CHICAGO RIVET & MACHINE CO, 10-K405, 1999-03-26

CHICAGO RIVET & MACHINE CO
10-K405, 1999-03-26
METALWORKG MACHINERY & EQUIPMENT

Previous: CHAMPION INTERNATIONAL CORP, 11-K, 1999-03-26

Next: CHICAGO RIVET & MACHINE CO, DEF 14A, 1999-03-26

<PAGE> 1

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

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, 1998

[ ] 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.

$24,288,219 AS OF FEBRUARY 2, 1999

COMMON SHARES OUTSTANDING AS OF FEBRUARY 2, 1999 WERE 1,153,496 ($1 PAR VALUE)

DOCUMENTS INCORPORATED BY REFERENCE

(1) PORTIONS OF THE COMPANY'S ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR
ENDED DECEMBER 31, 1998 (THE "1998 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 1999 ANNUAL MEETING OF SHAREHOLDERS ARE INCORPORATED BY REFERENCE IN
PART III OF THIS REPORT.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

PAGE 1 OF ____
EXHIBIT INDEX IS ON PAGE ____
<PAGE> 2
CHICAGO RIVET & MACHINE CO.
PERIOD ENDING DECEMBER 31, 1998

Item Page
No. No.
- --- ----
Part I

1. Business 3
2. Properties 4
3. Legal Proceedings 4
4. Submission of Matters to a Vote of Security Holders 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 13
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 13

Part III

10. Directors and Executive Officers of the Registrant 14
11. Executive Compensation 14
12. Security Ownership of Certain Beneficial Owners and
Management 14
13. Certain Relationships and Related Transactions 14

Part IV

14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 14

2
<PAGE> 3
PART I

ITEM 1 - BUSINESS

Chicago Rivet & Machine Co. (the Company) was incorporated under the
laws of the State of Illinois in December, 1927, as successor to the business of
Chicago Rivet & Specialty Co. The Company operates in two segments of the
fastener industry: Fasteners and Assembly Equipment. The fastener segment
consists of the manufacture and sale of rivets, cold-headed fasteners and parts
and screw machine products. The Assembly Equipment segment consists primarily of
the manufacture of automatic rivet setting machines, automatic assembly
equipment, parts and tools for such machines, and the leasing of automatic rivet
setting machines. For further discussion regarding the Company's operations see
Note 1 which appears on page 11 of the Company's 1998 Annual Report to
Shareholders, incorporated herein by reference. The 1998 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 segments in which the Company operates are characterized by active
and substantial competition. No single company dominates the industry. The
Company's competitors include both larger and smaller manufacturers, and
segments or divisions of large, diversified companies with substantial financial
resources. Principal competitive factors in the market for the Company's
products are quality, service, reliability and price.

The Company serves a wide variety of customers. Sales 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 production cycles. The level of business activity for
the Company is closely related to the overall level of industrial activity in
the United States. During 1998, 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, in both 1998 and 1997
and sales to Fisher Dynamics Corporation accounted for approximately 10% of the
Company's consolidated revenues in 1998 and approximately 11% of the Company's
consolidated revenues in 1997. No single customer accounted for more than 10% of
the Company's consolidated revenues in 1996.

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 11 of the Company's
Annual Report to Shareholders, incorporated herein by reference.

<PAGE> 4

The Company's business has historically been somewhat stronger during
the first half of the year.

In conformity with industry practice, the Company generally does not
provide credit terms in excess of thirty days.

The Company purchases raw materials from a number of sources, primarily
within the United States. 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, 1998, the Company employed 394 people.

The Company has no foreign operations, and sales to foreign customers
represent only a minor portion of the Company's total sales.

ITEM 2 - PROPERTIES

The Company conducts its manufacturing and warehousing operations at five
plants, which are described below. All 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.

Of the properties described below, the Jefferson, Iowa and the Madison Heights,
Michigan facilities are used entirely in the fastener segment. The Albia, Iowa
facility is used exclusively in the assembly equipment segment. The Tyrone,
Pennsylvania and the Naperville, Illinois facilities are utilized in both
operating segments.

Plant Locations and Descriptions

Naperville, Illinois Brick, concrete block and partial metal
construction with metal roof.

Tyrone, Pennsylvania Concrete block with small tapered beam
type warehouse.

Jefferson, Iowa Steel tapered beam construction.

Albia, Iowa Concrete block with prestressed concrete
roof construction.

Madison Heights, Michigan Concrete, brick and partial metal
construction with metal roof.

ITEM 3 - LEGAL PROCEEDINGS

The Company is, from time to time, involved in litigation, including
environmental claims, in the normal course of business. With regard to
environmental claims, the

<PAGE> 5

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. 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 $40,000 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 1998.

Executive Officers of the Registrant

The names, ages and positions of all executive officers of the Company,
as of March 25, 1999, 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.

<TABLE>
<CAPTION>
Number of years
Name and Age of Officer Position an Officer
- ----------------------- -------- ----------

<S> <C> <C> <C>
John A. Morrissey 63 Chairman,Chief 19
Executive Officer

John C. Osterman 47 President, Chief 15
Operating Officer
and Treasurer

Donald P. Long 47 Vice-President Sales 4

Kimberly A. Kirhofer 40 Secretary 8

Michael J. Bourg 36 Corporate Controller 3 Mos.

</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

5
<PAGE> 6

1985 when he became Assistant Vice President-Administration. He became
Vice President-Administration in May 1986 and was named Executive Vice
President in May 1987. He has been a director of the Company since May
1988.

- - Mr. Long has been Vice President - Sales of the Company since November
1994, and was Director of Sales and Marketing of the Company from March
1993 through November 1994. Prior to that, he was employed by Townsend
Engineered Products, a maker of rivets, cold-formed fasteners and rivet
setting equipment in various sales management positions for more than 5
years.

- - Mr. Bourg has been Controller of the Company since December 1998. Prior
to that, he was Accounting Manager at Fuchs Lubricants Co. a
manufacturer of industrial lubricants for two years and prior to that
worked was employed by the public accounting firm of McGladrey &
Pullen, LLP as a public accountant for more than five years.

- - Mrs. Kirhofer has been Secretary of the Company since August 1991, and
was Assistant Secretary of the Company from February 1991 through
August 1991. Prior to that, she held various administrative positions
with the Company since May 1983.

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 4, 1998 there were 451
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
15 of the 1998 Annual Report is incorporated herein by reference. The 1998
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 14
of the 1998 Annual Report is incorporated herein by reference. The 1998 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

6
<PAGE> 7

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.

RESULTS OF OPERATIONS

The recent year was another successful year for the Company. Despite a
number of challenges, the Company posted respectable earnings on modest revenue
growth. The economy continued to be strong throughout the year. In particular,
the strength of the automotive industry was reflected in the growth of revenues
within the fastener segment of our business. Unfortunately, most of that
increase in revenues was offset by a decline in revenues in the assembly
equipment segment of our operations. Demand in this segment was considerably
weaker than in the prior year, and the market was characterized by significant
competitive pressure on pricing. As a result, our overall product mix was more
heavily weighted toward fasteners, a segment with traditionally lower margins.
This resulting change in our product mix, combined with lower margins on
machinery and equipment due to price competition, contributed to a reduction in
net profits, compared to the outstanding results achieved in 1997.

We are pleased to report that all of the Company's fastener operations
have attained QS-9000 certification in addition to ISO-9002:1994 certification.
Our automotive customers mandated certification to these standards as a
prerequisite to continuing to receive new business, and we are pleased that we
have been able to attain and maintain certification to these standards.

The Company also made considerable progress in meeting its objective of
implementing a new data management system. This project entails the
implementation of new computer hardware and software that will not only improve
information management in all operational disciplines, but will also ensure Year
2000 compliance. Piloting activity is nearing completion for the sales and
finance portion of this initiative and implementation of the manufacturing
portion is scheduled to begin late in the first half of 1999.

