10-K405 1 c68192e10-k405.txt ANNUAL REPORT -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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, 2001, OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 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 36-0904920 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 901 Frontenac Road, Naperville, IL 60563 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (630) 357-8500 Securities registered pursuant to Section 12(b) of the Act: TITLE OF EACH CLASS --------------- Common Stock -- $1.00 Par Value (including Preferred Stock Purchase Rights) NAME OF EACH EXCHANGE ON WHICH REGISTERED -------------------- American Stock Exchange (Trading privileges only, not registered) 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. $20,242,333 AS OF FEBRUARY 15, 2002. COMMON SHARES OUTSTANDING AS OF FEBRUARY 15, 2002 WERE 967,132 ($1 PAR VALUE) DOCUMENTS INCORPORATED BY REFERENCE (1) PORTIONS OF THE COMPANY'S ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED DECEMBER 31, 2001 (THE "2001 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 2002 ANNUAL MEETING OF SHAREHOLDERS ARE INCORPORATED BY REFERENCE IN PART III OF THIS REPORT. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- PAGE 1 OF ______ EXHIBIT INDEX IS ON PAGE ______ CHICAGO RIVET & MACHINE CO. PERIOD ENDING DECEMBER 31, 2001 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 4 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 7a. Quantitative and Qualitative Disclosures About Market Risk 11 8. Financial Statements and Supplementary Data 11 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 11 Part III 10. Directors and Executive Officers of the Registrant 11 11. Executive Compensation 12 12. Security Ownership of Certain Beneficial Owners and Management 12 13. Certain Relationships and Related Transactions 12 Part IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 13 2 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-formed 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 8 of the Company's 2001 Annual Report to Shareholders, incorporated herein by reference. The 2001 Annual Report is filed as an exhibit to this report. The principal market for the Company's products is the North American automotive industry. Sales are solicited by employees and 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. Revenues are primarily derived from sales to customers involved, directly or indirectly, in the manufacture of automobiles and automotive components. 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 2001, sales to three customers exceeded 10% of the Company's consolidated revenues. Sales to TI Group Automotive Systems Corporation accounted for approximately 18% of the Company's consolidated revenues in 2001, 19% in 2000 and 17% in 1999. Sales to Fisher & Company accounted for approximately 14%, 11% and 11% of the Company's consolidated revenues in 2001, 2000, and 1999, respectively. Sales to Purchased Parts Group accounted for approximately 10% of the Company's consolidated revenues in 2001. The Company's business has historically been somewhat stronger during the first half of the year. 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, 2001, the Company employed 336 people. 3 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 five plants are owned by the Company and 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. 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. 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 2001. 4 Executive Officers of the Registrant The names, ages and positions of all executive officers of the Company, as of March 24, 2002, 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. Number of years Name and Age of Officer Position an Officer ----------------------- -------- ---------- John A. Morrissey 66 Chairman, Chief 22 Executive Officer John C. Osterman 50 President, Chief 18 Operating Officer and Treasurer Nirendu Dhar 60 General Manager 1 H & L Tool Company, Inc. Donald P. Long 50 Vice-President Sales 7 Kimberly A. Kirhofer 43 Secretary 11 Michael J. Bourg 39 Controller 3 - Mr. Morrissey has been Chairman of the Board of Directors of the Company since November 1979, and Chief Executive Officer since August 1981. He has been a director of the Company since 1968. - Mr. Osterman has been President, Chief Operating Officer and Treasurer of the Company since September 1987. He was Assistant Secretary from November 1983 to May 1985 when he became Assistant Vice President-Administration. He became Vice President-Administration in May 1986 and was named Executive Vice President in May 1987. He has been a director of the Company since May 1988. - Mr. Dhar has been employed as General Manager of the Company's subsidiary, H & L Tool Company, Inc., since 1996. Mr. Dhar was employed as Plant Manager and Chief Engineer of H & L Tool Company, Inc. prior to the Company's acquisition of H & L Tool Company for more than five years. - 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. - 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. - 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 was employed by the public accounting firm of McGladrey & Pullen, LLP as a public accountant, for more than five years. 