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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
For the fiscal year ended December 31, 1997
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: (630) 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--$1.00 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.
$30,310,298 AS OF FEBRUARY 2, 1998
COMMON SHARES OUTSTANDING AS OF FEBRUARY 2, 1998 WERE 1,169,096 ($1 PAR VALUE)
DOCUMENTS INCORPORATED BY REFERENCE
(1) PORTIONS OF THE COMPANY'S ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR
ENDED DECEMBER 31, 1997 (THE "1997 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 1998 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, 1997
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<CAPTION>
Item Page
No. No.
- ---- ----
<S> <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 6
6. Selected Financial Data 6
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
8. Financial Statements and Supplementary Data 12
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 12
Part III
10. Directors and Executive Officers of the Registrant 12
11. Executive Compensation 12
12. Security Ownership of Certain Beneficial Owners and
Management 13
13. Certain Relationships and Related Transactions 13
Part IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 13
</TABLE>
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PART I
ITEM 1 - BUSINESS
Chicago Rivet & Machine Co. (the Company) was incorporated under the laws
of the State of Illinois in December, 1927, as successor to the business of
Chicago Rivet & Specialty Co. The Company operates in the fastener industry in
the United States, producing and selling rivets, cold-headed parts, screw
machine products, 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
10 of the Company's 1997 Annual Report to Shareholders, incorporated herein by
reference. The 1997 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 revenues are
primarily derived from sales to customers involved, directly or indirectly, in
the manufacture of automobiles and appliances. 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 for the Company is closely related to the overall level of industrial
activity of the United States. During 1997, sales to two customers exceeded 10%
of the Company's consolidated revenues. Sales to Bundy Corporation accounted
for approximately 15% of the Company's consolidated revenues, and sales to
Fisher Dynamics Corporation accounted for approximately 11% of the Company's
consolidated revenues. No single customer accounted for more than 10% of the
Company's consolidated revenues in 1996 or 1995.
On December 3, 1996, the Company acquired substantially all of the assets
and assumed certain liabilities of H & L Tool Company, Inc. (H & L Tool) of
Madison Heights, Michigan. H & L Tool manufactures specialty cold-formed
parts, including fasteners, and screw machine products for sale to customers
primarily in the automotive industry. The assets purchased included all of H
&L Tool's production equipment, its facilities in Madison Heights, inventories,
accounts receivable and other operating assets. The purchase price was
approximately $19.1 million including $0.3 million of acquisition costs, and
was financed through a $4.8 million credit in consideration of the seller's
retention of all cash and marketable securities, an unsecured loan of $9.0
million and approximately $5.3 million of available cash. The Registrant
intends to continue operations at the Madison Heights location. For further
information regarding this acquisition, see Note 2 which appears on page 10 of
the Company's Annual Report to Shareholders, incorporated herein by reference.
The Company's business has historically been somewhat stronger during the
first half of the year.
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In conformity with industry practice, the Company generally does not
provide credit terms in excess of thirty days.
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, 1997, the Company employed 380 people.
The Company has no foreign operations, and sales to foreign customers
represent only a minor portion of the Company's total sales.
ITEM 2 - PROPERTIES
The Company conducts its fastener manufacturing and warehousing operations in
five 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
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<S> <C>
Naperville, Illinois Brick, concrete block and partial
Metal construction with metal roof.
Tyrone, Pennsylvania Concrete block with small tapered
Beam type warehouse.
Jefferson, Iowa Steel tapered beam construction.
Albia, Iowa Concrete block with prestressed
Concrete roof construction.
Madison Heights, Michigan Concrete, brick and partial metal
Construction with metal roof.
</TABLE>
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 has been named by state and/or federal
government agencies as a "potentially responsible party" with respect to
certain waste disposal sites. As a potentially responsible party, the Company
may be considered jointly and severally liable, along with other potentially
responsible parties, for the cost of remediation of these waste sites. The
actual cost of remediation is presently unknown; however, estimates currently
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available suggest that the cost of remediation at these sites will be between
$33 million and $49 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 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. At a number of waste disposal sites, the
issues affecting the Company, have been favorably resolved, or are nearing
resolution, and accordingly, the Company has reduced the amount of reserves
recorded in connection with these sites. Nevertheless, it is likely that the
Company will incur additional costs associated with the remaining proceedings
and, accordingly, the Company has recorded a total liability of $85,000 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 1997.
Executive Officers of the Registrant
The names, ages and positions of all executive officers of the Company, as
of March 27, 1998, 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.
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Number of years
Name and Age of Officer Position an Officer
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<S> <C> <C> <C>
John A. Morrissey 62 Chairman, Chief 18
Executive Officer
John C. Osterman 46 President, Chief 14
Operating Officer
And Treasurer
Donald P. Long 46 Vice-President Sales 3
Stephen D. Voss 36 Assistant Treasurer and 9
Corporate Controller
Kimberly A. Kirhofer 39 Secretary 7
</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
<PAGE> 6
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 time she held various administrative positions.
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 December 5, 1997 there were
471 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
14 of the 1997 Annual Report is incorporated herein by reference. The 1997
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 13 of
the 1997 Annual Report is incorporated herein by reference. The 1997 Annual
Report is filed as an exhibit to this report.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
When used in this discussion, the words "believe," "anticipated,"
"expected" and similar expressions are intended to identify "forward-looking
statements," which statements speak only as of the date thereof. Such
statements are subject to certain risks and uncertainties which could cause
actual circumstances to differ materially from those mentioned in this
discussion including, but not limited to: (i) the ability of the Company to
maintain its relationships with its significant customers, (ii) increases in
the prices of, or limitations on the availability of, the Company's primary raw
materials, (iii) a downturn in the automotive industry, upon which the Company
relies for sales revenue, and which is cyclical and dependent on, among other
things, consumer spending, international economic conditions and regulations and
policies regarding international trade, and (iv) failure of the Company or its
major customers or suppliers to successfully address Year 2000 issues.
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Readers are cautioned not to place undue reliance on these forward-looking
statements. The Company undertakes no obligation to publish revised
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events. In addition to
the disclosures contained herein, readers are also urged to carefully review
and consider any risks and uncertainties contained in other documents filed by
the Company with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
The past year was extraordinarily successful for the Company. The
largest factor contributing to increases in both revenues and profits was the
inclusion, for the full year, of operations of H & L Tool Company, Inc.
("H & L Tool"), which was acquired late in 1996. In addition, the Company's
ongoing efforts to increase market share, in combination with favorable
economic conditions, resulted in an increase in sales of the Company's
traditional products. Improvements in operating margins were realized as well,
contributing to the increase in income for the year.
The Company enjoyed improved results from both the fastener segment and
the assembly segment of its operations as employees at all locations met the
challenge of improving quality and service while successfully controlling
costs. At this time, all of our fastener plants have attained certification to
ISO-9002:1994. One of these facilities has attained QS-9000 certification and
our other fastener facilities are expected to be certified to a QS-9000
standard early in 1998. Attaining, and maintaining, these certifications is
essential to successfully competing in the automotive market today, and we are
pleased that so much progress toward this goal has been achieved in a
relatively short period of time.
In September, your Board of Directors approved a two for one stock split
of the Company's outstanding shares, and also approved a 20% increase in the
regular quarterly dividend. The Company's financial condition remains strong
and all indications are that the Company will continue to be successful.
1997 COMPARED TO 1996
Revenues increased in both the fastener and assembly equipment segments
compared with 1996. Overall, net sales and lease revenues amounted to
$44,543,404 in 1997 compared with $22,510,953 recorded in 1996. Revenues from
H & L Tool are included for the full twelve months of 1997, compared with only
one month in 1996, and this accounts for the largest share of the change,
although revenues from the Company's historical product lines also increased
compared with the prior year. The only notable exception was revenue from
leasing automatic rivet setting machines. Revenues from this activity, which
accounted for less than 1% of total revenues last year, have declined
steadily over the past several years as our customers find leasing less
attractive, and we expect revenues from this segment to continue to decline.
In line with the increase in revenues, the Company's total gross profit
increased substantially compared with the prior year. The addition of H & L
Tool accounts for a significant portion of the absolute increase; however, it
should be noted that H & L Tool's revenues are entirely related to the sale of
fasteners, and similar products, and the profit margins for those products,
when expressed as a percentage of sales, are below the margins historically
reported by the Company. As a result, even though gross margins increased
substantially, gross profit margins, when expressed as a percentage of sales,
declined from historical levels. Margins for our fastener products have been
constrained by the highly competitive nature of the market. Further, the
automotive customer base, which accounts for the majority of our sales,
continues to resolutely refuse to grant price relief, while simultaneously
adding quality and service requirements that tend to increase operating costs
for its suppliers. This has been the
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case for a number of years and is expected to continue in the years ahead.
Accordingly, we have continued to invest in equipment and methods designed to
allow us to remain competitive and to control our manufacturing costs. This
strategy has been successful in the past, and we intend to continue in a
similar manner in the future. The success of this approach, coupled with
increased volumes, contributed to the overall improvement in gross margins
from the sale of the Company's historical products during 1997. Increases in
fixed costs incurred are attributable to the acquisition and are consistent
with expectations.
Additional selling and administrative expenses incurred in connection with
operations of H & L Tool account for the majority of the increase experienced
in 1997. While the total expense increased over prior years, the proportionate
amount of the increase was substantially less than the increase in revenues,
and is in line with expectations. Sales commission expense decreased as a
percentage of sales, as a larger portion of revenues were generated from
customers serviced on a direct basis, rather than through commissioned sales
representatives.
A number of factors contributed to a decrease of approximately $488,000 in
non-operating income compared to 1996. Interest expense increased by
approximately $500,000, while interest income declined approximately $140,000.
Both of these changes stem from the use of cash and debt to finance the H & L
Tool purchase. Barring a sharp increase in interest rates, interest expense
will decline as the debt, which was $6.8 million at year end, continues to be
paid down. Gains from the sale of surplus equipment, including the sale of
lease machines, and a loss due to the write off of an investment in computer
software, resulted in a net gain of approximately $175,000.
