- ----------- -----------
Income Before Income Taxes........................ 3,645,215 3,239,881 2,291,845
Provision for Income Taxes (Notes 1 and 3)........ 1,410,000 1,331,000 889,000
----------- ----------- -----------
Net Income........................................ $ 2,235,215 $ 1,908,881 $ 1,402,845
=========== =========== ===========
Net Income Per Share.............................. $ 3.81 $ 3.25 $ 2.39
=========== =========== ===========
</TABLE>
STATEMENTS OF
RETAINED EARNINGS
<TABLE>
<S> <C> <C> <C>
Retained Earnings at Beginning of Year............ $14,067,745 $13,081,301 $12,449,301
Net Income for the Year........................... 2,235,215 1,908,881 1,402,845
Cancellation of Treasury Stock (Note 6)........... (25,175) (12,357) (7,163)
Cash Dividends Declared,
$1.75 Per Share in 1995, $1.55 Per Share in 1994
and $1.30 Per Share in 1993..................... (1,026,424) (910,080) (763,682)
----------- ----------- -----------
Retained Earnings at End of Year.................. $15,251,361 $14,067,745 $13,081,301
============ ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
6
<PAGE> 8
CHIGAGO RIVET LOGO
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
For the Years Ended December 31 1995 1994 1993
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income........................................... $ 2,235,215 $ 1,908,881 $ 1,402,845
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization...................... 671,452 678,744 617,681
Net Gain on the Sale of Properties................. (8,599) (16,058) (71,390)
Deferred Income Taxes.............................. (77,000) 37,000 3,968
Changes in Current Assets and Current Liabilities:
Accounts Receivable, Net........................ 493,065 349,435 (1,590,227)
Inventories..................................... 242,130 (937,811) (50,861)
Accounts Payable................................ (266,658) (126,502) 533,653
Other, Net...................................... 549,586 197,186 857,501
------------ ----------- -----------
Net Cash Provided by Operating
Activities............................... 3,839,191 2,090,875 1,703,170
------------ ----------- -----------
Cash Flows from Investing Activities:
Business Acquisition............................... -- -- (2,033,116)
Capital Expenditures............................... (231,340) (383,354) (1,088,841)
Net Proceeds from the Sale of Properties........... 83,434 165,434 156,180
Decrease in Short Term Investments................. -- -- 995,236
Proceeds from the Maturity of Held-to-Maturity
Securities...................................... 8,394,335 7,404,805 --
Purchases of Held-to-Maturity Securities........... (9,924,908) (8,025,181) --
Purchases of Available-for-Sale Securities......... (1,982,957) -- --
------------ ----------- -----------
Net Cash Used by Investing Activities...... (3,661,436) (838,296) (1,970,541)
------------ ----------- -----------
Cash Flows from Financing Activities:
Purchase of Treasury Stock......................... (27,683) (13,750) (8,000)
Cash Dividends..................................... (1,026,424) (910,080) (763,682)
------------ ----------- -----------
Net Cash Used by Financing Activities...... (1,054,107) (923,830) (771,682)
------------ ----------- -----------
Net Increase (Decrease) in Cash and Cash
Equivalents........................................ (876,352) 328,749 (1,039,053)
Cash and Cash Equivalents at Beginning of Year....... 2,225,445 1,896,696 2,935,749
------------ ----------- -----------
Cash and Cash Equivalents at End of Year............. $ 1,349,093 $ 2,225,445 $ 1,896,696
============ =========== ===========
Cash Paid During the Year for:
Income Taxes....................................... $ 1,358,324 $ 1,216,756 $ 552,421
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
7
<PAGE> 9
CHIGAGO RIVET LOGO
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL
STATEMENTS
1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
OPERATIONS--The Company operates in the fastener industry and is in the business
of producing and selling rivets, automatic rivet setting machines, parts and
tools for such machines, and the leasing of automatic rivet setting machines.
Rivet sales represented the following percentage of net sales and lease revenue
from operations: 44.9% in 1995, 47.7% in 1994 and 50.2% in 1993.
INCOME PER SHARE--Income per share of common stock is based on the weighted
average number of shares outstanding of 586,472 in 1995, 587,061 in 1994 and
587,348 in 1993.
CASH AND CASH EQUIVALENTS--The Company considers all highly liquid investments
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
Balance Sheets for cash and cash equivalents and certificates of deposit
approximate fair value because of the immediate or short-term maturity of these
financial instruments.