5 PART II ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock is traded on the American Stock Exchange (trading privileges only, not registered). As of December 31, 2001 there were 344 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 12 of the 2001 Annual Report is incorporated herein by reference. The 2001 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 11 of the 2001 Annual Report is incorporated herein by reference. The 2001 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 This discussion contains certain "forward-looking statements" which are inherently subject to risks and uncertainties that may cause actual events to differ materially from those discussed herein. Factors which may cause such differences in events include, among other things, our ability to maintain our relationships with our significant customers; increases in the prices of, or limitations on the availability of, our primary raw materials; or a downturn in the automotive industry, upon which we rely 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. Many of these factors are beyond our ability to control or predict. Readers are cautioned not to place undue reliance on these forward-looking statements. We undertake no obligation to publish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. 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 economic malaise that adversely affected our business during the latter portion of 2000 continued to be the dominant force impacting our business throughout 2001. Eventually, the economy was officially declared to be in a recession, and as the effects of this recession became more widespread during 2001, demand for our products continued to weaken. Within the fastener segment, customers responded to the worsening economic conditions by reducing inventories and reducing production, which translated into further reductions in purchasing activity. This same set of circumstances impacted demand for perishable tools and repair parts within our assembly equipment segment, where revenues from the sale of new automatic assembly equipment weakened considerably as activity within that sector of the economy fell to its lowest level in nearly ten years. In response to these conditions, we reduced production schedules, trimmed inventories and moved to control costs to the greatest extent possible, all of which contributed to results that were respectable in view of overall economic conditions. In 6 addition, we completed initiatives that should allow us to expand our market share in certain niche areas. 2001 COMPARED TO 2000 The effect of the current recession is apparent in the comparison of revenues and margins between 2001 and 2000. Net sales and lease revenues fell to $40,443,010 in 2001, a decline of 11% compared to 2000. This lower level of operations was the primary factor contributing to the decrease in gross margins, which fell to $9,187,046 for 2001, compared to $11,943,030 reported for 2000. Revenues within the fastener segment declined 8.5% and amounted to $32,704,142 during 2001. This decline stems from the combination of lower volumes for existing business, partially offset by successful efforts to win new business from both new and existing customers. Gross margins within this segment declined from 22.3% in 2000 to 19.9% for 2001. During the year, the Company was able to take advantage of softness within the raw materials market, successfully negotiating price reductions for certain raw materials and supplies. Unfortunately, the positive contribution from those activities was offset by increases in the cost of health insurance and a somewhat higher cost for perishable tooling. Other than those two areas, we were generally successful in reducing our variable costs in a manner consistent with the reduced level of operations. Fixed costs, as would be expected, remained relatively unchanged despite the reduced levels of operations. The domestic metalworking machinery market suffered a significant decline in 2001, with overall activity falling to its lowest level in nearly a decade. These conditions were plainly evident in the results of operations within our assembly equipment segment. Revenues fell to $7,738,868 during 2001, compared to $9,687,564 recorded during 2000. Despite our efforts to reduce costs and manage the negative effects of lower volumes, we were unable to cut costs as quickly and as deeply as demand declined. Because we believe that this downturn is of a cyclical nature, we made a decision to attempt to maintain as much of our skilled workforce as possible, rather than attempt to match volume declines with a wholesale reduction in the workforce. As a result, labor and benefit costs remained at levels somewhat higher than might otherwise be expected given recent business conditions. On a short-term basis, we view this as the most practical response to what we believe will be a temporary situation. We were able to achieve only limited reductions