1996 COMPARED TO 1995
Net sales and lease revenues for 1996 totaled $22,510,953, including
$1,390,158 in revenues from H & L Tool's operations recorded in December. This
was a decline of approximately 5.1% compared to 1995, which had been the best
year in the Company's recent history. Sales activity across all product lines
began to weaken during the latter part of 1995. This weakness continued
throughout 1996 and was more pronounced in our markets for machinery and
related tools and parts, especially in the area of complex, highly automated
assembly equipment. The additional revenue related to H & L Tool more than
offset the effects of weak market conditions with regard to fasteners and, as a
result, revenues for fasteners increased relative to 1995.
Gross margins declined compared to the prior year due to a number of
factors. Variable costs of manufacturing were generally reduced in line with
lower operating levels. However, certain costs of manufacture, including
wages, utility expense and supply costs increased, on a relative basis,
compared to 1995. These increases were partially offset by a reduction in
workers' compensation insurance costs. Operating profits in connection with H
& L Tool were offset by the recognition of a portion of the "step-up" value
assigned to the purchased inventory of H & L Tool. This treatment is required
under the purchase accounting provisions of APB Opinion No. 16 and is intended
to reflect that portion of the profit on the sale of purchased inventory that
was earned by the seller, prior to the sale of assets to the Company. The
effect, in 1996, was to reduce income by approximately $192,000, before income
taxes. This represented approximately one-half of the total amount that was
ultimately recognized; the remaining amount was reflected in operating results
for the first quarter of 1997. Fixed operating costs, as would be expected,
remained relatively unchanged from 1995. In addition, a slight change in
product mix contributed to the unfavorable comparison with the prior year.
The automotive industry remained extremely resistant to price increases, and
while cost reduction programs continue to be emphasized at Chicago Rivet, their
effectiveness has diminished as the most dramatic opportunities for cost
reduction have already been implemented.
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Interest income increased in 1996, reflecting higher interest rates and
larger invested balances throughout most of the year. Interest expense for
1996 amounted to $47,250, which represents one month of interest expense on
borrowings associated with the acquisition of H & L Tool. Selling and
administrative expenses were relatively unchanged compared to the prior year
period.
DIVIDENDS
The Company paid four regular quarterly dividends during 1997. In September of
1997, the Board declared a two for one stock split and voted to increase the
amount of the regular quarterly dividend. The Company paid two regular
quarterly dividends of $.15 per share and two regular quarterly dividends of
$.18 per share during 1997. In addition, an extra dividend of $.25 per share
was paid during the second quarter of 1997, bringing the total dividend payout
to $.91 per share, after adjustment for the effects of the stock split. On
February 16, 1998, your Board of Directors declared a regular quarterly
dividend of $.18 per share, payable March 20, 1998 to shareholders of record
March 5, 1998. This continues the uninterrupted record of consecutive
quarterly dividends paid by the Company to its shareholders that extends over
64 years. At that same meeting, the Board declared an extra dividend of $.40
per share, payable April 20, 1998 to shareholders of record, April 3, 1998.
ACQUISITION
On December 3, 1996, the Company acquired substantially all of the assets
and assumed certain liabilities of H & L Tool Company, Inc. of Madison
Heights, Michigan. The purchase price was approximately $19.1 million,
including acquisition costs of $0.3 million, and was financed through a $4.8
million credit against the purchase price in consideration of the seller's
retention of all cash and marketable securities, an unsecured loan of $9.0
million and approximately $5.3 million in available cash. Additional
information is contained in Note 2 to the Consolidated Financial Statements. H
& L Tool is a leading manufacturer of specialty screw-machine and cold-headed
products serving the automotive industry. This acquisition has significantly
enhanced the Company's product offerings and has strengthened our relationships
with certain key customers.
MACHINERY & EQUIPMENT
During 1997, capital investments totaled $963,917. Significant
expenditures included approximately $540,000 for equipment used in the
manufacture of fasteners and assembly equipment, $117,000 for data processing
and telecommunications equipment, building improvements amounting to $87,000
and approximately $58,000 which was invested in new equipment related to
quality control. The balance consists of investments in material handling and
other miscellaneous equipment.
Capital investments during 1996, exclusive of expenditures related to the
acquisition of the assets of H & L Tool, totaled $861,128. Of this total,
approximately $289,000 was invested in equipment used in the manufacture of
fasteners and machinery and $193,000 was expended for the purchase of a new
boiler to provide heat and process steam for our Tyrone facility. Approximately
$280,000 was invested in new data processing equipment and software. A total
of approximately $22,000 was invested in new automatic rivet setting machines
manufactured by the Company and leased to its customers. The balance was
expended for the purchase of various, smaller machine tools and office
equipment.
<PAGE> 10
Capital investments during 1995 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.
Depreciation expense amounted to $1,372,415 in 1997, $ 709,678 in 1996,
and $646,456 in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial condition continues to be sound. During the past
year, cash and short-term investments increased by approximately $2.5 million.
Investment in inventories declined approximately $.5 million, while accounts
receivable balances increased approximately $.6 million. Long term debt was
reduced by $2.2 million and working capital at year end amounted to
approximately $13.8 million, an increase of approximately $1.7 million from one
year ago. In connection with the 1996 acquisition of H & L Tool, the Company
borrowed $9.0 million, on an unsecured basis, subject to certain customary
covenants. Under the terms of the note, the Company is scheduled to repay the
principal in 20 quarterly installments of $450,000, plus interest computed on
the unpaid balance at a variable rate that is calculated under one of two
methods: the London Inter Bank Offering Rate, plus 80 basis points; or the
lender's reference rate, less 75 basis points. This rate is adjusted quarterly
and at year end was approximately 6.7%. During 1997, in addition to the four
scheduled payments, the Company paid an additional $450,000 against the
principal of the note. Throughout the year, the Company was in full
compliance with all terms and covenants associated with the note. Management
has identified a number of specific investments in new machine tools, data
processing equipment and software, and building improvements that are expected
to total approximately $2.7 million during 1998 and early 1999. Management
believes that this level of investment can be funded internally, nevertheless,
a $1.0 million line of credit, which was obtained from the Bank of America in
connection with the acquisition, remains available to the Company. There was
no charge for this facility, and as of December 31, 1997, it was unused. The
facility will expire on May 30, 1998.
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 has been named by state and/or federal
government agencies as a "potentially responsible party" with respect to
certain waste disposal sites. As a potentially responsible party, the Company
may be considered jointly and severally liable, along with other potentially
responsible parties, for the cost of remediation of these waste sites.
Certain estimates related to remediation costs were favorably adjusted during
1997 as remediation work nears completion at certain sites, while claims at
other sites are nearing resolution, and, accordingly, the Company has revised
the amount of reserves recorded in connection with these claims. The actual
cost of remediation is presently unknown; however, estimates currently
available suggest that the remaining cost of remediation at these sites will
be between $33 million and $49 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 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.
<PAGE> 11
Nevertheless, it is likely that the Company will incur additional costs
associated with these proceedings, and, accordingly, the Company has recorded a
total liability of $85,000 related to these matters. The adequacy of this
reserve will be reviewed periodically as more definitive cost information
becomes available.
NEW ACCOUNTING STANDARDS
The Company's financial statements and financial condition were not; and
are not expected to be, materially impacted by any new, or proposed, accounting
standards.
YEAR 2000 COMPLIANCE
Beginning in 1996, the Company began a study to identify and correct
date-sensitve hardware, software and procedures that could adversely affect
operations as we approach the year 2000 ("Year 2000" issues). The Company
expects to incur internal staff costs as well as consulting and other expenses
related to this issue. The majority of our Year 2000 issues will be addressed
as a by-product of current efforts to select and implement a new,
enterprise-wide, information management system. The Company expects to invest
between $700,000 and $1,000,000 in new hardware, software, consulting and
training related to this project. It should be noted that this effort,
scheduled for completion in 1999, is also expected to provide significant
improvements in manufacturing management, customer service and should also
yield a reduction in administrative expenses. In addition to the review of its
internal systems, the Company is querying its customers and suppliers as to
their progress in identifying and addressing Year 2000 issues. There can be no
assurance that the systems of other companies, including the systems of our
customers and suppliers will be timely converted, therefore, although
unlikely, it is possible that Year 2000 issues could have a material adverse
effect on the Company's financial condition and results of operations.
STOCK PURCHASE PROGRAM
Terms of a stock repurchase authorization originally approved by the Board of
Directors in February of 1990, and subsequently amended to permit the
repurchase of an aggregate of 200,000 shares, provides for purchases to be made
from time to time, in the open market or in private transactions, at prices
deemed reasonable by management. Purchases under the current repurchase
authorization have amounted to 119,396 shares at an average price of $11.69 per
share. This includes the purchase of 2,200 shares during 1997 at an average
price of $27.88 per share. It is management's intention to continue this
program, provided market conditions are favorable and funding for repurchases
is available.
OUTLOOK FOR 1998
1997 was an outstanding year for Chicago Rivet. We enjoyed favorable
market conditions, witnessed the successful integration of a new facility and
new products into our operations, and we made significant progress toward
attaining independent certification that the quality of our products truly is
world-class. We recorded levels of sales and profits that far exceeded those
of any year in memory. The equity markets rewarded our shareholders with a
significant increase in the value of their investment in the Company while the
Board of Directors approved a two for one stock split and a 20% increase in
the regular dividend. It was a year that will be very hard to follow.
<PAGE> 12
While we expect 1998 to be another successful year for the Company, we do
not anticipate that the Company's revenues and earnings will increase at the
same rate as last year. Much of 1997's success is the result of an
acquisition, and, while we would not rule out the possibility of another
similar acquisition, there is nothing definite in our immediate future.
Typically, our results are closely tied to conditions in the automotive
industry in particular and the overall economy in general. The U. S. economy
has enjoyed an unprecedented period of expansion over the past several years,
and analysts have begun to question how long the current expansion will last.