1998 COMPARED TO 1997

Net sales and lease revenues increased slightly compared with 1997,
totaling $44,938,184 for 1998, compared with $44,543,404 recorded during 1997.
Revenues in the fastener segment increased 3.7%, largely as a result of the
robust conditions in the automotive industry, which is the Company's primary
market. Conversely, revenues from the assembly equipment segment, which includes
sale of automatic assembly equipment, related tools and parts and lease revenue,
declined 7.0% compared to 1997. Several factors contributed to the decline in
revenue within the assembly equipment segment. The primary factor was a decline
in unit volume compared to 1997, which was an uncharacteristically strong year.
Also evident in 1998 was a noticeable change in product mix, with 1998 sales
consisting of more lower margin equipment compared to 1997. Finally, in order
to maintain certain customer relationships, the Company responded to competitive
pricing pressures by accepting margins below those historically associated with
its products in this segment.

7
<PAGE> 8
The positive impact from the increased level of fastener business was
largely offset by increases in wages, higher costs related to health insurance
and additional tooling expense in connection with initial production of a
variety of new fasteners. In addition, depreciation expense increased 7.4%
compared to 1997 due to increased capital expenditures. Competitive conditions
within the fastener industry, in conjunction with our major customers'
continuing policy of not accepting price increases, restricted our ability to
recover these higher costs. The net result is reflected in only nominal
improvement in gross profit within this segment of our operations. The Company's
investment in newer, more efficient equipment and procedures is intended to
reduce costs as well as expand capabilities, and should contribute to improved
operating margins in the future.

As would be expected given 1998's lower volume, gross profits in the
assembly equipment segment declined compared to 1997. While variable costs were
reduced in proportion to the reduced level of operations, fixed costs increased
slightly due primarily to higher wage and depreciation expense. Finally, the
competitive situation discussed above also had an adverse impact upon margins
within this segment.

Selling and administrative expenses, net of certain favorable
adjustments to environmental reserve accounts, increased approximately 5.8%
compared to 1997. Three factors comprise the majority of this increase. First,
expenses incurred in connection with the development and implementation of new
data processing software amounted to approximately $135,000; second, bad debt
expense increased by $145,000 due to the voluntary reorganization of a certain
fastener customer; and third, the Company incurred certain state taxes, totaling
$225,000 during 1998. While the Company was subject to this same state tax
during 1997, no tax liability was incurred in that year due to certain
deductions allowed in the computation of the tax. In addition, the company
incurred higher selling expense as a result of increased staffing designed to
strengthen our presence in certain key markets. A portion of these increased
costs were offset by reductions in commission expense, reductions in expenses
related to attaining QS-9000 certification and a reduction in profit sharing
expense.

Net non-operating expense declined approximately 24% compared with
1997, primarily as a result of reduced interest expense, which decreased from
$546,666 in 1997 to $376,098 during 1998. This interest expense is related to
borrowing in connection with the 1996 acquisition of H & L Tool Company, Inc.
The decrease in interest expense reflects both lower interest rates in 1998 and
a lower principal balance outstanding compared with 1997. Interest income
increased approximately 12% compared with 1997 due primarily to a higher level
of investment during the year.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the amounts of revenue and expenses during
the reporting period. During interim periods, the Company uses estimated gross
profit rates to determine the cost of goods sold. Actual results can vary from
these estimates and these estimates are adjusted, as necessary, when actual
information is available. During the fourth quarter of 1998, net income included
net favorable adjustments to inventory, accruals and allowances aggregating $.05
per share. Similar adjustments in the fourth quarter of 1997 and 1996 amounted
to $.16 per share and $.36 per share, respectively.

1997 COMPARED TO 1996

8
<PAGE> 9
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. Revenues in the assembly equipment segment increased 5.2%, and
amounted to $11,830,584 compared with $11,247,131 in 1996.

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 aggregate 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, has
established purchasing guidelines that discourage the acceptance of price
increases, 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 production methods designed to allow
us to remain competitive and to control our manufacturing costs in order to
produce an acceptable level of profitability. 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
improvements in gross margins from the sale of the Company's historical
products, in both the fastener and assembly equipment segments, 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 the 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 net 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. Gains from the sale of surplus equipment, including 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.

DIVIDENDS

The Company paid four regular quarterly dividends of $.18 per share
during 1998. In addition, an extra dividend of $.40 per share was paid during
the second quarter of 1998, bringing the total dividend payout to $1.12 per
share. On February 15, 1999 your Board of Directors declared a regular quarterly
dividend of $.18 per share, payable March 20, 1999 to shareholders of record
March 5, 1999. This continues the uninterrupted record of consecutive quarterly
dividends paid by the Company to its shareholders that extends over 65 years. At
that same meeting, the Board declared an extra dividend of $.35 per share,
payable April 20, 1999 to shareholders of record, April 5, 1999.

ACQUISITION

9
<PAGE> 10
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 significantly enhanced the Company's product
offerings and strengthened our relationships with certain key customers.

MACHINERY & EQUIPMENT

The Company made a number of significant investments in both equipment
and building improvements during 1998. Capital expenditures totaled nearly
$2,700,000. Expenditures related to new data processing systems, including
computer hardware and software, totaled approximately $542,000. Expenditures for
the purchase of new equipment used in the manufacture of fasteners amounted to
$1,430,000. The Company also purchased a variety of new machine tools, material
handling equipment and inspection equipment valued at approximately $313,000.
Building improvements, which included the installation of new air compressors at
one facility and a new roof at another facility, amounted to approximately
$252,000. Investment in both new equipment and rebuilding of existing equipment
used to plate and heat treat fasteners amounted to $63,000. A total of $51,000
was expended for the construction of new automatic rivet setting equipment that
is leased to customers. The balance was expended for a variety of smaller office
equipment and for the construction of new rivet setting machines that will be
used for demonstration purposes.

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 equipment 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.

Depreciation expense was $1,498,302 in 1998, $1,372,415 in 1997 and
$709,678 in 1996.

LIQUIDITY AND CAPITAL RESOURCES

10
<PAGE> 11

$9.0 million, on an unsecured basis, subject to certain customary covenants.
(The note includes a covenant limiting annual capital expenditures to $2.5
million. During 1998, the Company's capital expenditures exceeded that limit due
to a delay in receipt of certain equipment that was ordered for delivery in 1997
but was not delivered until 1998. The lender waived compliance with this
covenant for 1998. The Company was in compliance with all other terms of the
note throughout 1998.) 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. The interest rate is adjusted
quarterly and at year-end was approximately 6.26% and the unpaid balance of the
note was $4.95 million. Capital expenditures for new equipment and data
processing implementation are expected to total approximately $2.5 million
during 1999 and early 2000. 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, 1998, it was unused. The facility is scheduled to expire on May 30,
1999, but may be extended beyond that date.

NEW ACCOUNTING STANDARDS

In 1998, the Company adopted Statement of Financial Accounting
Standards No. 131 ("FAS 131"), "Disclosures about Segments of an Enterprise and
Related Information." The adoption of FAS 131 did not affect results of
operations or financial position but did affect the disclosure of segment
information.
The Company's financial statements and financial condition were not,
and are not expected to be, materially impacted by any other new, or proposed,
accounting standards.

YEAR 2000 COMPLIANCE

The Company continues to make ongoing assessments of its state of
readiness with respect to Year 2000 ("Y2K") issues. This process can logically
be segregated into two major categories -- information technology and
non-information technology. The first category encompasses issues related to
computer equipment and software used in the operation of the business, while the
second category deals with all other aspects of Y2K issues, including, but not
limited to, manufacturing equipment and systems, supplier and customer
preparedness and facility related issues such as telecommunications equipment,
HVAC systems and facility security. The Company has determined that its
information technology systems are not Y2K compliant and has further determined
that its existing software will not meet the needs of the organization in the
future. Accordingly, significant resources have been allocated to the process of
implementing a new data processing solution that will better meet the needs of
the organization while also addressing the Y2K issues. The implementation of
this solution is planned in three phases. The first two phases include hardware
and network installation and the installation of application software related to
financial reporting, inventory control, order processing, purchasing and
payroll. Hardware and network installation has been completed. The software
installation and testing is nearly completed, and training is scheduled for
completion in May 1999. The final phase consists of implementation of the
manufacturing software modules and is currently scheduled to begin late in the
second quarter or early in the third quarter of 1999. This project is expected
to resolve the fundamental Y2K information technology issues, and we believe
that it will also have significant benefits to the organization in terms of more
efficient operations, improved access to information related to production
control and inventory management as well as improvements in customer service.
While it is not possible to segregate the costs of this project into segments
that are solely related to resolution of Y2K issues and costs associated with
the other aspects of the project, the overall investment in information
technology is expected to total

11
<PAGE> 12
approximately $1.1 million. Actual expenditures related to this project, through
the end of 1998, totaled approximately $700,000. This project encompasses the
Company's solution to Y2K issues as well as significant improvements in
information systems. As such, nearly all of the information technology budget is
committed to this project. No other information technology projects have been
deferred because of resources committed to this project. Funding for this
project is expected to be available from internal sources.

