10-K 1 c83813e10vk.txt ANNUAL REPORT -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ------------------------------------ FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (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, 2003 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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, Illinois 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 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 INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS DEFINED IN EXCHANGE ACT RULE 12B-2). YES ____ NO X THE AGGREGATE MARKET VALUE OF COMMON STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT AS OF JUNE 30, 2003 WAS $20,624,997. AS OF FEBRUARY 16, 2004, 966,132 SHARES OF THE REGISTRANT'S COMMON STOCK WERE OUTSTANDING. DOCUMENTS INCORPORATED BY REFERENCE (1) PORTIONS OF THE COMPANY'S ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED DECEMBER 31, 2003 (THE "2003 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 2004 ANNUAL MEETING OF SHAREHOLDERS ARE INCORPORATED BY REFERENCE IN PART III OF THIS REPORT. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- CHICAGO RIVET & MACHINE CO. PERIOD ENDING DECEMBER 31, 2003

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 9a. Controls and Procedures 11 Part III 10. Directors and Executive Officers of the Registrant 12 11. Executive Compensation 12 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 12 13. Certain Relationships and Related Transactions 12 14. Principal Accountant Fees and Services 13 Part IV 15. 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 and segments see Note 10 of the financial statements which appears on page 10 of the Company's 2003 Annual Report to Shareholders. The 2003 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 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 2003, sales to two customers exceeded 10% of the Company's consolidated revenues. Sales to TI Group Automotive Systems Corporation accounted for approximately 13% of the Company's consolidated revenues in 2003, 18% in 2002 and 18% in 2001. Sales to Fisher & Company accounted for approximately 21%, 17% and 14% of the Company's consolidated revenues in 2003, 2002, and 2001, 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 stronger during the first half of the year. The Company purchases raw material from a number of sources, primarily within the United States. There are numerous sources of raw material, and the Company does not have to rely on a single source for any of its requirements. Beginning early in 2004, the cost of raw materials used in the manufacture of fasteners escalated sharply and some suppliers have indicated that global demand may constrain material availability. Patents, trademarks, licenses, franchises and concessions are not of significant importance to the business of the Company. The Company does not engage in significant 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. 3 At December 31, 2003, the Company employed 308 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 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 facilites 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 2003. 4 Executive Officers of the Registrant The names, ages and positions of all executive officers of the Company, as of March 26, 2004, 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.

Name and Age of Officer Position Years an Officer ----------------------- -------- ---------------- John A. Morrissey 68 Chairman, Chief 23 Executive Officer John C. Osterman 52 President, Chief Operating 20 Officer and Treasurer Nirendu Dhar 62 General Manager, 3 H & L Tool Company, Inc. Donald P. Long 52 Vice President-Sales 9 Kimberly A. Kirhofer 45 Secretary 13 Michael J. Bourg 41 Controller 5