Our business continues to be fairly strong, although our backlogs are not as
robust as one year ago. Demand for fasteners and related products continues
to meet expectations, but demand in the assembly equipment segment of our
business has not been as strong as we would like. There is an ongoing
consolidation in the supply base that services the automotive industry, and
this has affected certain of our long-term customer relationships while
simultaneously affording us new opportunities with other customers and
potential customers. We plan to continue to aggressively solicit new business
while maintaining our core accounts. We also recognize that price relief will
continue to be elusive, especially if the economy slows. Accordingly, we will
continue to focus on cost containment as we strive to produce the best possible
product at the lowest possible cost.
We gratefully acknowledge that the Company's past success has been
dependent upon a number of factors, including the continued loyalty of our
customers, which is dependent upon the diligent and conscientious efforts our
employees, and the continued support of our shareholders. We are confident
that those same factors will be the foundation for the Company's continued
success in the future.
ITEM 8 - FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
See the sections entitled "Consolidated Financial Statements" and
"Financial Statement Schedule" which appear on pages 15 through 17 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 4 through 8 of the Company's
1998 Proxy Statement, is incorporated herein by reference. The information
with regard to compliance with Section 16 (a) of the Exchange Act, which is set
forth at the end of the section entitled "Additional Information Concerning the
Board of Directors and Committees" on pages 7 and 8 of the 1998 Proxy
Statement, is incorporated herein by reference. The 1998 Proxy Statement is
to be filed with the Securities and Exchange Commission in connection with the
Company's 1998 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
<PAGE> 13
The information set forth in the section entitled "Executive Compensation"
which appears on pages 9 through 13 of the Company's 1998 Proxy Statement and
the information relating to compensation of directors set forth in the last
paragraph of the section entitled "Additional Information Concerning the Board
of Directors and Committees" which appears on pages 7 and 8 of the Company's
1998 Proxy Statement is incorporated herein by reference. The 1998 Proxy
Statement is to be filed with the Securities and Exchange Commission in
connection with the Company's 1998 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 page 3 of the Company's 1998 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 4 through 8 of the
Company's 1998 Proxy Statement is incorporated herein by reference. The 1998
Proxy Statement is to be filed with the Securities and Exchange Commission in
connection with the Company's 1998 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 penultimate sentence of footnote (2) on page 6 of the Company's 1998
Proxy Statement is incorporated herein by reference. The 1998 Proxy Statement
is to be filed with the Securities and Exchange Commission in connection with
the Company's 1998 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 "Consolidated Financial Statements"
which appears on page 15 of this report.
2. Financial statement schedule and supplementary information
required to be submitted.
See the section entitled "Financial Statement Schedule" which
appears on pages 16 and 17 of this report.
3. Exhibits:
See the section entitled "Exhibits" which appears on page 19
of this report.
(b) Reports on Form 8-K
1. The Company was not required to file any Reports on Form 8-K
during the quarter ended December 31, 1997.
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Chicago Rivet & Machine Co. has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Chicago Rivet & Machine Co.
By /s/ John C. Osterman
------------------------------
John C. Osterman, President
And Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
John A. Morrissey Chairman of the Board of
- ------------------- Directors, Chief Executive
John A. Morrissey Officer and Member of the
Executive Committee
March 27, 1998
--------------
John C. Osterman
- -------------------
John C. Osterman President, Chief Operating
Officer, Treasurer (Chief
Financial Officer), Member
Of the Executive Committee
And Director
March 27, 1998
--------------
Robert K. Brown
- -------------------
Robert K. Brown Director and Member of the
Executive Committee
March 27, 1998
--------------
Walter W. Morrissey Director, Member of Executive
- ------------------- Committee and Member of Audit
Walter W. Morrissey Committee
March 27, 1998
--------------
Stephen D. Voss Assistant Treasurer and
- ------------------- Controller (Principal
Stephen D. Voss Accounting Officer)
March 27, 1998
--------------
<PAGE> 15
CHICAGO RIVET & MACHINE CO.
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements, together with the notes thereto and
the report thereon of Price Waterhouse LLP dated March 6, 1998, appearing on
pages 6 to 13 of the accompanying 1997 Annual Report, and the section entitled
"Quarterly Financial Data (Unaudited)" appearing on page 14 of the accompanying
1997 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 1997 Annual Report is not to be deemed filed as part of
this Form 10-K Annual Report.
Consolidated Financial Statements from 1997 Annual Report (Exhibit 13 hereto):
Consolidated Balance Sheets (pages 6 & 7 of 1997 Annual Report)
Consolidated Statements of Operations (page 8 of 1997 Annual Report)
Consolidated Statements of Retained Earnings (page 8 of 1997 Annual Report)
Consolidated Statements of Cash Flows (page 9 of 1997 Annual Report)
Notes to Consolidated Financial Statements (pages 10, 11 and 12 of 1997
Annual Report)
Report of Independent Accountants (page 13 of 1997 Annual Report)
Quarterly Financial Data (Unaudited)
(page 14 of 1997 Annual Report)
<PAGE> 16
FINANCIAL STATEMENT SCHEDULE
1997, 1996 AND 1995
The following financial statement schedule should be read in conjunction
with the consolidated financial statements and the notes thereto in the 1997
Annual Report. Financial statement schedules not included herein have been
omitted because they are not applicable or the required information is shown in
the consolidated financial statements or notes thereto.
Page
----
Financial statement schedule:
Valuation and Qualifying Accounts (Schedule VIII) 17
Report of Independent Accountants on
Financial Statement Schedule 18
<PAGE> 17
CHICAGO RIVET & MACHINE CO.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<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>
1997
Allowance for doubtful
accounts, returns and
allowances $108,652 $48,412 $34,042 (1) $ --- $123,022
1996
Allowance for doubtful
accounts, returns and
allowances $166,634 $30,000 $34,042 (1) ($53,940) (2) $108,652
1995
Allowance for doubtful
accounts, returns and
allowances $120,000 $64,000 $17,366 (1) $ --- $166,634
</TABLE>
(1) Accounts receivable written off, net of recoveries.
(2) Reduction of allowance.
<PAGE> 18
Report of Independent Accountants on
Financial Statement Schedule
To the Board of Directors
of Chicago Rivet & Machine Co.
Our audits of the consolidated financial statements referred to in our report
dated March 6, 1998 appearing in the 1997 Annual Report to Shareholders of
Chicago Rivet & Machine Co. (which report and financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the Financial Statement Schedule listed in Item 14(a) of this Form
10-K. In our opinion, this Financial Statement Schedule presents fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
PRICE WATERHOUSE LLP
Chicago, Illinois
March 6, 1998
<PAGE> 19
CHICAGO RIVET & MACHINE CO.
EXHIBITS
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Page
- ------- ----
<S> <C> <C>
2.1 Purchase and Sale Agreement dated February 18,
1993. Incorporated by reference to Company's
Current Report on Form 8-K, dated May 7, 1993.
2.2 Purchase and Sale Agreement dated September 18,
1996. Incorporated by reference from Company's
Current Report on Form 8-K, dated December 16,
1996.
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 January
20, 1997. Incorporated by reference from
Company's report on Form 8-K, dated January 24, 1997.
3.5 Articles of Incorporation, as amended by the Amendment
to the Articles of Incorporation, dated August 18, 1997.
*13 Annual Report to Shareholders for the year
ended December 31, 1997.
21 Subsidiaries of the Registrant.
27.1 Financial Data Schedule.
</TABLE>
* Only the portions of this exhibit which are specifically
incorporated herein by reference shall be deemed to be filed
herewith.
<PAGE> 1
EXHIBIT 3.5
Text of Amendment to the Articles of Incorporation
of Chicago Rivet & Machine Co.
(dated August 18, 1997)
RESOLVED, that the Articles of Incorporation of the Corporation be amended by
increasing the number of shares of Common Stock which the Corporation is
authorized to issue from 2,000,000 shares of Common Stock of the par value of
$2.00 per share to 4,000,000 shares of Common Stock of the par value of $1.00
per share.
FURTHER RESOLVED, that these Articles of Amendment do not affect the
preferences, qualifications, limitations, restrictions and the special or
relative rights in respect of the 500,000 authorized shares of the Preferred
Stock of the Corporation.
<PAGE> 2
ARTICLES OF INCORPORATION
OF
CHICAGO RIVET & MACHINE CO.,
as last amended (August 18, 1997)
1. The name of the corporation is Chicago Rivet & Machine Co.
2. The object for which it is formed is to manufacture, export,
import, buy, sell and generally deal in metal specialties and
other goods, wares, merchandise and personal property of every
class and description; to acquire, hold, exercise and dispose of
any right, patent or otherwise, and to do all and everything
necessary or convenient for the accomplishment of any and all of
the purposes above mentioned and incidental thereto.
3. The duration of the corporation is perpetual.
4. The location of the original principal office is 1830 S. 54th
Ave., Cicero, County of Cook, State of Illinois.
5. The total authorized capital stock is (4,500,000) shares divided
into two classes:
500,000 shares of Preferred Stock, without par value, issuable
in series; and (4,000,000) shares of Common Stock of the par
value of ($1.00) per share,
the preferences, qualifications, limitations, restrictions,
and the special or relative rights in respect of the shares of
each class of stock to be as follows:
(a) THE PREFERRED STOCK
(i) The authorized shares of Preferred Stock may be divided
into and issued in series, each such series to be so
designated as to distinguish the shares thereof from
the shares of all other series and classes. All shares
of the Preferred Stock shall be identical except as to
the following relative rights and preferences, in
respect of any or all of which there may be variations
between different series:
(1) The rate of dividend.
(2) The price at and the terms and conditions on which
shares may be redeemed.
<PAGE> 3
(3) The amount payable on shares in event of
involuntary liquidation.
(4) The amount payable on shares in event of
voluntary liquidation.
(5) Sinking fund provisions, if any, for the
redemption or purchase of shares.
(6) The terms and conditions on which shares may be
converted, if the shares of any series are issued
with the privilege of conversion.