While we believe that the timetable for implementation is realistic and
attainable, it is not possible to be absolutely certain of completion within the
scheduled time frame. The failure to correct a material Y2K issue could result
in an interruption in, or failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. However, manual
systems currently exist for the essential functions covered by this project, and
such manual systems could be utilized on a temporary basis if the project falls
substantially behind schedule, so the potential disruption resulting from a
delay in implementation is expected to be manageable.
With respect to non-information technology issues, the Company has
completed an inventory of the production and support equipment and systems
currently in use and determined that most such equipment does not contain
microprocessors or embedded microchips and therefore will not be affected by Y2K
issues. Certain, more modern, production equipment contains microprocessors. For
the majority of that equipment, we have received the manufacturer's confirmation
that the equipment is Y2K compliant. In a limited number of cases, we are
awaiting responses from the equipment manufacturer and plan to continue efforts
to ascertain the status of that equipment with respect to Y2K issues. We believe
that we have alternative equipment available that could be utilized on an
interim basis should some of the modern equipment fail unexpectedly. This
eventuality would cause disruptions in our production schedules as the older
equipment is less efficient than the newer equipment, and our manufacturing
costs would be adversely affected as well. At this time, we are unable to
quantify the monetary impact of this potential disruption.
The Company has also requested that each of its major customers and
critical suppliers advise the Company of their current state of readiness as
well as their plans to resolve any open Y2K issues. The response to these
requests has been varied. In general, most firms contacted have indicated that
their systems are Y2K compliant, or that Y2K issues will be resolved during
1999. Typically, larger firms are better prepared than smaller concerns. A
number of smaller customers have not, as yet , responded to our inquiries with
respect to Y2K compliance. Ongoing follow up contacts with those vendors and
customers that have not yet indicated Y2K compliance are being made in an effort
to determine that their compliance efforts are progressing. The Company will
continue to monitor the status of its key vendors and customers and will develop
appropriate contingency plans as more information becomes available. The
Company's contingency plans related to these issues are not complete at this
time. Preliminary work in this area has focused upon information technology
issues and in-house manufacturing issues. while we continue to evaluate the
situation, based upon information currently available, we anticipate that we
will be able to maintain core operations with existing manual systems
supplemented by scheduling overtime to offset the reduced efficiency of manual
systems. Contingency planning with respect to third parties is limited by
incomplete information concerning their state of readiness and we are unable, at
this time, to make a reasonable estimate of the impact Y2K issues will have on
our customers or suppliers. We are evaluating the desirability of purchasing
additional supplies of raw material and critical operating supplies during the
second half of 1999. However, if our customers' plans include a similar
contingency, it is possible that we will use any such safety stock to satisfy
our customers' requests that we, in turn, supply them with safety stock. We are
also evaluating what action will be required to protect the Company's facilities
from the effects of cold weather in the event that utility service is disrupted.
To date, we have received notification Y2K compliance from certain utility
companies, but others have yet to respond to our requests for information. Our
plans will be revised as more information becomes available.

12
<PAGE> 13
STOCK PURCHASE PROGRAM

Terms of a stock repurchase authorization originally approved by the
Board of Directors in February of 1990, and subsequently amended to permit the
repurchase of an aggregate of 200,000 shares, provide 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 135,196 shares at an average price of $14.44 per
share. This includes the purchase of 15,800 shares during 1998 at an average
price of $35.26 per share. It is management's intention to continue this
program, provided market conditions are favorable and funding for repurchases is
available.

PERSONNEL

We are pleased to report that Michael J. Bourg joined the Company as
Controller in December 1998. Mr. Bourg is a CPA with both public accounting and
private industry experience and is a welcome addition to the staff.

OUTLOOK FOR 1999

We anticipate that 1999 will be another successful year for Chicago
Rivet & Machine Co. Consensus forecasts suggest that the economy will continue
to grow at a moderate rate, and we expect to maintain, or increase our business
relationships with our major existing customers and to aggressively solicit
business from new customers. That optimism is tempered by the recognition that
the ongoing consolidation among companies that supply the automotive industry
has affected some of our long-term customer relationships in the past and may
impact other relationships in the future. Revenues from the assembly equipment
segment of our business were less robust in 1998 than in 1997 and, at the
present time, we have no indications that a significant change will occur in
1999. While demand for fasteners continues to be relatively strong, our
customers continue to challenge us with expectations of reductions in product
costs. These expectations are manifested in many ways, including new quality
initiatives, reductions in manufacturing lot sizes combined with more frequent
shipments, or, on an increasing basis, requests for progressive annual price
reductions. Our goal is to meet these challenges more successfully in 1999 by
focusing on cost reduction strategies in all areas of our operations, while
still providing the level of service and quality that our customers expect and
deserve. The investments that have been made in equipment and technology are
essential elements of that strategy. But we recognize that success, both past
and future, is dependent upon intangible elements as well and take this
opportunity to acknowledge, with gratitude, the support of our shareholders, the
loyalty of our customers and suppliers and the conscientious efforts of our
workforce.

ITEM 8 - FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA

See the sections entitled "Consolidated Financial Statements" and
"Financial Statement Schedule" which appear on pages 17 through 19 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

13
<PAGE> 14
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
1999 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 1999 Proxy Statement, is
incorporated herein by reference. The 1999 Proxy Statement is to be filed with
the Securities and Exchange Commission in connection with the Company's 1999
Annual Meeting of Shareholders. The information called for with respect to
executive officers of the Company is included in Part I of this Report on Form
10-K under the caption "Executive Officers of the Registrant."

ITEM 11 - EXECUTIVE COMPENSATION

The information set forth in the section entitled "Executive
Compensation" which appears on pages 9 through 14 of the Company's 1999 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 1999 Proxy Statement is incorporated herein by reference. The 1999
Proxy Statement is to be filed with the Securities and Exchange Commission in
connection with the Company's 1999 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 1999 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 1999 Proxy Statement is incorporated herein by
reference. The 1999 Proxy Statement is to be filed with the Securities and
Exchange Commission in connection with the Company's 1999 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
1999 Proxy Statement is incorporated herein by reference. The 1999 Proxy
Statement is to be filed with the Securities and Exchange Commission in
connection with the Company's 1999 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 17 of this report.

2. Financial statement schedule and supplementary
information required to be submitted.

14
<PAGE> 15

See the section entitled "Financial Statement
Schedule" which appears on pages 18 and 19 of this
report.

3. Exhibits:

See the section entitled "Exhibits" which appears on
page 21 of this report.

(b) Reports on Form 8-K

1. The Company was not required to file Form 8-K during
the quarter ended December 31, 1998.

15
<PAGE> 16
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:

/s/ John A. Morrissey Chairman of the Board of
- ----------------------- Directors, Chief Executive
John A. Morrissey Officer and Member of the
Executive Committee
March 26, 1999
--------------

/s/ John C. Osterman
- ----------------------- President, Chief Operating
John C. Osterman Officer, Treasurer (Chief
Financial Officer), Member
of the Executive Committee
and Director
March 26, 1999
--------------

/s/ Robert K. Brown
- ----------------------- Director and Member of the
Robert K. Brown Executive Committee
March 26, 1999
--------------

/s/ Walter W. Morrissey
- ----------------------- Director, Member of Executive
Walter W. Morrissey Committee and Member of Audit
Committee
March 26, 1999
--------------

/s/ Michael J. Bourg
- ----------------------- Controller (Principal
Michael J. Bourg Accounting Officer)
March 26, 1999
--------------

16
<PAGE> 17
CHICAGO RIVET & MACHINE CO.

CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements, together with the notes thereto
and the report thereon of PricewaterhouseCoopers LLP dated March 5, 1999,
appearing on pages 7 to 14 of the accompanying 1998 Annual Report, and the
section entitled "Quarterly Financial Data (Unaudited)" appearing on page 15 of
the accompanying 1998 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 1998 Annual Report is not to be deemed
filed as part of this Form 10-K Annual Report.

Consolidated Financial Statements from 1998 Annual Report (Exhibit 13 hereto):

Consolidated Balance Sheets(pages 7 & 8 of 1998 Annual Report)

Consolidated Statements of Operations (page 9 of 1998 Annual Report)

Consolidated Statements of Retained Earnings (page 9 of 1998 Annual Report)
Consolidated Statements of Cash Flows (page 10 of 1998 Annual Report)

Notes to Consolidated Financial Statements (pages 11,12 and 13 of 1998 Annual
Report)

Report of Independent Accountants (page 14 of 1998 Annual Report)

Quarterly Financial Data (Unaudited) (page 15 of 1998 Annual
Report)

17
<PAGE> 18
FINANCIAL STATEMENT SCHEDULE

1998, 1997 and 1996

The following financial statement schedule should be read in
conjunction with the consolidated financial statements and the notes thereto in
the 1998 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) 19

Report of Independent Accountants on
Financial Statement Schedule 20

18
<PAGE> 19

CHICAGO RIVET & MACHINE CO.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

Additions
Charged
Balance to Balance
at beginning Costs and Other At end
Classification of year Expenses Deductions Adjustments of year
- -------------- ------------ -------- ---------- ----------- --------
1998
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts,
Returns and
allowances $123,022 $141,447 $141,447 (1) $(53,022) (3) $ 70,000

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
</TABLE>

(1) Accounts receivable written off, net of recoveries.
(2) Reduction of allowance.
(3) Balance sheet reclassification.

19
<PAGE> 20
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 5, 1999 appearing in the 1998 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)(2) of this Form
10-K. In our opinion, this Financial Statement Schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.

PricewaterhouseCoopers LLP

Chicago, Illinois
March 5, 1999

20
<PAGE> 21
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 Articles of Incorporation and Charter.
Incorporated by reference to Company's
report on Form 10, dated March 30, 1935.

3.2 Certified copy of articles of Amendment to
Articles of Incorporation, dated November 4,
1959. Incorporated by reference to Company's
report on Form 8-A, dated April 30, 1965.

3.3 Amendment of Articles of Incorporation
creating a class of 500,000 shares of no
par value preferred stock. Incorporated by
reference to Company's report on Form 10-K,
dated April 30, 1972.

3.4 Amended and Restated By-Laws, dated January
20, 1997. Incorporated by reference to the
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.
Incorporated by reference to the Company's report on
Form 10-K dated March 27, 1998.

*13 Annual Report to Shareholders for the year
ended December 31, 1998. 23 through 42

21 Subsidiaries of the Registrant. 43

27.1 Financial Data Schedule. 44

* Only the portions of this exhibit which are specifically incorporated herein
by reference shall be deemed to be filed herewith.
</TABLE>

<PAGE> 1
EXHIBIT 13
<PAGE> 2

[CHICAGO RIVET LOGO]
Chicago Rivet & Machine Co.
1998 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................................. 7

Consolidated Statements of Operations....................... 9

Consolidated Statements of Retained Earnings................ 9

Consolidated Statements of Cash Flows....................... 10

Notes to Consolidated Financial Statements.................. 11

Report of Independent Accountants........................... 14

Selected Financial Data..................................... 14

Quarterly Financial Data.................................... 15
</TABLE>

- --------------------------------------------------------------------------------
<PAGE> 4

[CHIGAGO RIVET LOGO]

- --------------------------------------------------------------------------------

HIGHLIGHTS

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
1998 1997 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES AND LEASE REVENUE.................... $44,938,184 $44,543,404 $22,510,953
NET INCOME..................................... 3,360,480 3,861,510 1,948,001
NET INCOME PER SHARE........................... 2.90 3.30 1.66
DIVIDENDS PER SHARE............................ 1.12 .91 .90
EXPENDITURES FOR PROPERTY, PLANT AND EQUIPMENT,
NET OF ACQUISITION........................... 2,696,701 963,917 861,128
DEPRECIATION FOR PROPERTY, PLANT AND
EQUIPMENT.................................... 1,498,302 1,372,415 709,678
NET WORKING CAPITAL............................ 12,363,179 13,766,681 12,040,579
TOTAL SHAREHOLDERS' EQUITY..................... 22,012,659 20,511,102 17,776,760
COMMON SHARES OUTSTANDING AT YEAR END.......... 1,153,496 1,169,296 1,171,496
SHAREHOLDERS' EQUITY PER COMMON SHARE.......... 19.08 17.54 15.17
APPROXIMATE NUMBER OF SHAREHOLDERS
OF RECORD.................................... 451 471 505
</TABLE>

REGISTRAR
First Chicago Trust Company, a division of EquiServe

TRANSFER AGENT
First Chicago Trust Company, a division of EquiServe

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 11, 1999 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
[CHIGAGO RIVET LOGO]
- --------------------------------------------------------------------------------

TO OUR SHAREHOLDERS:

RESULTS OF OPERATIONS

The recent year was another successful year for the Company. Despite a
number of challenges, the Company posted respectable earnings on modest revenue
growth. The economy continued to be strong throughout the year. In particular,
the strength of the automotive industry was reflected in the growth of revenues
within the fastener segment of our business. Unfortunately, most of that
increase in revenues was offset by a decline in revenues in the assembly
equipment segment of our operations. Demand in this segment was considerably
weaker than in the prior year, and the market was characterized by significant
competitive pressure on pricing. As a result, our overall product mix was more
heavily weighted toward fasteners, a segment with traditionally lower margins.
This change in our product mix, combined with lower margins on machinery and
equipment due to price competition, contributed to a reduction in net profits,
compared to the outstanding results achieved in 1997.

We are pleased to report that all of the Company's fastener operations have
attained QS-9000 certification in addition to ISO-9002:1994 certification. Our
automotive customers mandated certification to these standards as a prerequisite
to continuing to receive new business, and we are pleased that we have been able
to attain and maintain certification to these standards.

1998 COMPARED TO 1997

Net sales and lease revenues increased slightly compared with 1997, totaling
$44,938,184 for 1998, compared with $44,543,404 recorded during 1997. Revenues
in the fastener segment increased 3.7%, largely as a result of the robust
conditions in the automotive industry, which is the Company's primary market.
Conversely, revenues from the assembly equipment segment, which includes sale of
automatic assembly equipment, related tools and parts and lease revenue,
declined 7.0% compared to 1997. Several factors contributed to the decline in
revenue within the assembly equipment segment. The primary factor was a decline
in unit volume compared to 1997, which was an uncharacteristically strong year.
Also evident in 1998 was a noticeable change in product mix, with 1998 sales
consisting of more lower margin equipment compared to 1997. Finally, in order to
maintain certain customer relationships, the Company responded to competitive
pricing pressures by accepting margins below those historically associated with
its products in this segment.

The positive impact from the increased level of fastener business was
largely offset by increases in wages, higher costs related to health insurance
and additional tooling expense in connection with initial production of a
variety of new fasteners. In addition, depreciation expense increased 7.4%
compared to 1997 due to increased capital expenditures. Competitive conditions
within the fastener industry, in conjunction with our major customers'
continuing policy of not accepting price increases, restricted our ability to
recover these higher costs. The net result is reflected in only nominal
improvement in gross profit within this segment of our operations. The Company's
investment in newer, more efficient equipment and procedures is intended to
reduce costs as well as expand capabilities, and should contribute to improved
operating margins in the future.

Selling and administrative expenses, net of certain favorable adjustments to
environmental reserve accounts, increased 5.8% compared to 1997. Three factors
comprise the majority of this increase. First, expenses incurred in connection
with the development and implementation of new data processing software amounted
to approximately $135,000; second, bad debt expense increased by $145,000 due to
the voluntary reorganization of a certain fastener customer; and third, the
Company incurred certain state taxes, totaling $225,000, during 1998. While the
Company was subject to this same state tax during 1997, no tax liability was
incurred in that year due to certain deductions allowed in the computation of
the tax. In addition, the company incurred higher selling expense as a result of
increased staffing designed to strengthen our presence in certain key markets. A
portion of these increased costs were offset by reductions in commission
expense, reductions in expenses related to attaining QS-9000 certification and a
reduction in profit sharing expense.