in fixed costs compared with the prior year. The net result was an overall decline in gross margins, which fell to approximately 35% in 2001, compared to 42% recorded in 2000. Selling and administrative expenses declined significantly compared with the prior year. Successful completion of the first phase of implementation of new data processing systems resulted in a significant reduction in consulting expenses compared with the prior year. In addition, salary and benefit expenses declined significantly due to reductions in headcount, achieved mainly through attrition. Sales commissions and profit sharing expense declined to levels consistent with the lower sales volume and lower income, respectively. Unfortunately, bad debt expense increased by a net amount of $114,000, mainly due to the third quarter bankruptcy filing of a certain customer. Lower prevailing interest rates, combined with lower debt, resulted in a net interest expense reduction of $61,000. 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 for a portion of its operations. Actual results can vary from these estimates and these estimates are adjusted, as necessary, when actual information is available. During the fourth quarter of 2001, net income included net unfavorable adjustments to inventory 7 and certain accruals aggregating $.02 per share. Similar adjustments in the fourth quarter of 2000 and 1999 amounted to net favorable adjustments of $.10 per share and $.09 per share, respectively. 2000 COMPARED TO 1999 In 2000, conditions in our major markets tended to weaken as the year progressed. As a result, net sales and lease revenues declined to $45,423,263 in 2000. On an overall basis, this represents a decline of 7.5% compared to the record level of $49,080,257 recorded in 1999. Revenues within the fastener segment, which began 2000 at a slightly stronger pace than in the prior year, ended the year at $35,735,699, a decline of 4.7% compared to 1999, as the second half of the year was characterized by business levels that were sharply lower than the preceding six months. This downturn is attributable to a decline in the level of activity within the motor vehicle and automotive parts sector of the economy upon which we depend for the majority of our fastener revenues. Within the assembly equipment segment, demand was comparatively soft early in the year, and became weaker as the year progressed. As a result, revenues for the full year declined approximately 16% compared to 1999, totaling $9,687,564 during 2000. Given the reduced operating levels, gross margins within the fastener segment declined compared to the prior year. However, there were other significant factors that impacted gross margins. Among them were increases in wage levels necessary to retain skilled labor in the face of very tight labor markets, increases in the cost of tooling and supplies used in manufacturing, significantly higher costs for health insurance and higher depreciation expense associated with recent investments in new manufacturing equipment. While competitive situations continued to hamper our ability to recover the higher costs outlined above, favorable conditions in the market for raw materials enabled us to negotiate modest reductions in the prices paid for certain raw materials. Overall, however, the combination of lower volume and generally higher manufacturing costs caused gross margins, within the fastener segment, to fall to 22.3% compared to 23.9% in the prior year. During 2000, revenues within the assembly equipment segment declined approximately 16% compared to 1999. Most of this decline was a function of reduced unit sales, as demand was comparatively weak throughout the year. Gross margins declined from approximately 45% in 1999 to 42% in 2000, due in part to a continued shift toward lower priced and lower margin equipment, and also due to the impact of higher health insurance costs. Most other costs of manufacturing were reduced to levels consistent with the lower operating levels. Selling and administrative expenses declined 3.6% compared with 1999. Costs incurred in connection with the implementation of new data processing systems declined substantially compared with 1999, but still remained at higher than normal levels for most of the current year. Both commission expense and profit sharing expense declined in proportion with the decline in sales and profits, respectively. Offsetting these changes were professional fees incurred in connection with the Company's "Dutch auction" tender offer, higher health insurance costs, and increases in salary expense. Interest expense increased approximately $123,000 due primarily to additional borrowing in connection with the tender offer and, to a lesser extent, higher interest rates. DIVIDENDS The Company paid four regular quarterly dividends of $.18 per share during 2001. In addition, an extra dividend of $.25 per share was paid during the second quarter of 2001, bringing the total dividend distribution to $.97 per share. On February 18, 2002 your Board of Directors declared a regular quarterly dividend of $.18 per share, payable March 