The Board of Directors of the Corporation is hereby
expressly vested with authority to divide the
authorized shares of the Preferred Stock into series
and, within the limitations of the laws of Illinois, to
fix and determine the relative rights and preferences
of the shares of any series so established; provided,
however, that such authority hereinabove expressly
vested in the Board of Directors of the Corporation
shall be subject to such further limitations, if any,
as are stated in the Articles of Incorporation of the
Corporation, as amended. In order for the Board of
Directors of the Corporation to establish a series of
the Preferred Stock pursuant to the authority
hereinabove expressly vested in it, the Board of
Directors shall adopt a resolution or resolutions
setting forth the designation of such series and fixing
and determining the relative rights and preferences
thereof. All shares of the Preferred Stock of any one
series shall be identical in all respects, except that
shares of any one series issued at different times may
differ in respect to the dates from which dividends
thereon shall be cumulative.
(ii) The holders of each series of the Preferred Stock shall
be entitled to receive out of any funds legally
available therefor, as and when declared by the Board
of Directors, cumulative cash dividends at not to
exceed the rate per annum fixed by the Board of
Directors in the resolution or resolutions establishing
such series of Preferred Stock payable quarterly on
such dates as shall be fixed by the Board of Directors
in such resolution or resolutions. Dividends on shares
of the Preferred Stock shall be cumulative from the
respective dates of issuance thereof and shall accrue
from day to day whether or not earned or declared.
Accumulation of dividends shall not bear interest. All
cumulative dividends on the outstanding shares of the
Preferred Stock for all dividend periods shall be paid
or declared and set apart for payment, and all amounts
required to be paid into or set aside for any sinking,
purchase or redemption fund applicable to any series of
the Preferred Stock, shall have been paid or set aside
before any dividend or other distribution (other than a
dividend or distribution consisting solely of shares of
Common Stock) shall be paid or made or declared and set
apart for payment on the Common Stock. No dividends
shall be paid or declared and set apart for payment on
2
<PAGE> 4
any series of the Preferred Stock in respect of any
dividend period unless at the same time a like
proportionate dividend for the same dividend period
shall have been paid or declared and set apart for
payment on all other series of Preferred Stock then
issued and outstanding.
(iii) Upon any liquidation, dissolution or winding-up of the
Corporation (whether voluntary or involuntary), the
holders of each series of the Preferred Stock shall be
entitled to receive payment of such amount, in cash or
in kind, as the Board of Directors in the resolution or
resolutions establishing such series of the Preferred
Stock shall have determined to be payable to the
holders of such series of the Preferred Stock in the
event of any such liquidation, dissolution or
winding-up, as the case may be, plus all accumulated
dividends, and no more, before any sum shall be paid or
any assets distributed among the holders of the Common
Stock, and after such payment to the holders of the
Preferred Stock, all remaining assets and funds shall
be paid or distributed pro rata to the holders of the
Common Stock. If, upon any such liquidation,
dissolution or winding-up of the Corporation, the
assets of the Corporation available for payment and
distribution to holders of all series of the Preferred
Stock are insufficient to make payment in full to such
holders, then the holders of the Preferred Stock of all
series shall share in any payment or distribution of
assets in proportion to the full amounts to which they
would otherwise respectively be entitled, and in such
event no payment or distribution shall be made to the
holders of the Common Stock. Neither the consolidation
or merger of the Corporation, nor the sale, lease,
exchange, mortgage, pledge or other disposition of all
or substantially all of its assets nor the purchase or
redemption of shares of any class, nor a reduction of
its capital, nor a dividend or distribution to
shareholders from net profits or surplus earned, in
pursuance of applicable provisions of law providing
therefor, shall be deemed to be a liquidation,
dissolution or winding-up of the affairs of the
Corporation within the meaning of the foregoing
provisions of this paragraph.
(iv) Any series of the Preferred Stock may be redeemed in
whole or in part, at the option of the Corporation, by
resolution of its Board of Directors, or by the
operation of the sinking, redemption or purchase fund,
if any, provided for such series, at any time, or from
time to time, at such price as may be fixed and
determined by the Board of Directors in any resolution
providing for the issue of any particular series of the
Preferred Stock. If less than all the outstanding
shares of any series are to be redeemed, the shares to
be redeemed shall be
3
<PAGE> 5
determined by lot or pro rata in such manner as the
Board of Directors may provide.
(v) The series of Preferred Stock of each series
shall be convertible into or exchangeable for shares of
Common Stock or shares of any other series of Preferred
Stock, upon such terms and conditions, as shall be
fixed and determined by the Board of Directors in any
resolution providing for the issuance of such series of
Preferred Stock.
(vi) In the event that any shares of Preferred Stock which
have been issued or reacquired by the Corporation, in
any manner, including such shares as may be redeemed or
purchased or converted into Common Stock or any other
series of Preferred Stock, then such shares shall have
the status of authorized and unissued Preferred Stock
and may be reissued as shares of the series of which
they were originally a part or may be issued as shares
of a new series or as shares of any other series, all
subject to the conditions and restrictions of any
series of Preferred Stock as fixed and determined by
resolution of the Board of Directors.
(b) COMMON STOCK
(i) The holders of the Common Stock shall be entitled to
such dividends as may from time to time be declared by
the Board of Directors, but only when and as declared
by the Board of Directors out of any funds legally
available for declaration of dividends, subject to the
provisions and conditions set forth in section (a)
hereof in favor of the Preferred Stock.
(ii) In the event of any liquidation, dissolution or
winding-up of the affairs of the Corporation, the
holders of the Common Stock shall be entitled to share
pro rata in the net assets available for distribution
to holders of the Common Stock after payment to the
holders of Preferred Stock of the amounts to which they
are entitled pursuant to the resolution or resolutions
of the Board of Directors providing for the issue of a
series of Preferred Stock.
(c) OTHER PROVISIONS APPLICABLE TO PREFERRED STOCK AND COMMON
STOCK
(i) In the exercise of voting powers, each holder of a
share of Preferred Stock and each holder of a share of
Common Stock shall be entitled to one vote for each of
the shares held by him of record on the books of the
Corporation at the time for determining holders thereof
entitled to vote. The holders of Common Stock shall
vote together, share for share, with the holders of
Preferred Stock as one class except as to
4
<PAGE> 6
those matters which, by express statutory provision,
are required to be determined by class voting.
(ii) No holder of stock of any class of the Corporation,
whether now or hereafter authorized, shall have any
pre-emptive or preferential right to subscribe to any
share of stock of the Corporation of any class, now or
hereafter authorized, or to any obligations convertible
into stock of the Corporation, issued or sold, or any
right to subscribe to any thereof, and the Board of
Directors may issue stock of the Corporation, or
obligations convertible into stock, without offering
such issue of stock or such obligations, either in
whole or in part, to the shareholders of the
Corporation.
6. The names and addresses of the original stockholders of the
consolidated corporation and the amount of stock held and paid in by each are
as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
NAME ADDRESS NUMBER OF AMOUNT AMOUNT
SHARES HELD PAID IN
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John A. Morrissey 801 S. Euclid Ave. 879 $87,900 $87,900
Oak Park, Ill.
..............................................................................
Edward J. Morrissey 4520 N. Whipple St. 1 100 100
Chicago, Ill.
..............................................................................
Edward P. O'Malley 1849 Waveland Ave. 120 12,000 12,000
Chicago, Ill.
..............................................................................
Edward P. O'Malley 1924 Grace St. 10 1,000 1,000
Chicago, Ill.
..............................................................................
Francis E. O'Malley Tyrone, New Mexico 20 2,000 2,000
..............................................................................
Herman J. Tonn 1737 N. Francisco Ave. 287 28,700 28,700
Chicago, Ill.
..............................................................................
Edward G. Goergen 7831 White Ave. 200 20,000 20,000
Lyons, Ill.
..............................................................................
Vincent A. Scully Cedarhurst 50 5,000 5,000
Long Island, N.Y.
..............................................................................
M. P. McManus General Motors Bldg. 25 2,500 2,500
Detroit, Mich.
..............................................................................
Stephen Rechtoris 4208 N. Drake Ave. 158 15,800 15,800
Chicago, Ill.
- ------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 7
7. The location and a general description of the original property in
which capital stock was paid is as follows: All of the property, real, personal
and mixed consisting of machinery, tools, dies, desks, office equipment,
finished and raw materials, accounts receivable and real estate, located in
Cicero, Illinois.
8. The management of the corporation shall be vested in seven
directors.
9. The names and addresses of the first board of directors, at least
one of whom is a resident of Illinois, and the respective terms for which
elected are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
NAME ADDRESS TERM FOR WHICH
ELECTED
- ------------------------------------------------------------------------------
<S> <C> <C>
John A. Morrissey 801 S. Euclid Ave., Oak Park, Ill. Until next annual
directors meeting.
..............................................................................
Edward J. Morrissey 105 S. LaSalle St., Chicago, Ill. "
..............................................................................
Herman J. Tonn 1737 N. Francisco Ave., Chicago, Ill. "
..............................................................................
Edward G. Goergen 7831 White Ave., Lyons, Illinois "
..............................................................................
Edward P. O'Malley 1849 Waveland Ave., Chicago, Ill. "
- ------------------------------------------------------------------------------
</TABLE>
10. No shareholder of this corporation shall have any preemptive right
to subscribe for or acquire additional shares of the corporation, whether now
authorized or to be authorized hereafter.
6
<PAGE> 1
EXHIBIT 13
<PAGE> 2
CHICAGO RIVET LOGO
Chicago Rivet & Machine Co.