GOVERNMENT SECURITIES--Effective January 1, 1994, the Company adopted Statement
of Financial Accounting Standards No. 115 (SFAS 115), "Accounting for Certain
Investments in Debt and Equity Securities", designating all investment
securities as held-to-maturity. On December 31, 1995, management reassessed this
classification and transferred, at fair value, certain debt securities from
held-to-maturity to available-for-sale in consideration of projected future
liquidity requirements. In accordance with SFAS 115, securities classified as
held-to-maturity are reported at amortized cost, and available-for-sale
securities are reported at fair market value with unrealized gains and losses,
where material, included in Shareholders' Equity. At December 31, 1995, the
Company has recorded $682,483 of U.S. Government Securities as held-to-maturity,
and $2,021,050 of U.S. Government Securities as available-for-sale.
INVENTORIES--Inventories are stated at the lower of cost or net realizable
value, cost being determined principally by the first-in, first-out (FIFO)
method. The cost of steel wire and the raw material content of steel rivets is
determined by the last-in, first-out (LIFO) method (Note 2).
LEASE INCOME--Automatic rivet setting machines are available to customers on
either a sale or lease basis. The leases, generally for a one-year term, are
cancellable at the option of the Company or the customer and are accounted for
under the operating method which recognizes lease revenue over the term of the
lease. Rentals are billed in advance, and revenues attributable to future
periods are shown as Unearned Lease Revenue in the balance sheet. Costs related
to lease revenue, other than the cost of the machines, are expensed as incurred.
PURCHASE OF COMPANY COMMON STOCK--The Company is required by its state of
incorporation to retire any common stock it purchases. The excess of cost over
par value is charged proportionately to Additional Paid-in Capital and Retained
Earnings.
CREDIT RISK--The Company extends credit primarily on the basis of 30 day terms
to various companies doing business primarily in the automotive and appliance
industries. The Company does not believe it has a significant concentration of
credit risk in any one geographic area or market segment. Accounts receivable
from sales are unsecured.
PROPERTY, PLANT AND EQUIPMENT--Properties are stated at cost and, for additions
prior to 1981, are depreciated over their estimated useful lives using either
the straight-line or accelerated methods for financial reporting purposes.
Beginning in 1981, property additions are depreciated using the straight-line
method. Accelerated methods of depreciation are used for income tax purposes,
and deferred taxes are provided on the difference between financial and tax
depreciation. The estimated useful lives by asset category are:
Asset category Estimated useful life
- ------------------------------------------------------------
<TABLE>
<S> <C>
Land improvements........................... 15 to 25 years
Buildings and improvements.................. 10 to 35 years
Machinery and equipment..................... 9 to 12 years
Automatic rivet setting machines on lease... 10 years
Other equipment............................. 3 to 15 years
</TABLE>
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 currently. Maintenance, repairs and minor betterments
which do not improve the related asset or extend its useful life are charged to
operations as incurred.
ESTIMATES--The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2--INVENTORIES--Inventories at December 31, 1995 and 1994 consisted of the
following:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Raw materials..................... $ 697,010 $ 828,616
Work in process................... 901,040 1,172,978
Finished goods.................... 2,504,356 2,342,942
---------- ----------
Total............................. $ 4,102,406 $ 4,344,536
========== ==========
</TABLE>
At December 31, 1995 and December 31, 1994, inventories valued by the LIFO
method aggregated approximately $186,000 and $267,000 respectively. The excess
of current replacement cost of LIFO inventories over stated cost approximated
$114,000 and $108,000 at December 31, 1995 and 1994.
3--INCOME TAXES--The provision for income tax expense consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- ---------
<S> <C> <C> <C>
Current
Federal................. $ 1,232,000 $ 1,077,000 $ 724,032
State................... 255,000 217,000 161,000
Deferred.................. (77,000) 37,000 3,968
---------- ---------- --------
$ 1,410,000 $ 1,331,000 $ 889,000
========== ========== ========
</TABLE>
The deferred tax liabilities and assets are comprised of the following:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Depreciation.................... $ (1,061,493) $ (1,007,986)
----------- -----------
Inventory valuations............ 218,283 209,461
Environmental accruals.......... 255,550 205,433
Accrued vacation................ 150,254 144,956
Unearned rental revenue......... 28,048 42,141
Doubtful accounts............... 66,654 48,000
Other, net...................... 107,001 45,292
----------- -----------
825,790 695,283
----------- -----------
$ (235,703) $ (312,703)
=========== ===========
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE> 10
CHIGAGO RIVET LOGO
- --------------------------------------------------------------------------------
The following is a reconciliation of the statutory federal income tax rate
to the actual effective tax rate:
<TABLE>
<CAPTION>
1995 1994 1993
------------------ ------------------ ----------------
AMOUNT % Amount % Amount %
------------------ ------------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Expected tax at U.S.
statutory rate............. $ 1,239,373 34.0 $ 1,101,560 34.0 $ 779,227 34.0
State taxes, net of
federal benefit............ 168,300 4.6 155,500 4.8 106,260 4.6
Other, net.................. 2,327 .1 -- -- 3,513 .2
Adjustment to prior year
accrual.................... -- -- 73,940 2.3 -- --
---------- ---------- --------
Income tax expense.......... $ 1,410,000 38.7 $ 1,331,000 41.1 $ 889,000 38.8
========== ========== ========
</TABLE>
4--PENSIONS--The Company has a noncontributory profit sharing plan and insurance
annuity plans covering substantially all employees. Total expenses relating to
the profit sharing plan amounted to $373,000 in 1995, $265,000 in 1994 and
$135,000 in 1993.