20, 2002 to shareholders of record March 5, 2002. These dividends continued the uninterrupted record of consecutive quarterly dividends paid by the Company to its 8 shareholders that extends over 68 years. At that same meeting, the Board declared an extra dividend of $.15 per share, payable April 19, 2002 to shareholders of record, April 5, 2002. MACHINERY AND EQUIPMENT The Company invested approximately $1.4 million in machinery, equipment and building improvements during 2001. The total amount of investment was lower than in the recent past, and, as has been the case for the past several years, the majority of these expenditures were related to the fastener segment of our operations. Specifically, a total of $1.1 million was expended for the purchase of equipment used directly in the manufacture of fasteners and $88,000 was invested in new equipment related to the quality control process related to fastener manufacturing. $129,000 was expended in connection with data processing and data communications equipment, $61,000 was spent for building improvements, primarily related to the fastener segment of our business, and the balance was expended for a variety of smaller machinery and equipment, including the manufacture of automatic rivet setting equipment that is leased to our customers. Capital investments totaled approximately $2.1 million during 2000. Slightly over $1.9 million of this total was invested in new equipment related to the production of fasteners. Of the amount expended within the fastener segment, $1.5 million was invested in new cold heading and thread-forming equipment and certain support equipment. This equipment will be utilized to expand our capacity to manufacture certain specialty products for which demand has exceeded our capacity. Certain obsolete heat treating equipment was replaced at a cost of $276,000. The balance was expended for various smaller projects, including new quality control equipment and building improvements. Within the assembly equipment segment, capital expenditures totaled $150,372, primarily for the replacement of machine tools used in the manufacture of perishable tooling that is sold to our customers. The balance was expended for data processing equipment and various office equipment. Investments in machinery and equipment totaled $1,709,527 during 1999. Investments in new equipment related to the manufacture of fasteners accounted for the majority of these investments and totaled $994,000 during the year. Investments in hardware and software related to improved information management technology totaled $267,000. A total of $181,000 was expended for the purchase of a variety of test and inspection equipment related to quality control initiatives. Investments in new machine tools used in the manufacture of assembly equipment totaled $108,000. Approximately $41,000 was invested in new telephone equipment and the balance was expended for the purchase, or repair, of various, smaller machine tools and building repairs. Depreciation expense amounted to $1,921,703 in 2001, $1,889,849 in 2000, and $1,711,721 in 1999. LIQUIDITY AND CAPITAL RESOURCES As of December 31, 2001, working capital was $11.6 million. While this is a modest decline compared with the prior year, our current ratio (current assets divided by current liabilities) improved to 3.7 from 3.5. The accounts receivable balance at year-end declined substantially compared with the year earlier, largely as a result of lower fourth quarter sales. Inventory levels, which increased slightly during 2000, were significantly reduced during 2001, and our objective is to further improve our ability to operate with lower levels of inventory. In connection with a "Dutch auction" tender offer in April 2000, the Company obtained, on an unsecured basis, a financing commitment that provided borrowing capacity of up to $9.0 million plus a $1.0 million line of credit. The new borrowing was used to finance the unpaid balance of a 1996 loan related to the acquisition of H & L Tool Company, Inc. ($2.7 million) and to fund the purchase of stock under the terms of the "Dutch auction." At December 31, 2001, the indebtedness under the term loan was 9 approximately $3.4 million. Under the terms of the note, the Company is scheduled to repay the principal in quarterly installments of $450,000, plus interest computed on the unpaid balance at a variable rate that is calculated under one of two methods, selected at the option of the Company: the London Inter-Bank Offering Rate (LIBOR) plus an applicable margin; or the lender's prime rate, less an applicable margin. The applicable margin is based upon the funded debt ratio and, for any portion of the loan that bears interest at the prime rate, this margin is up to 50 basis points, and for any portion that bears interest at the LIBOR rate, it is up to 130 basis points. This rate is adjusted quarterly and was approximately 2.9% at December 31, 2001. Management believes that current cash, cash equivalents, operating cash flow and the available line of credit will be sufficient to provide adequate working capital for the foreseeable future. The Company has not entered into, and has no current plans to enter into, any off-balance sheet financing arrangements. The Company has no long-term supply contracts that will have a material impact on liquidity and financial resources. NEW ACCOUNTING STANDARDS The Company's financial statements and financial condition were not, and are not expected to be, materially impacted by any new, or proposed, accounting standards. 