1997 Annual Report
<PAGE> 3
CHIGAGO RIVET LOGO
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Highlights.................................................. 1
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 2
Consolidated Balance Sheets................................. 6
Consolidated Statements of Operations....................... 8
Consolidated Statements of Retained Earnings................ 8
Consolidated Statements of Cash Flows....................... 9
Notes to Consolidated Financial Statements.................. 10
Report of Independent Accountants........................... 13
Selected Financial Data..................................... 13
Quarterly Financial Data.................................... 14
</TABLE>
Chicago Rivet & Machine Co. - 901 Frontenac Road - PO Box 3061 - Naperville,
Illinois 60566 - Telephone: (630) 357-8500
- --------------------------------------------------------------------------------
<PAGE> 4
CHIGAGO RIVET LOGO
- --------------------------------------------------------------------------------
HIGHLIGHTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES AND LEASE REVENUE.................... $44,543,404 $22,510,953 $23,717,410
NET INCOME..................................... 3,861,510 1,948,001 2,235,215
NET INCOME PER SHARE........................... 3.30 1.66 1.91
DIVIDENDS DECLARED PER SHARE................... .91 .90 .88
EXPENDITURES FOR PROPERTY, PLANT AND EQUIPMENT,
NET OF ACQUISITION........................... 963,917 861,128 231,340
DEPRECIATION FOR PROPERTY, PLANT AND
EQUIPMENT.................................... 1,372,415 709,678 646,456
NET WORKING CAPITAL............................ 13,766,681 12,040,579 12,710,825
TOTAL SHAREHOLDERS' EQUITY..................... 20,511,102 17,776,760 16,883,109
COMMON SHARES OUTSTANDING AT YEAR END.......... 1,169,296 1,171,496 1,171,496
SHAREHOLDERS' EQUITY PER COMMON SHARE.......... 17.54 15.17 14.41
APPROXIMATE NUMBER OF SHAREHOLDERS OF RECORD... 471 505 550
</TABLE>
REGISTRAR
First Chicago Trust Company of New York
TRANSFER AGENT
First Chicago Trust Company of New York
STOCK EXCHANGE
The Company's stock is traded on the
American Stock Exchange (Ticker symbol CVR).
ANNUAL MEETING
The annual meeting of shareholders
will be held on May 12, 1998 at 10:00 a.m. at
901 Frontenac Road
Naperville, Illinois 60566
- --------------------------------------------------------------------------------
1
<PAGE> 5
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
TO OUR SHAREHOLDERS:
RESULTS OF OPERATIONS
The past year was extraordinarily successful for the Company. The largest
factor contributing to increases in both revenues and profits was the inclusion,
for the full year, of operations of H & L Tool Company, Inc. ("H & L Tool"),
which was acquired late in 1996. In addition, the Company's ongoing efforts to
increase market share, in combination with favorable economic conditions,
resulted in an increase in sales of the Company's traditional products.
Improvements in operating margins were realized as well, contributing to the
increase in income for the year.
The Company enjoyed improved results from both the fastener segment and the
assembly segment of its operations as employees at all locations met the
challenge of improving quality and service while successfully controlling costs.
At this time, all of our fastener plants have attained certification to
ISO-9002:1994. One of these facilities has attained QS-9000 certification and
our other fastener facilities are expected to be certified to a QS-9000 standard
early in 1998. Attaining, and maintaining, these certifications is essential to
successfully competing in the automotive market today, and we are pleased that
so much progress toward this goal has been achieved in a relatively short period
of time.
In September, your Board of Directors approved a two for one stock split of
the Company's outstanding shares, and also approved a 20% increase in the
regular quarterly dividend. The Company's financial condition remains strong and
all indications are that the Company will continue to be successful.
1997 COMPARED TO 1996
Revenues increased in both the fastener and assembly equipment segments
compared with 1996. Overall, net sales and lease revenues amounted to
$44,543,404 in 1997 compared with $22,510,953 recorded in 1996. Revenues from H
& L Tool are included for the full twelve months of 1997, compared with only one
month in 1996, and this accounts for the largest share of the change, although
revenues from the Company's historical product lines also increased compared
with the prior year. The only notable exception was revenue from leasing
automatic rivet setting machines. Revenues from this activity, which accounted
for less than 1% of total revenues last year, have declined steadily over the
past several years as our customers find leasing less attractive, and we expect
revenues from this segment to continue to decline.
In line with the increase in revenues, the Company's total gross profit
increased substantially compared with the prior year. The addition of H & L Tool
accounts for a significant portion of the absolute increase; however, it should
be noted that H & L Tool's revenues are entirely related to the sale of
fasteners, and similar products, and the profit margins for those products, when
expressed as a percentage of sales, are below the margins historically reported
by the Company. As a result, even though gross margins increased substantially,
gross profit margins, when expressed as a percentage of sales, declined from
historical levels. Margins for our fastener products have been constrained by
the highly competitive nature of the market. Further, the automotive customer
base, which accounts for the majority of our sales, continues to resolutely
refuse to grant price relief, while simultaneously adding quality and service
requirements that tend to increase operating costs for its suppliers. This has
been the case for a number of years and is expected to continue in the years
ahead. Accordingly, we have continued to invest in equipment and methods
designed to allow us to remain competitive and to control our manufacturing
costs. This strategy has been successful in the past, and we intend to continue
in a similar manner in the future. The success of this approach, coupled with
increased volumes, contributed to the overall improvement in gross margins from
the sale of the Company's historical products during 1997. Increases in fixed
costs incurred are attributable to the acquisition and are consistent with
expectations.
Additional selling and administrative expenses incurred in connection with
operations of H & L Tool account for the majority of the increase experienced in
1997. While the total expense increased over prior years, the proportionate
amount of the increase was substantially less than the increase in revenues, and
is in line with expectations. Sales commission expense decreased as a percentage
of sales, as a larger portion of revenues were generated from customers serviced
on a direct basis, rather than through commissioned sales representatives.
A number of factors contributed to a decrease of approximately $488,000 in
non-operating income compared to 1996. Interest expense increased by
approximately $500,000, while interest income declined approximately $140,000.
Both of these changes stem from the use of cash and debt to finance the H & L
Tool purchase. Barring a sharp increase in interest rates, interest expense will
decline as the debt, which was $6.8 million at year end, continues to be paid
down. Gains from the sale of surplus equipment, including the sale of lease
machines, and a loss due to the write off of an investment in computer software,
resulted in a net gain of approximately $175,000.
1996 COMPARED TO 1995
Net sales and lease revenues for 1996 totaled $22,510,953, including
$1,390,158 in revenues from H & L Tool's operations recorded in December. This
was a decline of approximately 5.1% compared to 1995, which had been the best
year in the Company's recent history. Sales activity
- --------------------------------------------------------------------------------
2
<PAGE> 6
MANAGEMENT'S DISCUSSION
(Continued) CHIGAGO RIVET LOGO
- --------------------------------------------------------------------------------
across all product lines began to weaken during the latter part of 1995. This
weakness continued throughout 1996 and was more pronounced in our markets for
machinery and related tools and parts, especially in the area of complex, highly
automated assembly equipment. The additional revenue related to H & L Tool more
than offset the effects of weak market conditions with regard to fasteners and,
as a result, revenues for fasteners increased relative to 1995.
Gross margins declined compared to the prior year due to a number of
factors. Variable costs of manufacturing were generally reduced in line with
lower operating levels. However, certain costs of manufacture, including wages,
utility expense and supply costs increased, on a relative basis, compared to
1995. These increases were partially offset by a reduction in workers'
compensation insurance costs. Operating profits in connection with H & L Tool
were offset by the recognition of a portion of the "step-up" value assigned to
the purchased inventory of H & L Tool. This treatment is required under the
purchase accounting provisions of APB Opinion No. 16 and is intended to reflect
that portion of the profit on the sale of purchased inventory that was earned by
the seller, prior to the sale of assets to the Company. The effect, in 1996, was
to reduce income by approximately $192,000, before income taxes. This
represented approximately one-half of the total amount that was ultimately
recognized; the remaining amount was reflected in operating results for the
first quarter of 1997. Fixed operating costs, as would be expected, remained
relatively unchanged from 1995. In addition, a slight change in product mix
contributed to the unfavorable comparison with the prior year. The automotive
industry remained extremely resistant to price increases, and while cost
reduction programs continue to be emphasized at Chicago Rivet, their
effectiveness has diminished as the most dramatic opportunities for cost
reduction have already been implemented.
Interest income increased in 1996, reflecting higher interest rates and
larger invested balances throughout most of the year. Interest expense for 1996
amounted to $47,250, which represents one month of interest expense on
borrowings associated with the acquisition of H & L Tool. Selling and
administrative expenses were relatively unchanged compared to the prior year
period.
DIVIDENDS
The Company paid four regular quarterly dividends during 1997. In September
of 1997, the Board declared a two for one stock split and voted to increase the
amount of the regular quarterly dividend. The Company paid two regular quarterly
dividends of $.15 per share and two regular quarterly dividends of $.18 per
share during 1997. In addition, an extra dividend of $.25 per share was paid
during the second quarter of 1997, bringing the total dividend payout to $.91
per share, after adjustment for the effects of the stock split. On February 16,
1998, your Board of Directors declared a regular quarterly dividend of $.18 per
share, payable March 20, 1998 to shareholders of record March 5, 1998. This
continues the uninterrupted record of consecutive quarterly dividends paid by
the Company to its shareholders that extends over 64 years. At that same
meeting, the Board declared an extra dividend of $.40 per share, payable April
20, 1998 to shareholders of record, April 3, 1998.
ACQUISITION
On December 3, 1996, the Company acquired substantially all of the assets
and assumed certain liabilities of H & L Tool Company, Inc. of Madison Heights,
Michigan. The purchase price was approximately $19.1 million, including
acquisition costs of $0.3 million, and was financed through a $4.8 million
credit against the purchase price in consideration of the seller's retention of
all cash and marketable securities, an unsecured loan of $9.0 million and
approximately $5.3 million in available cash. Additional information is
contained in Note 2 to the Consolidated Financial Statements. H & L Tool is a
leading manufacturer of specialty screw-machine and cold-headed products serving
the automotive industry. This acquisition has significantly enhanced the
Company's product offerings and strengthened our relationships with certain key
customers.
MACHINERY & EQUIPMENT
During 1997, capital investments totaled $963,917. Significant expenditures
included approximately $540,000 for equipment used in the manufacture of
fasteners and assembly equipment, $117,000 for data processing and
telecommunications equipment, building improvements amounting to $87,000 and
approximately $58,000 which was invested in new equipment related to quality
control. The balance consists of investments in material handling and other
miscellaneous equipment.
Capital investments during 1996, exclusive of expenditures related to the
acquisition of the assets of H & L Tool, totaled $861,128. Of this total,
approximately $289,000 was invested in equipment used in the manufacture of
fasteners and machinery and $193,000 was expended for the purchase of a new
boiler to provide heat and process steam for our Tyrone facility. Approximately
$280,000 was invested in new data processing equipment and software. A total of
approximately $22,000 was invested in new automatic rivet setting machines
manufactured by the Company and leased to its customers. The balance was
expended for the purchase of various, smaller machine tools and office
equipment.