The Company's funding policy for the insurance annuity plans is to
contribute annually the amounts necessary to satisfy ERISA funding standards.
Net pension expense relating to these plans is not significant. The fair value
of the plans' assets was $584,495 and $548,103 at December 31, 1995 and 1994,
respectively, and the vested, accumulated and projected benefit obligation was
approximately $701,000 and $562,000 at the end of 1995 and 1994, respectively.
The assumed discount rate used in determining the actuarial present value of the
projected benefit obligation was 6% and 7% for 1995 and 1994, respectively.
5--OTHER ACCRUED EXPENSES--Accrued expenses consist of the following:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Environmental costs..................... $ 638,875 $ 513,583
Property taxes.......................... 60,137 64,366
Payroll taxes........................... 45,819 14,723
All other items......................... (421) 9,522
-------- --------
$ 744,410 $ 602,194
======== ========
</TABLE>
6--TREASURY STOCK TRANSACTIONS--In 1995, 1994 and 1993 the Company purchased
900, 500 and 300 shares of its common stock for $27,683, $13,750 and $8,000,
respectively.
All stock purchased was retired, the excess of cost over par value was
charged proportionately to Additional Paid-in Capital and Retained Earnings.
7--LEASED MACHINES--Lease revenue amounted to $502,847 in 1995, $572,358 in 1994
and $623,400 in 1993. 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>
1995 1994
----------- -----------
<S> <C> <C>
Cost................................ $ 1,011,394 $ 1,114,135
Accumulated depreciation............ 776,002 800,843
---------- ----------
Carrying value...................... $ 235,392 $ 313,292
========== ==========
</TABLE>
8--OTHER INCOME, NET--Other income, net consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Gain on sale of properties
and equipment.............. $ 8,599 $ 16,058 $ 71,390
Interest income.............. 324,563 190,806 153,880
Amortization expense......... (24,996) (24,996) (16,664)
Other........................ 2,991 32,471 20,942
-------- -------- --------
$ 311,157 $ 214,339 $ 229,548
======== ======== ========
</TABLE>
9--COMMITMENTS AND CONTINGENCIES--Rent expense aggregated approximately $52,233,
$41,061 and $53,792 for 1995, 1994 and 1993, respectively. Total future minimum
rentals at December 31, 1995 are not significant.
The Company is, from time to time involved in litigation, including
environmental claims, in the normal course of business. With regard to
environmental claims, the Company, and a former subsidiary, W.S. & W.C., Inc.,
have been named by state and/or federal government agencies as "potentially
responsible parties" with respect to certain waste disposal sites. As a
potentially responsible party, the Company, or its former subsidiary, 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 remediation is presently unknown; however estimates currently
available suggest that the cost of remediation at these sites will be between
$100 million and $133 million. Despite the joint and several nature of the
liability, these proceedings are frequently resolved on the basis of the
quantity and type of waste disposed by the parties. The actual amount of
liability for the Company, and its former subsidiary, 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 liability will not be material to the Company's financial condition.
Nevertheless, it is unlikely that the Company will not incur significant costs
associated with these proceedings and accordingly the Company has recorded a
liability of approximately $639,000 related to these matters. The adequacy of
this reserve will be reviewed periodically as more definitive cost information
becomes available.
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.
10--OTHER UNUSUAL ITEMS OF INCOME AND EXPENSE--Fourth quarter net income
includes the net favorable effect of certain adjustments related to inventory,
accruals and allowances of $.31, $.21 and $.17 per share, for 1995, 1994 and
1993, respectively.
11--ACQUISITIONS--On May 7, 1993 the Company acquired certain operating assets
of Textron's Townsend Automation division for $2,033,116 in cash. Results
related to the acquired assets have been included since the date of acquisition.
The Company accounted for the acquisition as a purchase. Accordingly, the
purchase price was allocated to specific assets based upon their estimated fair
market value at the date of acquisition. The excess of the purchase price over
the fair market value of assets acquired of $100,000 was recorded as goodwill.
The goodwill is being amortized on a straight-line basis over four years.
Amortization expense during 1995 and 1994 was $24,996.
- --------------------------------------------------------------------------------
9
<PAGE> 11
CHIGAGO RIVET LOGO
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Chicago Rivet & Machine Co.