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 of the Company's common stock 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 161,996 shares at an average price of $15.58 per share. Although no purchases were made during 2001, it is management's intention to continue this program, provided funding for repurchases is available and market conditions are favorable. In addition to the purchases described above, the Company purchased 159,564 shares at a price of $23.00 per share pursuant to a "Dutch auction" tender offer completed in April 2000. OUTLOOK FOR 2002 The Company's fortunes remain closely tied to the level of industrial activity in general, with an emphasis on North American automobile production. While we anticipate that business conditions will improve, the timing and extent of improvement continues to be uncertain. We have seen some firming in demand on the fastener side of our business, but it has been customer specific, rather than a broad-based improvement. Demand for automated assembly equipment and related perishable tooling remain at very low levels. On an overall basis, bookings for the first two months of this year lag the levels recorded during the same period last year, apparently supporting those forecasts that suggest the timing of the recovery will be later in the year. The prevailing conditions foster intensified price competition and continued downward pressure on margins. We have responded by taking appropriate actions to reduce costs wherever possible and to contain costs where reductions are not feasible. In addition, in situations where it is both necessary and economically practical, we have reduced our prices in order to meet competitive challenges and maintain our market share. We have actively solicited new business within our existing customer base as well as from new customers. These efforts have met with varying degrees of success, and we plan to follow a similar course of action in the coming months. 10 Investments in new equipment to expand our capabilities in the manufacture of specialty fasteners are finally beginning to bear fruit and should contribute to both revenues and profits in 2002. We anticipated that this would have occurred during 2001, but market conditions delayed realization by several months. We are optimistic that sustainable shipments of these products will begin late in the first quarter of this year. We are glad to leave 2001 behind us and look forward to the opportunities that lie ahead. Certainly, the future will hold challenges as well as opportunities, but we believe we are well prepared to meet those challenges and to take advantage of the opportunities that will arise. We gratefully acknowledge the support of our shareholders, the loyalty of our customers and the contributions of our workforce - for each of these elements has been critical to our past success and each is essential for our future success. ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Over time, the Company is exposed to market risks arising from changes in interest rates. The Company has not historically used derivative financial instruments. As of December 31, 2001, $3.43 million of floating-rate debt was exposed to changes in interest rates compared to $5.23 million at the prior year-end. This exposure was primarily linked to the London Inter-Bank Offering Rate and the lender's prime rate under the Company's term loan. A hypothetical 10% change in these rates would not have had a material effect on the Company's annual earnings. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See the sections entitled "Consolidated Financial Statements" and "Financial Statement Schedule" which appear on pages 16 through 18 of this report. ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There have been no changes in or disagreements with accountants requiring disclosure herein. PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information with respect to the Board of Directors' nominees for directors that is not related to security ownership, which is set forth in the section entitled "Election of Directors" on pages 4 through 8 of the Company's 2002 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 2002 Proxy Statement, is incorporated herein by reference. The 2002 Proxy Statement is to be filed with the Securities and Exchange Commission in connection with the Company's 2002 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." 