Capital investments during 1995 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.
Depreciation expense amounted to $1,372,415 in 1997, $709,678 in 1996, and
$646,456 in 1995.
- --------------------------------------------------------------------------------
3
<PAGE> 7
MANAGEMENT'S DISCUSSION
(Continued)
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial condition continues to be sound. During the past
year, cash and short-term investments increased by approximately $2.5 million.
Investment in inventories declined approximately $.5 million, while accounts
receivable balances increased approximately $.6 million. Long term debt was
reduced by $2.2 million and working capital at year end amounted to
approximately $13.8 million, an increase of approximately $1.7 million from one
year ago. In connection with the 1996 acquisition of H & L Tool, the Company
borrowed $9.0 million, on an unsecured basis, subject to certain customary
covenants. Under the terms of the note, the Company is scheduled to repay the
principal in 20 quarterly installments of $450,000, plus interest computed on
the unpaid balance at a variable rate that is calculated under one of two
methods: the London Inter Bank Offering Rate, plus 80 basis points; or the
lender's reference rate, less 75 basis points. This rate is adjusted quarterly
and at year end was approximately 6.7%. During 1997, in addition to the four
scheduled payments, the Company paid an additional $450,000 against the
principal of the note. Throughout the year, the Company was in full compliance
with all terms and covenants associated with the note. Management has identified
a number of specific investments in new machine tools, data processing equipment
and software, and building improvements that are expected to total approximately
$2.7 million during 1998 and early 1999. Management believes that this level of
investment can be funded internally, nevertheless, a $1.0 million line of
credit, which was obtained from the Bank of America in connection with the
acquisition, remains available to the Company. There was no charge for this
facility, and as of December 31, 1997, it was unused. The facility will expire
on May 30, 1998.
NEW ACCOUNTING STANDARDS
The Company's financial statements and financial condition were not, and are
not expected to be, materially impacted by any new, or proposed, accounting
standards.
YEAR 2000 COMPLIANCE
Beginning in 1996, the Company began a study to identify and correct
date-sensitive hardware, software and procedures that could adversely affect
operations as we approach the year 2000 ("Year 2000" issues). The Company
expects to incur internal staff costs as well as consulting and other expenses
related to this issue. The majority of our Year 2000 issues will be addressed as
a by-product of current efforts to select and implement a new, enterprise-wide,
information management system. The Company expects to invest between $700,000
and $1,000,000 in new hardware, software, consulting and training related to
these issues. It should be noted that this effort, scheduled for completion in
1999, is also expected to provide significant improvements in manufacturing
management, customer service and should also yield a reduction in administrative
expenses. In addition to the review of its internal systems, the Company is
querying its customers and suppliers as to their progress in identifying and
addressing Year 2000 issues. There can be no assurance that the systems of other
companies, including the systems of our customers and suppliers will be timely
converted, therefore, although unlikely, it is possible that Year 2000 issues
could have a material adverse effect on the Company's financial condition and
results of operations.
STOCK PURCHASE PROGRAM
Terms of a stock repurchase authorization originally approved by the Board
of Directors in February of 1990, and subsequently amended to permit the
repurchase of an aggregate of 200,000 shares, provides for purchases to be made
from time to time, in the open market or in private transactions, at prices
deemed reasonable by management. Purchases under the current repurchase
authorization have amounted to 119,396 shares at an average price of $11.69 per
share. This includes the purchase of 2,200 shares during 1997 at an average
price of $27.88 per share. It is management's intention to continue this
program, provided market conditions are favorable and funding for repurchases is
available.
OUTLOOK FOR 1998
1997 was an outstanding year for Chicago Rivet. We enjoyed favorable market
conditions, witnessed the successful integration of a new facility and new
products into our operations, and we made significant progress toward attaining
independent certification that the quality of our products truly is world-class.
We recorded levels of sales and profits that far exceeded those of any year in
memory. The equity markets rewarded our shareholders with a significant increase
in the value of their investment in the Company while the Board of Directors
approved a two for one stock split and a 20% increase in the regular dividend.
It was a year that will be very hard to follow.
While we expect 1998 to be another successful year for the Company, we do
not anticipate that the Company's revenues and earnings will increase at the
same rate as last year. Much of 1997's success is the result of an acquisition,
and, while we would not rule out the possibility of another similar acquisition,
there is nothing definite in our immediate future. Typically, our results are
closely tied to conditions in the automotive industry in particular and the
overall economy in general. The U. S. economy has enjoyed an unprecedented
period of expansion over the past several years, and analysts have begun to
question how long the current expansion will last. Our business continues to be
fairly strong, although our backlogs are not as robust as one year ago. Demand
for fasteners and related products continues to meet expectations, but demand in
the assembly equipment segment of our business has not been as strong as we
would like. There is an
- --------------------------------------------------------------------------------
4
<PAGE> 8
MANAGEMENT'S DISCUSSION
(Continued) CHIGAGO RIVET LOGO
- --------------------------------------------------------------------------------
ongoing consolidation in the supply base that services the automotive industry,
and this has affected certain of our long-term customer relationships while
simultaneously affording us new opportunities with other customers and potential
customers. We plan to continue to aggressively solicit new business while
maintaining our core accounts. We also recognize that price relief will continue
to be elusive, especially if the economy slows. Accordingly, we will continue to
focus on cost containment as we strive to produce the best possible product at
the lowest possible cost.
We gratefully acknowledge that the Company's past success has been dependent
upon a number of factors, including the continued loyalty of our customers,
which is dependent upon the diligent and conscientious efforts of our employees,
and the continued support of our shareholders. We are confident that those same
factors will be the foundation for the Company's continued success in the
future.
Respectfully,
<TABLE>
<S> <C>
J. A. Morrissey John C. Osterman
John A. Morrissey John C. Osterman
Chairman President
</TABLE>
March 6, 1998
FORWARD-LOOKING STATEMENTS
When used in this discussion, the words "believe," "anticipated," "expected"
and similar expressions are intended to identify "forward-looking statements,"
which statements speak only as of the date hereof. Such statements are subject
to certain risks and uncertainties which could cause actual circumstances to
differ materially from those mentioned in this discussion including, but not
limited to: (i) the ability of the Company to maintain its relationships with
its significant customers, (ii) increases in the prices of, or limitations on
the availability of, the Company's primary raw materials, (iii) a downturn in
the automotive industry, upon which the Company relies for sales revenue, and
which is cyclical and dependent on, among other things, consumer spending,
international economic conditions and regulations and policies regarding
international trade, and (iv) failure of the Company or its major customers or
suppliers to successfully address year 2000 issues.
Readers are cautioned not to place undue reliance on these forward-looking
statements. The Company undertakes no obligation to publish revised
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events. In addition to the
disclosures contained herein, readers are also urged to carefully review and
consider any risks and uncertainties contained in other documents filed by the
Company with the Securities and Exchange Commission.