- --------------------------------------------------------------------------------

2
<PAGE> 6
MANAGEMENT'S DISCUSSION
(Continued)
- --------------------------------------------------------------------------------

Net non-operating expense declined approximately 24% compared with 1997,
primarily as a result of reduced interest expense, which decreased from $546,666
in 1997 to $376,098 during 1998. This interest expense is related to borrowing
in connection with the 1996 acquisition of H & L Tool Company, Inc. The decrease
in interest expense reflects both lower interest rates in 1998 and a lower
principal balance outstanding compared with 1997. Interest income increased
approximately 12% compared with 1997 due primarily to a higher level of
investment during the year.

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 related
to the sale of fasteners increased to $32,712,820 compared with $11,263,822
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. Revenues in the
assembly equipment segment increased 5.2%, and amounted to $11,830,584 compared
with $11,247,131 in 1996.

Additional selling and administrative expenses incurred in connection with
the 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
net 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. Gains from the sale of surplus equipment, including sale of
leased machines, and a loss due to the write off of an investment in computer
software, resulted in a net gain of approximately $175,000.

DIVIDENDS

The Company paid four regular quarterly dividends of $.18 per share during
1998. In addition, an extra dividend of $.40 per share was paid during the
second quarter of 1998, bringing the total dividend payout to $1.12 per share.
On February 15, 1999 your Board of Directors declared a regular quarterly
dividend of $.18 per share, payable March 20, 1999 to shareholders of record
March 5, 1999. This continues the uninterrupted record of consecutive quarterly
dividends paid by the Company to its shareholders that extends over 65 years. At
that same meeting, the Board declared an extra dividend of $.35 per share,
payable April 20, 1999 to shareholders of record, April 5, 1999.

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 significantly enhanced the Company's
product offerings and strengthened our relationships with certain key customers.

- --------------------------------------------------------------------------------

3
<PAGE> 7
MANAGEMENT'S DISCUSSION
(Continued) [CHIGAGO RIVET LOGO]
- --------------------------------------------------------------------------------

MACHINERY & EQUIPMENT

The Company made a number of significant investments in both equipment and
building improvements during 1998. Capital expenditures totaled nearly
$2,700,000. Expenditures related to new data processing systems, including
computer hardware and software, totaled approximately $542,000. Expenditures for
the purchase of new equipment used in the manufacture of fasteners amounted to
$1,430,000. The Company also purchased a variety of new machine tools, material
handling equipment and inspection equipment valued at approximately $313,000.
Building improvements, which included the installation of new air compressors at
one facility and a new roof at another facility, amounted to approximately
$252,000. Investment in both new equipment and rebuilding of existing equipment
used to plate and heat treat fasteners amounted to $63,000. A total of $51,000
was expended for the construction of new automatic rivet setting equipment that
is leased to customers. The balance was expended for a variety of smaller office
equipment and for the construction of new rivet setting machines that will be
used for demonstration purposes.

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 equipment 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.

Depreciation expense was $1,498,302 in 1998, $1,372,415 in 1997 and $709,678
in 1996.

LIQUIDITY AND CAPITAL RESOURCES

Working capital, at the end of 1998, amounted to approximately $12.4
million. While this is a decrease of $1.4 million compared to the beginning of
the year, the current level is considered sufficient for current operations. The
primary factor contributing to this decrease was the use of cash to fund the
unusually high level of capital expenditures made during 1998. Accounts
receivable balances at year-end increased by approximately $821,000 compared to
1997. Shipping activity during the latter part of 1998 was approximately 12%
higher than during the same period in 1997, and the normal timing difference
between shipment and the receipt of payment is reflected in the higher year-end
accounts receivable balance. Long-term debt was reduced by $1.8 million as the
Company continued to meet the repayment obligations of a commercial loan
obtained 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. The interest rate is adjusted
quarterly and at year-end was approximately 6.26% and the unpaid balance of the
note was $4.95 million. Capital expenditures for new equipment and data
processing implementation are expected to total approximately $2.5 million
during 1999 and early 2000. 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, 1998, it was unused. The facility is scheduled to expire on May 30,
1999, but may be extended beyond that date.

NEW ACCOUNTING STANDARDS

The Company's financial statements and financial condition were not, and are
not expected to be, materially impacted by any other new, or proposed,
accounting standards.

YEAR 2000 COMPLIANCE

- --------------------------------------------------------------------------------

4
<PAGE> 8
MANAGEMENT'S DISCUSSION
(Continued)
- --------------------------------------------------------------------------------

The Company has determined that its information technology systems are not
Y2K compliant and has further determined that its existing software will not
meet the needs of the organization in the future. Accordingly, significant
resources have been allocated to the process of implementing a new data
processing solution that will better meet the needs of the organization while
also addressing the Y2K issues. The implementation of this solution is planned
in three phases. The first two phases include hardware and network installation
and the installation of application software related to financial reporting,
inventory control, order processing, purchasing and payroll. Hardware and
network installation has been completed. The software installation and testing
is nearly completed, and training is scheduled for completion in May 1999. The
final phase consists of implementation of the manufacturing software modules and
is currently scheduled to begin late in the second quarter or early in the third
quarter of 1999. This project is expected to resolve the fundamental Y2K
information technology issues, and we believe that it will also have significant
benefits to the organization in terms of more efficient operations, improved
access to information related to production control and inventory management as
well as improvements in customer service. While it is not possible to segregate
the costs of this project into segments that are solely related to resolution of
Y2K issues and costs associated with the other aspects of the project, the
overall investment in information technology is expected to total approximately
$1.1 million. Actual expenditures related to this project, through the end of
1998, totaled approximately $700,000.

With respect to non-information technology issues, the Company has completed
an inventory of the production and support equipment and systems currently in
use and determined that most such equipment does not contain microprocessors or
embedded microchips and therefore will not be affected by Y2K issues. Certain,
more modern, production equipment contains microprocessors. For the majority of
that equipment, we have received confirmation that the equipment is Y2K
compliant, and we believe that we have alternative equipment available that
could be utilized on an interim basis should some of the modern equipment fail
unexpectedly.

The Company has also requested that each of its major customers and critical
suppliers advise the Company of their current state of readiness as well as
their plans to resolve any open Y2K issues. The response to these requests has
been varied. In general, most firms contacted have indicated that their systems
are Y2K compliant, or that Y2K issues will be resolved during 1999. The Company
will continue to monitor the status of its key vendors and customers and will
develop appropriate contingency plans as more information becomes available.

STOCK PURCHASE PROGRAM

Terms of a stock repurchase authorization originally approved by the Board
of Directors in February of 1990, and subsequently amended to permit the
repurchase of an aggregate of 200,000 shares, provide 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 135,196 shares at an average price of $14.44 per
share. This includes the purchase of 15,800 shares during 1998 at an average
price of $35.26 per share. It is management's intention to continue this
program, provided market conditions are favorable and funding for repurchases is
available.

PERSONNEL

OUTLOOK FOR 1999

- --------------------------------------------------------------------------------

5
<PAGE> 9
MANAGEMENT'S DISCUSSION
(Continued) [CHIGAGO RIVET LOGO]
- --------------------------------------------------------------------------------

These expectations are manifested in many ways, including new quality
initiatives, reductions in manufacturing lot sizes combined with more frequent
shipments, or, on an increasing basis, requests for progressive annual price
reductions. Our goal is to meet these challenges more successfully in 1999 by
focusing on cost reduction strategies in all areas of our operations, while
still providing the level of service and quality that our customers expect and
deserve. The investments that have been made in equipment and technology are
essential elements of that strategy. But we recognize that success, both past
and future, is dependent upon intangible elements as well and take this
opportunity to acknowledge, with gratitude, the support of our shareholders, the
loyalty of our customers and suppliers and the conscientious efforts of our
workforce.