11 ITEM 11 - EXECUTIVE COMPENSATION The information set forth in the section entitled "Executive Compensation" which appears on pages 9 through 12 of the Company's 2002 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 2002 Proxy Statement is incorporated herein by reference. The 2002 Proxy Statement is to be filed with the Securities and Exchange Commission in connection with the Company's 2002 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 2002 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 2002 Proxy Statement is incorporated herein by reference. The 2002 Proxy Statement is to be filed with the Securities and Exchange Commission in connection with the Company's 2002 Annual Meeting of Shareholders. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information relating to the law firm of Morrissey & Robinson set forth in the last sentence of footnote (2) on page 6 of the Company's 2002 Proxy Statement is incorporated herein by reference. The 2002 Proxy Statement is to be filed with the Securities and Exchange Commission in connection with the Company's 2002 Annual Meeting of Shareholders. 12 PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as a part of this report: 1. Financial Statements: See the section entitled "Consolidated Financial Statements" which appears on page 15 of this report. 2. Financial statement schedule and supplementary information required to be submitted. See the section entitled "Financial Statement Schedule" which appears on pages 16 through 18 of this report. 3. Exhibits: See the section entitled "Exhibits" which appears on page 19 of this report. (b) Reports on Form 8-K 1. The Company did not file any reports on Form 8-K during the quarter ended December 31, 2001. 13 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, 2002 /s/ John C. Osterman President, Chief Operating ------------------- Officer, Treasurer (Chief John C. Osterman Financial Officer), Member of the Executive Committee and Director March 26, 2002 /s/ John R. Madden Director, Member of the ------------------ Executive Committee and John R. Madden Member of the Audit Committee March 26, 2002 /s/ Walter W. Morrissey Director, Member of Executive ---------------------- Committee Walter W. Morrissey March 26, 2002 /s/ Michael J. Bourg Controller (Principal Accounting ------------------- Officer) Michael J. Bourg March 26, 2002 14 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 1, 2002, appearing on pages 5 to 11 of the accompanying 2001 Annual Report, and the section entitled "Quarterly Financial Data (Unaudited)" appearing on page 12 of the accompanying 2001 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 2001 Annual Report is not to be deemed filed as part of this Form 10-K Annual Report. Consolidated Financial Statements from 2001 Annual Report (Exhibit 13 hereto): Consolidated Balance Sheets (page 5 of 2001 Annual Report) Consolidated Statements of Income (page 6 of 2001 Annual Report) Consolidated Statements of Retained Earnings (page 6 of 2001 Annual Report) Consolidated Statements of Cash Flows (page 7 of 2001 Annual Report) Notes to Consolidated Financial Statements (pages 8, 9, and 10 of 2001 Annual Report) Report of Independent Accountants (page 11 of 2001 Annual Report) Quarterly Financial Data (Unaudited) (page 12 of 2001 Annual Report) 15 FINANCIAL STATEMENT SCHEDULE 2001, 2000 AND 1999 The following financial statement schedule should be read in conjunction with the consolidated financial statements and the notes thereto in the 2001 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 II) 17 Report of Accountants on Financial Statement Schedule 18 16 CHICAGO RIVET & MACHINE CO. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

Additions Balance at Charged to Balance Beginning Costs and Other At end Classification of year Expenses Deductions Adjustments of year -------------- ------- -------- ---------- ----------- ------- 2001 Allowance for doubtful accounts, Returns and allowances $90,000 $172,728 $22,728(1) $ -- $240,000 2000 Allowance for doubtful accounts, Returns and allowances $80,000 $ 58,993 $48,993(1) $ -- $ 90,000 1999 Allowance for doubtful accounts, Returns and allowances $70,022 $ 47,679 $37,679(1) $ -- $ 80,000

(1) Accounts receivable written off, net of recoveries. 17 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 1, 2002 appearing in the 2001 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 1, 2002 18 CHICAGO RIVET & MACHINE CO. EXHIBITS INDEX TO EXHIBITS Exhibit Number Page ------ ---- 2.1 Purchase and Sale Agreement dated February 18, 1993. Incorporated by reference to Company's Current Report on Form 8-K, dated May 7, 1993. 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, as amended February 19, 2001. Incorporated by reference to the Company's report on Form 10-K, dated March 29, 2001. 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. 4.1 Rights Agreement, dated November 22, 1999, between the Company and First Chicago Trust Company of New York as Rights Agent. Incorporated by reference to the Company's report on Form 10-K, dated March 29, 2000. 13* Annual Report to Shareholders for the year ended December 31, 2001. 20 through 36 21 Subsidiaries of the Registrant. 37 * Only the portions of this exhibit which are specifically incorporated herein by reference shall be deemed to be filed herewith. 19