- --------------------------------------------------------------------------------
5
<PAGE> 9
CHIGAGO RIVET LOGO
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
DECEMBER 31 1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash and Cash Equivalents (Note 1)........................ $ 3,983,471 $ 3,215,688
Certificate of Deposit.................................... 2,867,715 705,407
U.S. Government Securities (Note 1)....................... -- 396,815
Accounts Receivable--Less allowances of $123,022 and
$108,652, respectively (Note 1)........................ 5,662,538 5,028,885
Inventories (Notes 1 and 4)............................... 6,354,607 6,898,603
Deferred Income Taxes (Notes 1 and 5)..................... 764,588 813,000
Other Current Assets...................................... 360,448 271,973
----------- -----------
Total Current Assets...................................... 19,993,367 17,330,371
----------- -----------
Goodwill, net of amortization............................... -- 8,348
----------- -----------
Property, Plant and Equipment (Notes 1 and 9)
Land and Improvements..................................... 1,008,901 982,635
Buildings and Improvements................................ 5,501,189 5,464,355
Production Equipment, Leased Machines and Other........... 21,404,751 21,221,316
----------- -----------
27,914,841 27,668,306
Less Accumulated Depreciation............................. 14,960,748 13,680,473
----------- -----------
Net Property, Plant and Equipment......................... 12,954,093 13,987,833
----------- -----------
Total Assets................................................ $32,947,460 $31,326,552
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
- --------------------------------------------------------------------------------
6
<PAGE> 10
CHIGAGO RIVET LOGO
- --------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
DECEMBER 31 1997 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Current Liabilities
Accounts Payable.......................................... $ 1,700,296 $ 1,257,704
Contributions Due Profit Sharing and Pension Plans (Note
6)..................................................... 707,747 522,278
Wages and Salaries........................................ 772,247 754,791
Other Accrued Expenses (Note 7)........................... 329,708 435,019
Unearned Lease Revenue (Note 1)........................... 68,711 53,411
Accrued Interest Expense (Note 3)......................... 108,634 47,250
Current Portion of Note Payable (Note 3).................. 1,800,000 1,800,000
Federal and State Income Taxes (Notes 1 and 5)............ 739,343 419,339
----------- -----------
Total Current Liabilities................................. 6,226,686 5,289,792
Note Payable (Note 3)....................................... 4,950,000 7,200,000
Deferred Income Taxes (Notes 1 and 5)....................... 1,259,672 1,060,000
----------- -----------
Total Liabilities......................................... 12,436,358 13,549,792
----------- -----------
Shareholders' Equity
Preferred Stock, No Par Value--Authorized 500,000
Shares--None Outstanding............................... -- --
Common Stock, $1.00 Par Value:
Authorized 4,000,000 Shares Issued and Outstanding
1,169,296 and 1,171,496, respectively (Note 8)......... 1,169,296 1,171,496
Additional Paid-in Capital................................ 459,388 460,252
Retained Earnings, Per Accompanying Statement............. 18,882,418 16,145,012
----------- -----------
Total Shareholders' Equity................................ 20,511,102 17,776,760
----------- -----------
Commitments and Contingencies (Note 11)
Total Liabilities and Shareholders' Equity.................. $32,947,460 $31,326,552
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
- --------------------------------------------------------------------------------
7
<PAGE> 11
CHIGAGO RIVET LOGO
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
For the Years Ended December 31 1997 1996 1995
- -----------------------------------------------------------------------------------------------
Net Sales and Lease Revenue (Notes 1 and 9)....... $44,543,404 $22,510,953 $23,717,410
Cost of Goods Sold and Costs Related to Lease
Revenue......................................... 30,797,023 14,938,997 15,036,303
----------- ----------- -----------
Gross Profit...................................... 13,746,381 7,571,956 8,681,107
Selling and Administrative Expenses............... 7,573,074 4,757,440 5,347,049
Other Income (Expenses), Net (Note 10)............ (128,797) 359,485 311,157
----------- ----------- -----------
Income Before Income Taxes........................ 6,044,510 3,174,001 3,645,215
Provision for Income Taxes (Notes 1 and 5)........ 2,183,000 1,226,000 1,410,000
----------- ----------- -----------
Net Income........................................ $ 3,861,510 $ 1,948,001 $ 2,235,215
=========== =========== ===========
Net Income Per Share.............................. $ 3.30 $ 1.66 $ 1.91
=========== =========== ===========
</TABLE>
CONSOLIDATED STATEMENTS OF
RETAINED EARNINGS
<TABLE>
<S> <C> <C> <C>
Retained Earnings at Beginning of Year............ $16,145,012 $15,251,361 $14,067,745
Net Income for the Year........................... 3,861,510 1,948,001 2,235,215
Cancellation of Treasury Stock (Note 8)........... (58,259) -- (25,175)
Cash Dividends Declared,
$.91 Per Share in 1997, $.90 Per Share in 1996
and $.88 Per Share in 1995...................... (1,065,845) (1,054,350) (1,026,424)
----------- ----------- -----------
Retained Earnings at End of Year.................. $18,882,418 $16,145,012 $15,251,361
=========== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
- --------------------------------------------------------------------------------
8
<PAGE> 12
CHIGAGO RIVET LOGO
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31 1997 1996 1995
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flow from Operating Activities:
Net Income................................................ $ 3,861,510 $ 1,948,001 $ 2,235,215
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Depreciation and Amortization........................... 1,380,763 734,674 671,452
Net Gain on the Sale of Properties...................... (175,059) (54,376) (8,599)
Deferred Income Taxes................................... 248,084 11,297 (77,000)
Changes in Current Assets and Current Liabilities, net
of the effects of the acquisition of H&L Tool:
Accounts Receivable, Net.............................. (633,653) 770,288 493,065
Inventories........................................... 543,996 (10,553) 242,130
Accounts Payable...................................... 442,592 168,876 (266,658)
Accrued Interest...................................... 61,384 47,250 --
Other Accrued Expenses................................ (105,311) (349,391) 142,216
Accrued Wages and Salaries............................ 17,456 (301,362) (14,775)
Taxes Payable......................................... 320,004 (121,706) 128,676
Other, Net............................................ 112,305 (50,383) 293,469
----------- ----------- -----------
Net Cash Provided by Operating Activities........ 6,074,071 2,792,615 3,839,191
----------- ----------- -----------
Cash Flows from Investing Activities:
Acquisition of H&L Tool, net of cash acquired of $4.8
million............................................... -- (14,294,470) --
Capital Expenditures.................................... (963,917) (861,128) (231,340)
Net Proceeds from the Sale of Properties................ 800,302 114,403 83,434
Proceeds from Held-to-Maturity Securities............... 4,316,492 7,921,447 8,394,335
Proceeds from Available-for-Sale Securities............. -- 2,209,513 --
Purchases of Held-to-Maturity Securities................ (6,081,987) (3,766,410) (9,924,908)
Purchases of Available-for-Sale Securities.............. -- (195,025) (1,982,957)
----------- ----------- -----------
Net Cash Used by Investing Activities............ (1,929,110) (8,871,670) (3,661,436)
----------- ----------- -----------
Cash Flows from Financing Activities:
Borrowings under Term Loan Agreement.................... -- 9,000,000 --
Payments under Term Loan Agreement...................... (2,250,000) -- --
Purchase of Treasury Stock.............................. (61,333) -- (27,683)
Cash Dividends.......................................... (1,065,845) (1,054,350) (1,026,424)
----------- ----------- -----------
Net Cash Provided (Used) by Financing
Activities..................................... (3,377,178) 7,945,650 (1,054,107)
----------- ----------- -----------
Net Increase(Decrease) in Cash and Cash Equivalents....... 767,783 1,866,595 (876,352)
Cash and Cash Equivalents at Beginning of Year............ 3,215,688 1,349,093 2,225,445
----------- ----------- -----------
Cash and Cash Equivalents at End of Year.................. $ 3,983,471 $ 3,215,688 $ 1,349,093
=========== =========== ===========
Cash Paid During the Year for:
Income Taxes.......................................... $ 1,614,913 $ 1,337,427 $ 1,358,324
Interest.............................................. $ 485,282 -- --
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
- --------------------------------------------------------------------------------
9
<PAGE> 13
CHIGAGO RIVET LOGO
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION--The Consolidated Financial Statements include the
accounts of Chicago Rivet & Machine Co. and its wholly-owned subsidiary. All
significant intercompany accounts and transactions have been eliminated.
OPERATIONS--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. Rivets, cold-formed fasteners, and
screw machine product sales represented the following percentage of net sales
and lease revenue from operations: 73% in 1997, 50% in 1996 and 44.9% in 1995.
INCOME PER SHARE--Income per share of common stock is based on the weighted
average number of shares outstanding of 1,170,988 in 1997, 1,171,496 in 1996 and
1,172,944 in 1995, after giving effect to a two for one stock split that
occurred on September 19, 1997.
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
consolidated balance sheets for cash and cash equivalents, certificates of
deposit and U.S. government securities approximate fair value because of the
immediate or short-term maturity of these financial instruments. The carrying
amount reported for the note payable approximates fair market value because the
underlying instrument is at a rate similar to current rates offered to the
Company for notes with the same remaining maturities.
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". 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, 1996 the Company recorded all U.S. Government securities as
held-to-maturity.
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.
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
cancelable 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 consolidated balance sheets.
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 has a concentration of credit risk primarily within the
automotive industry and in the Midwestern United States.
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.
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.
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--ACQUISITIONS--On December 3, 1996, the Company acquired substantially all of
the assets and assumed certain liabilities of H & L Tool Company, Inc. (H & L
Tool) of Madison Heights, Michigan in a transaction accounted for as a purchase.
The purchase price was approximately $19.1 million, including $0.3 million of
acquisition costs, and was financed through a $4.8 million credit in
consideration of the seller's retention of all cash and marketable securities,
an unsecured loan of $9.0 million and approximately $5.3 million of available
cash. The purchase price was allocated to the fair market value of the assets
acquired, including all of H & L Tool's production equipment and its facilities
in Madison Heights, inventories, accounts receivable, and other operating
assets. The consolidated financial statements for the year ended December 31,
1996, reflect the operations of H & L Tool since the date of acquisition.
The following represents the unaudited pro forma results of operations, as
if the acquisition occurred on January 1, 1995 (in thousands, except per share
data).
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Net sales and lease revenue....... $ 42,957 $ 46,003
Net Income........................ 1,856 2,921
Net Income per share.............. 1.58 2.49
</TABLE>
The unaudited pro forma financial information is not necessarily indicative
of, and does not include all adjustments management considers necessary to
reflect, the results of operations that would have been obtained if the
acquisition had taken place at the beginning of the period presented or of
future results of operation.
- --------------------------------------------------------------------------------
10
<PAGE> 14
CHIGAGO RIVET LOGO
- --------------------------------------------------------------------------------
3--NOTE PAYABLE--On November 25, 1996, in connection with the acquisition of H &
L Tool, the Company entered into (i) a five-year unsecured term loan agreement
(the Term Loan) in the principal amount of $9 million, and (ii) a $1 million
line of credit agreement (the Line of Credit) available through May 30, 1997.
The Term Loan bears interest, payable quarterly, at the Company's option, at (i)
the reference rate of the financial institution less 75 basis points, or (ii)
the LIBOR rate plus 80 basis points. Repayments of principal are made quarterly
in the amount of $450,000 through July 1, 2001. The Line of Credit was extended
through May 31, 1998 and remains unused at December 31, 1997.
4--INVENTORIES--Inventories at December 31, 1997 and 1996 consisted of the
following:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Raw materials..................... $1,901,419 $1,715,685
Work in process................... 1,427,764 2,318,535
Finished goods.................... 3,025,424 2,864,383
---------- ----------
Total............................. $6,354,607 $6,898,603
========== ==========
</TABLE>
5--INCOME TAXES--The provision for income tax expense consists of the following:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Current
Federal............... $ 1,729,916 $ 993,703 $ 1,232,000
State................. 205,000 221,000 255,000
Deferred................ 248,084 11,297 (77,000)
----------- ----------- -----------
$ 2,183,000 $ 1,226,000 $ 1,410,000
=========== =========== ===========
</TABLE>
The deferred tax liabilities and assets are comprised of the following:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Depreciation.................... $(1,287,412) $(1,087,073)
----------- -----------
Inventory valuations............ 427,166 343,194
Environmental accruals.......... 47,600 113,606
Accrued vacation................ 183,477 182,413
Unearned rental revenue......... 27,484 21,364
Doubtful accounts............... 44,827 69,687
Other, net...................... 61,774 109,809
----------- -----------
792,328 840,073
----------- -----------
$ (495,084) $ (247,000)
=========== ===========
</TABLE>
The following is a reconciliation of the statutory federal income tax rate
to the actual effective tax rate:
<TABLE>
<CAPTION>
1997 1996 1995
---------------- ---------------- ----------------
AMOUNT % Amount % Amount %
---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Expected tax at U.S.
statutory rate....... $2,055,133 34.0 $1,079,160 34.0 $1,239,373 34.0
State taxes, net of
federal benefit...... 135,300 2.2 145,860 4.6 168,300 4.6
Other, net............ (7,433) -- 980 -- 2,327 .1
---------- ---- ---------- ---- ---------- ----
Income tax expense.... $2,183,000 36.2 $1,226,000 38.6 $1,410,000 38.7
========== ==== ========== ==== ========== ====
</TABLE>
6--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 approximately $627,000 in 1997, $327,000 in
1996 and $373,000 in 1995.