In our opinion, the accompanying balance sheets and the related statements
of operations, of retained earnings, and of cash flows present fairly, in all
material respects, the financial position of Chicago Rivet & Machine Co. at
December 31, 1995 and 1994, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles. 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 audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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
audits provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Price Waterhouse LLP
Chicago, Illinois
March 1, 1996
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales and Lease Revenue $23,717,410 $23,012,730 $20,390,304 $15,757,704 $15,271,567
- ---------------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes 3,645,215 3,239,881 2,291,845 1,545,618 1,209,263
- ---------------------------------------------------------------------------------------------------------------------------------
Net Income 2,235,215 1,908,881 1,402,845 951,618 750,263
- ---------------------------------------------------------------------------------------------------------------------------------
Net Income Per Share 3.81 3.25 2.39 1.62 1.25
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends Declared Per Share 1.75 1.55 1.30 1.20 1.35
- ---------------------------------------------------------------------------------------------------------------------------------
Average Common Shares Outstanding 586,472 587,061 587,348 587,522 599,698
- ---------------------------------------------------------------------------------------------------------------------------------
Net Working Capital 12,710,825 10,968,607 9,434,565 10,221,304 9,880,522
- ---------------------------------------------------------------------------------------------------------------------------------
Total Assets 21,355,139 19,923,085 18,597,383 16,770,307 16,530,711
- ---------------------------------------------------------------------------------------------------------------------------------
Shareholders' Equity 16,883,109 15,702,000 14,716,949 14,085,786 13,842,448
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE> 12
CHIGAGO RIVET LOGO
- --------------------------------------------------------------------------------
QUARTERLY FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1995
Net Sales and Lease
Revenue.............. $6,458,657 $6,982,747 $4,991,360 $5,284,646
Gross Profit.......... 2,242,434 2,460,751 1,600,927 2,376,995
Net Income............ 589,243 668,908 334,831 642,233
Per Share Data:
Net Income Per
Share.............. 1.00 1.14 .58 1.09
Average Common Shares
Outstanding........ 586,648 586,645 586,548 586,052
1994
Net Sales and Lease
Revenue.............. $5,860,647 $5,907,264 $5,243,111 $6,001,708
Gross Profit.......... 2,015,678 2,070,011 1,586,242 2,388,083
Net Income............ 499,491 456,612 322,121 630,657
Per Share Data:
Net Income Per
Share.............. .85 .78 .55 1.07
Average Common Shares
Outstanding........ 587,148 587,110 587,048 586,943
<CAPTION>
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1993
Net Sales and Lease
Revenue.............. $4,683,856 $4,747,860 $5,201,650 $5,756,938
Gross Profit.......... 1,495,323 1,541,056 1,541,958 2,114,468
Net Income............ 316,130 249,890 265,919 570,906
Per Share Data:
Net Income Per
Share.............. .54 .42 .45 .98
Average Common Shares
Outstanding........ 587,448 587,441 587,261 587,245
</TABLE>
INFORMATION ON COMPANY'S COMMON STOCK
The Company's common stock is traded on the American Stock Exchange. The
following chart 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 1995 1994 1995 1994
- ---------- --------- ---- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
First $.85* $.65* $29 1/4 $25 3/4 $34 3/8 $27 1/4
Second .30 .30 $30 1/4 $26 3/4 $30 3/4 $27 3/8
Third .30 .30 $34 7/8 $29 7/8 $32 7/8 $26 5/8
Fourth .30 .30 $32 7/8 $28 1/8 $31 1/4 $25 7/8
</TABLE>
- ---------------
* Includes an extra dividend of $.55 and $.35 per share for 1995 and 1994,
respectively.
- --------------------------------------------------------------------------------
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,349,093
<SECURITIES> 7,271,745
<RECEIVABLES> 2,546,131
<ALLOWANCES> 166,634
<INVENTORY> 4,102,406
<CURRENT-ASSETS> 16,140,925
<PP&E> 18,296,726
<DEPRECIATION> 13,115,856
<TOTAL-ASSETS> 21,355,139
<CURRENT-LIABILITIES> 3,430,100
<BONDS> 0
1,171,496
0
<COMMON> 0
<OTHER-SE> 15,711,613
<TOTAL-LIABILITY-AND-EQUITY> 21,355,139
<SALES> 23,214,563
<TOTAL-REVENUES> 23,717,410
<CGS> 15,036,303
<TOTAL-COSTS> 20,383,352
<OTHER-EXPENSES> (221,040)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,645,215
<INCOME-TAX> 1,410,000
<INCOME-CONTINUING> 2,235,215
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,235,215
<EPS-PRIMARY> 3.81
<EPS-DILUTED> 3.81
</TABLE>