Respectfully,

<TABLE>
<S> <C>
J. A. MORRISSEY JOHN C. OSTERMAN
John A. Morrissey John C. Osterman
Chairman President
</TABLE>

March 5, 1999

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.

- --------------------------------------------------------------------------------

6
<PAGE> 10

[CHIGAGO RIVET LOGO]

- --------------------------------------------------------------------------------

CONSOLIDATED BALANCE SHEETS
ASSETS

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
DECEMBER 31 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>

Current Assets

Cash and Cash Equivalents (Note 1)........................ $ 3,181,471 $ 3,983,471

Certificates of Deposit................................... 550,254 2,867,715

Accounts Receivable--Less allowances of $70,000 and
$123,022, respectively (Note 1)........................ 6,483,214 5,662,538

Inventories (Notes 1 and 4)............................... 6,529,747 6,354,607

Deferred Income Taxes (Notes 1 and 5)..................... 691,191 764,588

Other Current Assets...................................... 235,149 360,448
----------- -----------

Total Current Assets...................................... 17,671,026 19,993,367
----------- -----------

Property, Plant and Equipment (Notes 1 and 9)

Land and Improvements..................................... 1,008,901 1,008,901

Buildings and Improvements................................ 5,634,144 5,501,189

Production Equipment, Leased Machines and Other........... 23,737,405 21,404,751
----------- -----------

30,380,450 27,914,841

Less Accumulated Depreciation............................. 16,235,695 14,960,748
----------- -----------

Net Property, Plant and Equipment......................... 14,144,755 12,954,093
----------- -----------

Total Assets................................................ $31,815,781 $32,947,460
=========== ===========
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.

- --------------------------------------------------------------------------------
7
<PAGE> 11
[CHIGAGO RIVET LOGO]

- --------------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
DECEMBER 31 1998 1997
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Current Liabilities

Current Portion of Note Payable (Note 3).................. $ 1,800,000 $ 1,800,000

Accounts Payable.......................................... 1,272,462 1,700,296

Wages and Salaries........................................ 745,158 772,247

Contributions Due Profit Sharing Plan (Note 6)............ 546,078 707,747

Other Accrued Expenses (Note 7)........................... 546,068 438,342

Unearned Lease Revenue (Note 1)........................... 43,267 68,711

Federal and State Income Taxes (Notes 1 and 5)............ 354,814 739,343
----------- -----------

Total Current Liabilities................................. 5,307,847 6,226,686

Note Payable (Note 3)....................................... 3,150,000 4,950,000

Deferred Income Taxes (Notes 1 and 5)....................... 1,345,275 1,259,672
----------- -----------

Total Liabilities......................................... 9,803,122 12,436,358
----------- -----------

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
1,153,496 and 1,169,296, respectively (Note 8)......... 1,153,496 1,169,296

Additional Paid-in Capital................................ 453,184 459,388

Retained Earnings......................................... 20,405,979 18,882,418
----------- -----------

Total Shareholders' Equity................................ 22,012,659 20,511,102
----------- -----------

Commitments and Contingencies (Note 12)

Total Liabilities and Shareholders' Equity.................. $31,815,781 $32,947,460
=========== ===========
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.

- --------------------------------------------------------------------------------
8
<PAGE> 12
[CHIGAGO RIVET LOGO]

- --------------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
For the Years Ended December 31 1998 1997 1996
- -----------------------------------------------------------------------------------------------
Net Sales and Lease Revenue (Notes 1 and 9)....... $44,938,184 $44,543,404 $22,510,953
Cost of Goods Sold and Costs Related to Lease
Revenue......................................... 31,622,558 30,797,023 14,938,997
----------- ----------- -----------
Gross Profit...................................... 13,315,626 13,746,381 7,571,956
Selling and Administrative Expenses............... 8,140,630 7,573,074 4,757,440
Other Income (Expenses), Net (Note 10)............ (97,516) (128,797) 359,485
----------- ----------- -----------
Income Before Income Taxes........................ 5,077,480 6,044,510 3,174,001
Provision for Income Taxes (Notes 1 and 5)........ 1,717,000 2,183,000 1,226,000
----------- ----------- -----------
Net Income........................................ $ 3,360,480 $ 3,861,510 $ 1,948,001
=========== =========== ===========
Net Income Per Share.............................. $ 2.90 $ 3.30 $ 1.66
=========== =========== ===========
</TABLE>

CONSOLIDATED STATEMENTS OF
RETAINED EARNINGS

<TABLE>
<S> <C> <C> <C>
Retained Earnings at Beginning of Year............ $18,882,418 $16,145,012 $15,251,361
Net Income........................................ 3,360,480 3,861,510 1,948,001
Cancellation of Treasury Stock (Note 8)........... (535,058) (58,259) --
Cash Dividends Paid,
$1.12 Per Share in 1998, $.91 Per Share in 1997
and $.90 Per Share in 1996...................... (1,301,861) (1,065,845) (1,054,350)
----------- ----------- -----------
Retained Earnings at End of Year.................. $20,405,979 $18,882,418 $16,145,012
=========== =========== ===========
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.

- --------------------------------------------------------------------------------
9
<PAGE> 13
[CHIGAGO RIVET LOGO]

- --------------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31 1998 1997 1996
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income................................................ $3,360,480.. $ 3,861,510 $ 1,948,001
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Depreciation and Amortization........................... 1,498,302 1,380,763 734,674
Net Gain on the Sale of Properties...................... (14,787) (175,059) (54,376)
Deferred Income Taxes................................... 159,000 248,084 11,297
Changes in Working Capital Components, net of the
effects of the acquisition of H & L Tool:
Accounts Receivable................................... (820,676) (633,653) 770,288
Inventories........................................... (175,140) 543,996 (10,553)
Other Current Assets.................................. 125,299 (88,475) 16,914
Accounts Payable...................................... (427,834) 442,592 168,876
Accrued Wages and Salaries............................ (27,089) 17,456 (301,362)
Accrued Benefit Plan Contributions.................... (161,669) 185,469 (50,586)
Other Accrued Expenses................................ 107,726 (43,916) (302,143)
Unearned Lease Revenue................................ (25,444) 15,300 (16,709)
Income Taxes Payable.................................. (384,529) 320,004 (121,706)
----------- ----------- -----------
Net Cash Provided by Operating Activities........ 3,213,639 6,074,071 2,792,615
----------- ----------- -----------
Cash Flows from Investing Activities:
Acquisition of H & L Tool, net of cash acquired of $4.8
million............................................... -- -- (14,294,470)
Capital Expenditures.................................... (2,696,701) (963,917) (861,128)
Proceeds from the Sale of Properties.................... 22,524 800,302 114,403
Proceeds from Held-to-Maturity Securities............... 5,831,753 4,316,492 7,921,447
Proceeds from Available-for-Sale Securities............. -- -- 2,209,513
Purchases of Held-to-Maturity Securities................ (3,514,292) (6,081,987) (3,766,410)
Purchases of Available-for-Sale Securities.............. -- -- (195,025)
----------- ----------- -----------
Net Cash Used in Investing Activities............ (356,716) (1,929,110) (8,871,670)
----------- ----------- -----------
Cash Flows from Financing Activities:
Borrowings under Term Loan Agreement.................... -- -- 9,000,000
Payments under Term Loan Agreement...................... (1,800,000) (2,250,000) --
Purchases of Treasury Stock............................. (557,062) (61,333) --
Cash Dividends Paid..................................... (1,301,861) (1,065,845) (1,054,350)
----------- ----------- -----------
Net Cash Provided by (Used in) Financing
Activities..................................... (3,658,923) (3,377,178) 7,945,650
----------- ----------- -----------
Net Increase(Decrease) in Cash and Cash Equivalents....... (802,000) 767,783 1,866,595
Cash and Cash Equivalents at Beginning of Year............ 3,983,471 3,215,688 1,349,093
----------- ----------- -----------
Cash and Cash Equivalents at End of Year.................. $ 3,181,471 $ 3,983,471 $ 3,215,688
=========== =========== ===========
Cash Paid During the Year for:
Income Taxes.......................................... $ 1,942,529 $ 1,614,913 $ 1,337,427
Interest.............................................. $ 458,080 $ 485,282 --
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.