During 1997, the Company's defined benefit pension plans were terminated
and all plan liabilities were satisfied.
7--OTHER ACCRUED EXPENSES--Accrued expenses consist of the following:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Environmental costs................... $ 85,000 $250,015
Property taxes........................ 95,620 95,037
Payroll taxes......................... 68,951 35,543
All other items....................... 80,137 54,424
-------- --------
$329,708 $435,019
======== ========
</TABLE>
8--TREASURY STOCK TRANSACTIONS--In 1997, the Company purchased 2,200 shares of
its common stock for $61,333. In 1995, the Company purchased 900 shares of its
common stock for $27,683.
All stock purchased was retired, the excess of cost over par value was
charged proportionately to Additional Paid-in Capital and Retained Earnings.
9--LEASED MACHINES--Lease revenue amounted to $330,312 in 1997, $414,129 in 1996
and $502,847 in 1995. 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>
1997 1996
--------- -----------
<S> <C> <C>
Cost................................ $742,491 $ 828,545
Accumulated depreciation............ 649,939 664,468
-------- ----------
Carrying value...................... $ 92,552 $ 164,077
======== ==========
</TABLE>
10--OTHER INCOME (EXPENSE), NET--Other income (expense) consists of the
following:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Gain on sale of
properties and
equipment............. $ 175,059 $ 54,376 $ 8,599
Interest income......... 221,975 362,158 324,563
Interest expense........ (546,666) (47,250) --
Amortization expense.... (8,348) (24,996) (24,996)
Other................... 29,183 15,197 2,991
----------- ----------- -----------
$ (128,797) $ 359,485 $ 311,157
=========== =========== ===========
</TABLE>
11--COMMITMENTS AND CONTINGENCIES--The Company recorded rent expense aggregating
approximately $27,229, $8,547 and $52,233 for 1997, 1996 and 1995, respectively.
Total future minimum rentals at December 31, 1997 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 has been named by state and/or federal
government agencies as a "potentially responsible party" with respect to certain
waste disposal sites. As a potentially responsible party, the Company may be
considered jointly and severally liable, along with other potentially
responsible parties, for the cost of remediation of these waste sites. Certain
estimates related to remediation costs were favorably adjusted during 1997 as
remediation work nears completion at certain sites, while claims at other sites
are nearing resolution, and, accordingly, the Company has revised the amount of
reserves recorded in connection with these claims. The actual cost of
remediation is presently unknown; however, estimates currently available suggest
that the cost of remediation at these sites will be between $33 million and $49
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 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.
- --------------------------------------------------------------------------------
11
<PAGE> 15
CHIGAGO RIVET LOGO
- --------------------------------------------------------------------------------
Nevertheless, it is likely that the Company will incur additional costs
associated with these proceedings and accordingly the Company has recorded a
total liability of $85,000 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.
12--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 $.16, $.36 and $.15 per share, for 1997, 1996 and
1995, respectively. The 1997 adjustment includes $.08 per share related to the
reduction in environmental reserves recorded in connection with favorable
resolution of certain environmental claims and revised liability estimates in
connection with certain other environmental claims.
- --------------------------------------------------------------------------------
12
<PAGE> 16
CHIGAGO RIVET LOGO
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Chicago Rivet & Machine Co.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated 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, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, 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 6, 1998
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales and Lease Revenue $44,543,404 $22,510,953 $23,717,410 $23,012,730 $20,390,304
- -------------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes 6,044,510 3,174,001 3,645,215 3,239,881 2,291,845
- -------------------------------------------------------------------------------------------------------------------------------
Net Income 3,861,510 1,948,001 2,235,215 1,908,881 1,402,845
- -------------------------------------------------------------------------------------------------------------------------------
Net Income Per Share 3.30 1.66 1.91 1.63 1.19
- -------------------------------------------------------------------------------------------------------------------------------
Dividends Declared Per Share .91 .90 .88 .78 .65
- -------------------------------------------------------------------------------------------------------------------------------
Average Common Shares Outstanding 1,170,988 1,171,496 1,172,944 1,174,122 1,174,696
- -------------------------------------------------------------------------------------------------------------------------------
Net Working Capital 13,766,681 12,040,579 12,710,825 10,968,607 9,434,565
- -------------------------------------------------------------------------------------------------------------------------------
Total Assets 32,947,460 31,326,552 21,355,139 19,923,085 18,597,383
- -------------------------------------------------------------------------------------------------------------------------------
Shareholders' Equity 20,511,102 17,776,760 16,883,109 15,702,000 14,716,949
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
13
<PAGE> 17
CHIGAGO RIVET LOGO
- --------------------------------------------------------------------------------
QUARTERLY FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1997
Net Sales and Lease
Revenue............. $11,898,645 $11,564,802 $10,122,352 $10,957,605
Gross Profit......... 3,108,504 3,750,335 3,196,822 3,690,720
Net Income........... 731,983 1,070,424 704,495 1,354,608
Per Share Data:
Net Income Per
Share............. .62 .91 .60 1.17
Average Common
Shares
Outstanding....... 1,171,496 1,171,444 1,170,896 1,170,134
1996
Net Sales and Lease
Revenue............. $ 5,323,632 $ 6,162,712 $ 4,807,028 $ 6,217,581
Gross Profit......... 1,718,656 1,908,693 1,594,397 2,350,210
Net Income........... 350,629 433,227 381,773 782,372
Per Share Data:
Net Income Per
Share............. .30 .37 .33 .67
Average Common
Shares
Outstanding....... 1,171,496 1,171,496 1,171,496 1,171,496
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............. .50 .57 .29 .55
Average Common
Shares
Outstanding....... 1,173,296 1,173,290 1,173,096 1,172,104
</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 1997 1996 1997 1996
------- ---- ---- -------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First................ $.40* $.45* $18 3/4 $15 1/2 $17 15/16 $14 5/8
Second............... .15 .15 $24 15/16 $18 $18 1/4 $15 1/2
Third................ .18 .15 $39 15/16 $23 $17 3/4 $15 13/16
Fourth............... .18 .15 $36 $23 1/2 $16 1/8 $15 3/8
</TABLE>
- ---------------
* Includes an extra dividend of $.25 and $.30 per share for 1997 and 1996,
respectively.
- --------------------------------------------------------------------------------
14
<PAGE> 18
CHIGAGO RIVET LOGO
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS
ROBERT K. BROWN(e)
Retired President of
the Company
STEPHEN L. LEVY(a)(c)
Senior Advisor to the
Chief Executive Office
Motorola Inc.
Schaumburg, Illinois
JOHN R. MADDEN(a)(c)
Chairman of the Board
of Directors of
The First National Bank
of La Grange
La Grange, Illinois
JOHN A. MORRISSEY(e)
Chairman of the Board
of the Company
President & Director
Algonquin State Bank
Algonquin, Illinois
WALTER W. MORRISSEY(a)(c)(e)
Attorney at Law
Morrissey & Robinson
Oak Brook, Illinois
JOHN C. OSTERMAN(e)
President of the Company
CORPORATE OFFICERS
JOHN A. MORRISSEY
Chairman, Chief
Executive Officer
JOHN C. OSTERMAN
President, Chief Operating
Officer and Treasurer
DONALD P. LONG
Vice President--Sales
STEPHEN D. VOSS
Assistant Treasurer and Controller
KIMBERLY A. KIRHOFER
Secretary
CHICAGO RIVET & MACHINE CO.
ADMINISTRATIVE & SALES OFFICES
Naperville, Illinois
Norwell, Massachusetts
MANUFACTURING FACILITIES
Albia Division
Albia, Iowa
H & L Tool Company, Inc.
Madison Heights, Michigan
Jefferson Division
Jefferson, Iowa
Tyrone Division
Tyrone, Pennsylvania
(a) Member of Audit Committee
(c) Member of Compensation Committee
(e) Member of Executive Committee
Chicago Rivet & Machine Co. - 901 Frontenac Road - P.O. Box 3061 - Naperville,
Illinois 60566 - Telephone: (630) 357-8500
- --------------------------------------------------------------------------------
<PAGE> 19
LOGO
Chicago Rivet & Machine Co. - 901 Frontenac Road - P.O. Box 3061 - Naperville,
Illinois 60566 - Telephone: (630) 357-8500
<PAGE> 1
EXHIBIT 21
CHICAGO RIVET & MACHINE CO.
SUBSIDIARIES OF THE REGISTRANT
The Company's only subsidiary is H & L Tool Company, Inc., which is
wholly-owned and is organized in the State of Illinois.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,983,471
<SECURITIES> 2,867,715
<RECEIVABLES> 5,785,560
<ALLOWANCES> 123,022
<INVENTORY> 6,354,607
<CURRENT-ASSETS> 19,993,367
<PP&E> 27,914,841
<DEPRECIATION> 14,960,748
<TOTAL-ASSETS> 32,947,460
<CURRENT-LIABILITIES> 6,226,686
<BONDS> 4,950,000
0
0
<COMMON> 1,169,296
<OTHER-SE> 19,341,806
<TOTAL-LIABILITY-AND-EQUITY> 32,947,460
<SALES> 44,213,092
<TOTAL-REVENUES> 44,543,404
<CGS> 30,797,023
<TOTAL-COSTS> 30,797,023
<OTHER-EXPENSES> 7,573,074
<LOSS-PROVISION> 52,208
<INTEREST-EXPENSE> 546,666
<INCOME-PRETAX> 6,044,510
<INCOME-TAX> 2,183,000
<INCOME-CONTINUING> 3,861,510
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,861,510
<EPS-PRIMARY> 3.30
<EPS-DILUTED> 3.30
</TABLE>