- --------------------------------------------------------------------------------
10
<PAGE> 14

[CHIGAGO RIVET LOGO]

- --------------------------------------------------------------------------------

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

1--NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS--The Company operates in the fastener industry and is in the
business of producing and selling rivets, cold-formed fasteners, screw-machine
products, automatic rivet setting machines, parts and tools for such machines,
and the leasing of automatic rivet setting machines.

A SUMMARY OF THE COMPANY'S SIGNIFICANT ACCOUNTING POLICIES FOLLOWS:

PRINCIPLES OF CONSOLIDATION--The Consolidated Financial Statements include the
accounts of Chicago Rivet & Machine Co. and its wholly owned subsidiary, H & L
Tool Company, Inc. All significant intercompany accounts and transactions have
been eliminated.

REVENUE RECOGNITION--Revenues from product sales are generally recognized upon
shipment and a reserve is provided for estimated returns and allowances based on
experience.

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.

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.

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 and certificates of
deposit 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 available to the Company for notes with the same
remaining maturities.

INVENTORIES--Inventories are stated at the lower of cost or net realizable
value, cost being determined principally by the first-in, first-out method.

PROPERTY, PLANT AND EQUIPMENT--Properties are stated at cost and are depreciated
over their estimated useful lives using the straight-line method for financial
reporting purposes. Accelerated methods of depreciation are used for income tax
purposes, and deferred taxes are provided on the difference between financial
and tax depreciation. Direct costs related to developing or obtaining software
for internal use are capitalized as property and equipment. Capitalized software
costs are amortized over the software's useful life when the software is ready
for its intended use. 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
Capitalized software costs.................. 3 to 5 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
that do not improve the related asset or extend its useful life are charged to
operations as incurred.

INCOME TAXES--Deferred income taxes are determined under the asset and liability
method in accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes". Deferred income taxes arise from temporary
differences between the income tax basis of assets and liabilities and their
reported amounts in the financial statements.

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.

SEGMENT INFORMATION--In 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, ("FAS 131") "Disclosures about Segments of an
Enterprise and Related Information." FAS 131 establishes new standards for
defining a Company's segments and disclosing information about them. It requires
that segments be based on the internal structure and reporting of the Company's
operations. The adoption of FAS 131 did not affect results of operations or
financial position but did affect the disclosure of segment information.

NET INCOME PER SHARE--Net income per share of common stock is based on the
weighted average number of shares outstanding of 1,159,360 in 1998, 1,170,988 in
1997 and 1,171,496 in 1996, after giving effect to a two-for-one stock split
that occurred September 19, 1997.

ESTIMATES--The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and the
accompanying notes. 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

- --------------------------------------------------------------------------------
11
<PAGE> 15
[CHIGAGO RIVET LOGO]
- --------------------------------------------------------------------------------

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 operation of H & L Tool from the date of
acquisition.

The following represents the unaudited pro forma results of operations, for
1996, as if the acquisition occurred on January 1, 1996 (in thousands, except
per share data):

<TABLE>
<S> <C>
Net sales and lease revenue................... $ 42,957
Net Income.................................... 1,856
Net Income per share.......................... 1.58
</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.

3--NOTE PAYABLE--On November 25, 1996, in connection with the acquisition of H &
L Tool, the Company entered into a five-year unsecured term loan agreement (the
Term Loan) for $9 million, and 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 the reference rate of the financial
institution less 75 basis points, or the LIBOR rate plus 80 basis points.
Repayments of principal are made quarterly in the amount of $450,000 through
September 2001. The Line of Credit was extended through May 30, 1999 and remains
unused at December 31, 1998.
4--INVENTORIES--Inventories at December 31, 1998 and 1997 consisted of the
following:

<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Raw materials..................... $1,656,179 $1,901,419
Work in process................... 1,777,584 1,427,764
Finished goods.................... 3,095,984 3,025,424
---------- ----------
$6,529,747 $6,354,607
========== ==========
</TABLE>

5--INCOME TAXES--The provision for income tax expense consists of the following:

<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Current
Federal............... $ 1,431,000 $ 1,729,916 $ 993,703
State................. 127,000 205,000 221,000
Deferred................ 159,000 248,084 11,297
----------- ----------- -----------
$ 1,717,000 $ 2,183,000 $ 1,226,000
=========== =========== ===========
</TABLE>

The deferred tax liabilities and assets are comprised of the following:

<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Depreciation.................... $(1,368,531) $(1,287,412)
----------- -----------
Inventory....................... 443,202 427,166
Accrued vacation................ 176,400 183,477
Unearned rental revenue......... 16,710 27,484
Allowance for doubtful
accounts...................... 26,110 44,827
Environmental accrual........... 15,448 34,000
Other........................... 36,577 75,374
----------- -----------
714,447 792,328
----------- -----------
$ (654,084) $ (495,084)
=========== ===========
</TABLE>

The following is a reconciliation of the statutory federal income tax rate
to the actual effective tax rate:

<TABLE>
<CAPTION>
1998 1997 1996
----------------- ----------------- ----------------
AMOUNT % Amount % Amount %
----------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Expected tax at U.S
Statutory rate....... $1,726,000 34.0 $2,055,133 34.0 $1,079,160 34.0
State taxes, net of
federal benefit...... 84,000 1.7 135,300 2.2 145,860 4.6
Other, net............ 7,000 .1 (7,433) -- 980 --
Adjustment to prior
year accrual......... (100,000) (2.0) -- -- -- --
---------- ---- ---------- ---- ---------- ----
Income tax expense.... $1,717,000 33.8 $2,183,000 36.2 $1,226,000 38.6
========== ==== ========== ==== ========== ====
</TABLE>

6--PENSIONS--The Company has a noncontributory profit sharing plan covering
substantially all employees. Total expenses relating to the profit sharing plan
amounted to approximately $546,000 in 1998, $627,000 in 1997 and $327,000 in
1996.

During 1997, the Company's defined benefit pension plans were terminated
and all liabilities were satisfied.

7--OTHER ACCRUED EXPENSES--Accrued expenses consist of the following:

<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Property taxes........................ $100,008 $ 95,620
Payroll taxes and withholding......... 149,466 68,951
Interest.............................. 26,652 108,634
Environmental costs................... 40,000 85,000
Commissions........................... 85,039 8,863
All other items....................... 144,903 71,274
-------- --------
$546,068 $438,342
======== ========
</TABLE>

8--TREASURY STOCK TRANSACTIONS--In 1998, the Company purchased 15,800 shares of
its common stock for $557,062. In 1997, the Company purchased 2,200 shares of
its common stock for $61,333. 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 $376,644 in 1998, $330,312 in 1997
and $414,129 in 1996. 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>
1998 1997
--------- ---------
<S> <C> <C>
Cost.................................. $725,459 $742,491
Accumulated depreciation.............. 610,616 649,939
-------- --------
Carrying value........................ $114,843 $ 92,552
======== ========
</TABLE>

10--OTHER INCOME (EXPENSES), NET--Other income (expenses) consists of the
following:

<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Gain on sale of properties
and equipment........... $ 14,787 $ 175,059 $ 54,376
Interest income........... 247,889 221,975 362,158
Interest expense.......... (376,098) (546,666) (47,250)
Amortization expense...... -- (8,348) (24,996)
Other..................... 15,906 29,183 15,197
---------- ---------- ----------
$ (97,516) $ (128,797) $ 359,485
========== ========== ==========
</TABLE>

- --------------------------------------------------------------------------------
12
<PAGE> 16
[CHIGAGO RIVET LOGO]
- --------------------------------------------------------------------------------

11--SEGMENT INFORMATION--The Company operates, primarily in the United States,
in two business segments as determined by its products. The fastener segment,
which aggregates H & L Tool and the parent company's fastener operations,
includes rivets, cold-formed fasteners and screw-machine products. The assembly
equipment segment includes automatic rivet setting machines, parts and tools for
such machines and the leasing of automatic rivet setting machines. Information
by segment is as follows:

<TABLE>
<CAPTION>
ASSEMBLY
FASTENER EQUIPMENT OTHER CONSOLIDATED
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
YEAR ENDED
DECEMBER 31, 1998:
Net sales and lease
revenue............... $33,931,740 $11,006,444 $ -- $44,938,184
Depreciation........... 1,148,343 213,294 136,665 1,498,302
Segment profit......... 7,073,936 4,758,406 -- 11,832,342
Selling and administra-
tive expenses......... 6,626,653 6,626,653
Interest expense....... 376,098 376,098
Interest income........ (247,889) (247,889)
-----------
Income before income
taxes................. 5,077,480
-----------
Capital expenditures... 1,992,015 229,553 475,133 2,696,701
Segment assets:
Inventory............. 3,761,580 2,768,167 -- 6,529,747
Property, plant and
equipment........... 10,588,483 1,790,190 1,766,082 14,144,755
Other assets.......... -- -- 11,141,279 11,141,279
-----------
31,815,781
-----------
YEAR ENDED
DECEMBER 31, 1997:
Net sales and lease
revenue............... $32,712,820 $11,830,584 $ -- $44,543,404
Depreciation........... 1,068,940 187,708 115,767 1,372,415
Segment profit......... 7,016,647 5,404,439 -- 12,421,086
Selling and administra-
tive expenses......... 6,051,885 6,051,885
Interest expense....... 546,666 546,666
Interest income........ (221,975) (221,975)
-----------
Income before income
taxes................. 6,044,510
-----------
Capital expenditures... 533,865 291,814 138,238 963,917
Segment assets:
Inventory............. 3,698,325 2,656,282 -- 6,354,607
Property, plant and
equipment........... 9,941,054 1,609,264 1,403,775 12,954,093
Other assets.......... -- -- 13,638,760 13,638,760
-----------
32,947,460
-----------
YEAR ENDED
DECEMBER 31, 1996:
Net sales and lease
revenue............... $11,263,822 $11,247,131 $ -- $22,510,953
Depreciation........... 430,040 170,037 109,601 709,678
Segment profit......... 1,378,077 5,220,540 -- 6,598,617
Selling and administra-
tive expenses......... 3,739,524 3,739,524
Interest expense....... 47,250 47,250
Interest income........ (362,158) (362,158)
-----------
Income before income
taxes................. 3,174,001
-----------
Capital expenditures... 335,948 204,272 320,908 861,128
Segment assets:
Inventory............. 4,154,710 2,743,893 -- 6,898,603
Property, plant and
equipment........... 10,689,532 1,676,989 1,621,312 13,987,833
Other assets.......... -- -- 10,440,116 10,440,116
-----------
31,326,552
-----------
</TABLE>

The Company does not allocate selling and administrative expenses, except
for freight allowed and certain identifiable engineering expenses, for internal
reporting, thus, no allocation was made for segment disclosure purposes. Segment
assets reported internally are limited to inventory and long-lived assets.
Long-lived assets of one plant location are allocated between the two segments
based on estimated plant utilization as this plant serves both fastener and
assembly equipment activities. Other assets are not allocated to segments
internally and to do so would be impracticable. Sales to two customers in the
fastener segment accounted for 15 and 10 percent of consolidated revenues during
1998 and sales to these customers accounted for 15 and 11 percent, respectively,
in 1997. No single customer accounted for 10 percent of consolidated revenues
during 1996.

12--COMMITMENTS AND CONTINGENCIES--The Company recorded rent expense aggregating
approximately $26,000, $27,000 and $9,000 for 1998, 1997 and 1996, respectively.
Total future minimum rentals at December 31, 1998 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 1998 and
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. 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. 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
$40,000 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.

13--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 $.05, $.16 and $.36 per share, for 1998, 1997 and
1996, respectively. The 1998 adjustment includes $.09 per share related to the
reduction of prior year accrued income taxes. 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.

- --------------------------------------------------------------------------------
13
<PAGE> 17

[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, retained earnings and cash flows present
fairly, in all material respects, the financial position of Chicago Rivet &
Machine Co. and its subsidiary at December 31, 1998 and 1997, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998, 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

Chicago, Illinois
March 5, 1999

SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales and Lease Revenue $44,938,184 $44,543,404 $22,510,953 $23,717,410 $23,012,730
- -------------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes 5,077,480 6,044,510 3,174,001 3,645,215 3,239,881
- -------------------------------------------------------------------------------------------------------------------------------
Net Income 3,360,480 3,861,510 1,948,001 2,235,215 1,908,881
- -------------------------------------------------------------------------------------------------------------------------------
Net Income Per Share 2.90 3.30 1.66 1.91 1.63
- -------------------------------------------------------------------------------------------------------------------------------
Dividends Per Share 1.12 .91 .90 .88 .78
- -------------------------------------------------------------------------------------------------------------------------------
Average Common Shares Outstanding 1,159,360 1,170,988 1,171,496 1,172,944 1,174,122
- -------------------------------------------------------------------------------------------------------------------------------
Net Working Capital 12,363,179 13,766,681 12,040,579 12,710,825 10,968,607
- -------------------------------------------------------------------------------------------------------------------------------
Total Debt 4,950,000 6,750,000 9,000,000 -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total Assets 31,815,781 32,947,460 31,326,552 21,355,139 19,923,085
- -------------------------------------------------------------------------------------------------------------------------------
Shareholders' Equity 22,012,659 20,511,102 17,776,760 16,883,109 15,702,000
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>

- --------------------------------------------------------------------------------
14
<PAGE> 18

[CHIGAGO RIVET LOGO]

- --------------------------------------------------------------------------------

QUARTERLY FINANCIAL DATA (UNAUDITED):

<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1998
Net Sales and Lease
Revenue............. $11,672,949 $10,822,531 $10,331,367 $12,111,337
Gross Profit......... 3,401,609 3,194,414 3,180,502 3,539,101
Net Income........... 914,820 783,924 718,506 943,230
Per Share Data:
Net Income Per
Share............. .78 .68 .62 .82
Average Common
Shares
Outstanding....... 1,169,100 1,159,793 1,155,535 1,153,764

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 .32 .67
Average Common
Shares
Outstanding....... 1,171,496 1,171,496 1,171,496 1,171,496
</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 1998 1997 1998 1997
------- ---- ---- -------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First................ $.58* $.40* $46 1/2 $28 $18 3/4 $15 1/2
Second............... .18 .15 $49 1/2 $32 $24 15/16 $18
Third................ .18 .18 $34 7/8 $24 3/4 $39 15/16 $23
Fourth............... .18 .18 $30 1/2 $21 $36 $23 1/2
</TABLE>

- ---------------
* Includes an extra dividend of $.40 and $.25 per share for 1998 and 1997,
respectively.

- --------------------------------------------------------------------------------
15
<PAGE> 19

[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
KIMBERLY A. KIRHOFER
Secretary
MICHAEL J. BOURG
Corporate Controller

CHICAGO RIVET & MACHINE CO.

ADMINISTRATIVE & SALES OFFICES
Naperville, Illinois
Norwell, Massachusetts
MANUFACTURING FACILITIES
Albia Division
Albia, Iowa

Jefferson Division
Jefferson, Iowa

Tyrone Division
Tyrone, Pennsylvania

H & L Tool Company, Inc.
Madison Heights, Michigan

(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> 20

[CHICAGO RIVET 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.

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 3,181,471
<SECURITIES> 550,254
<RECEIVABLES> 6,553,214
<ALLOWANCES> 70,000
<INVENTORY> 6,529,747
<CURRENT-ASSETS> 17,671,026
<PP&E> 30,380,450
<DEPRECIATION> 16,235,695
<TOTAL-ASSETS> 31,815,781
<CURRENT-LIABILITIES> 5,307,847
<BONDS> 3,150,000
0
0
<COMMON> 1,153,496
<OTHER-SE> 20,859,163
<TOTAL-LIABILITY-AND-EQUITY> 31,815,781
<SALES> 44,561,540
<TOTAL-REVENUES> 44,938,184
<CGS> 31,622,558
<TOTAL-COSTS> 31,622,558
<OTHER-EXPENSES> 8,140,630
<LOSS-PROVISION> 141,447
<INTEREST-EXPENSE> 376,098
<INCOME-PRETAX> 5,077,480
<INCOME-TAX> 1,717,000
<INCOME-CONTINUING> 3,360,480
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,360,480
<EPS-PRIMARY> 2.90
<EPS-DILUTED> 2.90

</TABLE>