- 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. He has been a director of the Company since May 2001. - 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, 2003 there were approximately 310 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 2003 Annual Report is incorporated herein by reference. The 2003 Annual Report is filed as an exhibit to this report. See Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations - Dividends," for additional information about the Company's dividend policy. ITEM 6 - SELECTED FINANCIAL DATA The section entitled "Selected Financial Data" which appears on page 11 of the 2003 Annual Report is incorporated herein by reference. The 2003 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; increased global competition; 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 past year was extremely difficult for the Company. After a relatively auspicious start, which fostered an optimistic outlook for the balance of the year, our business weakened considerably as production of domestic automobiles trailed prior year levels and domestic manufacturing activity, in general, remained weak. In addition, our customers continued to demand price concessions, while simultaneously raising the bar with respect to quality and service requirements. In response to these conditions, we relied on the time-tested approach of cost containment and cost reductions. In retrospect, it is clear that these actions were insufficient to offset the combined impact of lower volumes, lower prices and increased service expectations. 6 2003 COMPARED TO 2002 Reduced revenues were the dominant factor contributing to reduced margins within the fastener segment during 2003. Fastener segment revenues declined abruptly late in the first quarter and remained weak for the balance of the year. For the year 2003, fastener segment revenues declined 11.3% compared to 2002, totaling a disappointing $31,024,036. Reductions in North American production of domestic automobiles and trucks contributed to the weakness in our business as did continuing competitive pressures which contributed to the loss of some business, as we were unable to meet the price concessions demanded by certain customers. In addition, some high margin parts were lost in connection with design changes that accompanied the new model year. Reductions in manufacturing staff failed to keep pace with the decline in business activity, and the resultant inefficiencies are reflected in disproportionately higher labor costs in 2003, compared to 2002. In addition, margins were adversely affected by increases in the cost of employee health insurance and higher tooling expenses incurred in connection with the initial production of a variety of new parts. Within the assembly equipment segment, revenues declined 10.6% compared to 2002. As was the case in the fastener segment, lower volumes contributed to significantly reduced operating efficiencies that were manifested in disproportionately high labor and benefit costs compared with prior years. Other factors impacting margins within this segment were increases in the cost of raw materials, offset in part, by a decrease in depreciation expense. Selling and administrative expenses for 2003 were 5.9% below those for 2002. A $302,000 reduction in profit sharing expense was the largest single factor contributing to the decrease in this expense category, followed by reductions of $145,000 in bonus expense, and $96,000 in commission expense due to lower sales in the current year. These reductions were partially offset by a $74,000 expense related to an early retirement program and an increase in the cost of employee health insurance. Net interest income increased by approximately $45,000 during 2003, primarily as a result of lower interest expense related to lower balances on a note payable, which was paid in full in December. 2002 COMPARED TO 2001 Net sales and lease revenues improved approximately 6% compared with 2001 and totaled $43,012,766 in 2002. As discussed below, revenue gains were achieved in both the fastener and assembly equipment segments and the increased volume, coupled with successful efforts to hold the line on costs, translated into improvements in gross margins, which amounted to $10,585,563 for 2002, compared with $9,187,046 recorded in 2001. Within the fastener segment, revenues increased 7%, to $34,991,758, reflecting an overall increase in automobile production. However, it should be noted that our volumes did not increase across our entire customer base. Instead, our overall gain was due to increases in business with certain key customers, bolstered by revenues related to new customers and new products from existing customers. Gross margins within the fastener segment improved to 21.1% in 2002, compared with 19.9% recorded in 2001. This improvement was largely attributable to the effects of higher volumes and increases in efficiency associated with those higher volumes. A number of other factors impacted operations during the year. While we benefited 7 from reductions in tooling costs, those savings were offset by increases in the cost of materials and by a substantial increase in the cost of employee health insurance. Activity levels within the assembly equipment segment remained well below historical levels. While revenues within the segment improved to $8,021,008 in 2002, compared with $7,738,868 in 2001, the change is attributable to a few large orders and not due to any significant improvement in the market for equipment, which remained adversely affected by a persistent decline in the broad manufacturing sector and the related restraint on capital spending. Nevertheless, gross margins within this segment improved to approximately 40% in 2002 compared with 35% for 2001. This improvement is primarily attributable to higher volumes and reduced labor expense. Selling and administrative expenses increased approximately 3.7% compared with 2001. Both profit sharing and sales commissions increased as a result of higher sales and increased profits. Other factors contributing to the increase include higher salary expense and increased health insurance costs, partially offset by a decrease in the provision for bad debt expense, which was unusually high in the prior year due to the bankruptcy filing of a certain customer. The Company recorded net interest income during 2002 of $4,214, compared with net interest expense of $114,607 in 2001, as a result of lower prevailing interest rates and reduced debt levels. DIVIDENDS In determining to pay dividends, the Board considers current profitability, the outlook for longer-term profitability, known and potential cash requirements and the overall financial condition of the Company. The Company paid four regular quarterly dividends of $.18 per share during 2003. In addition, an extra dividend of $.25 per share was paid during the second quarter of 2003, bringing the total dividend distribution to $.97 per share. On February 16, 2004, your Board of Directors determined that an extra dividend would not be declared or paid in the second quarter of 2004; however, the Board did declare a regular quarterly dividend of $.18 per share, payable March 19, 2004 to shareholders of record on March 5, 2004. This continues the uninterrupted record of consecutive quarterly dividends paid by the Company to its shareholders that extends over 70 years. PROPERTY, PLANT AND EQUIPMENT During 2003, capital expenditures amounted to $641,715, of which $535,268 was invested within the fastener segment, $89,379 was invested within the assembly equipment segment and the remainder was expended for building improvements that cannot be allocated between segments. Within the fastener segment, approximately $317,000 was invested in a new solvent based parts cleaning system. This system, installed during the second half of the year, is expected to yield reductions in supply and waste disposal costs. Other expenditures were approximately $92,000 for vehicles, including $68,000 for a new delivery truck; $32,000 for in-line wire drawing equipment; some $21,000 for equipment related to quality control; with the balance expended for smaller tools and equipment and building improvements. Within the assembly equipment segment, approximately $86,000 was expended for the purchase of new equipment related to the manufacture of perishable tooling that is sold to customers. The balance was expended for building improvements and office equipment. Investments in machinery and equipment totaled $886,009 in 2002. The majority of this investment was related to the fastener segment of our operations. Approximately $567,000 was invested in new equipment directly related to the manufacture of fasteners, with an additional $123,000 expended for equipment related to quality control and finishing operations for the fastener segment. The balance 8 was expended for a variety of items, including material handling, data processing and other equipment. The Company invested approximately $1.4 million in machinery, equipment and building improvements during 2001. 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 in 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. Depreciation expense amounted to $1,861,600 in 2003, $1,915,726 in 2002 and $1,921,703 in 2001. LIQUIDITY AND CAPITAL RESOURCES The Company's holdings in cash, cash equivalents and certificates of deposits amounted to nearly $6.0 million at December 31, 2003, an increase of approximately $.6 million compared with the end of 2002. Accounts receivable balances decreased approximately $.4 million, reflecting lower sales during the latter part of 2003, compared to the same period in 2002. Inventory levels, at the end of 2003, are also less than at the end of 2002 due to efforts taken to reduce inventories in response to continued weakness in demand for our products. 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, 2003, the indebtedness under the term loan had been extinguished. The line of credit was extended through May 31, 2004 and remained unused at December 31, 2003. Off-Balance Sheet Arrangements The Company has not entered into, and has no current plans to enter into, any off-balance sheet financing arrangements. The following table presents a summary of the Company's contractual obligations as of December 31, 2003:

Payments Due By Period ------------------------------------------------------- Less Than 1 - 3 4 - 5 More Than Cotractual Obligation Total 1 Year Years Years 5 Years --------------------- -------- -------- -------- ------- --------- Long-term Debt $ -- $ -- $ -- $ -- $ -- Capital Lease Obligations -- -- -- -- -- Operating Leases 36,657 27,493 9,164 -- -- Purchase Obligations 378,686 160,750 200,256 17,680 -- -------- -------- -------- ------- ---- Total $415,343 $188,243 $209,420 $17,680 $ -- ======== ======== ======== ======= ====

Management believes that current cash, cash equivalents and operating cash flow will be sufficient to provide adequate working capital for the foreseeable future. 9 APPLICATION OF CRITICAL ACCOUNTING POLICIES 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. The effect of these estimates is described in Note 11 of the financial statements. NEW ACCOUNTING STANDARDS The Company's financial statements and financial condition were not, and are not expected to be, materially impacted by new, or proposed, accounting standards. 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, permit 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. The company did not purchase any of its shares during 2003. During 2002, the company purchased 1,000 shares at an average price of $26.98 per share. Cumulative purchases under the repurchase authorization have amounted to 162,996 shares at an average price of $15.66 per share. OUTLOOK FOR 2004 The anticipated improvement in economic activity has not yet generated a meaningful increase in orders for our products. While we are encouraged by the fact that we have been awarded contracts for a number of new parts in the fastener segment, we are concerned about conditions within the assembly equipment segment, which remains very weak. Domestic competition remains intense and foreign competition, which affects us directly through the increase of imported fasteners and indirectly through the import of products that were previously assembled domestically, is a growing concern. These conditions increase the risk that our markets will not only become even more price competitive due to imports, but will shrink in size as domestic assembly operations are supplanted by imports of products that were traditionally assembled domestically, utilizing domestic fasteners and domestic assembly equipment. As mentioned above, we are pleased that we have been awarded new business within the fastener segment, but, in many instances, production volumes related to this new business will not reach significant levels until later in 2004. We will continue soliciting additional business from our current customers as well as from new customers. We face challenges in the form of recent and significant increases in the cost of raw materials utilized in the production of fasteners. While we have not experienced shortages of raw material, some of our suppliers report that increases in global demand may constrain availability of raw materials later this year. Our success in maintaining supply and recovering these higher costs, without losing market share, will be a critical determinant of our success in the coming year. Cost reduction will be another critical factor influencing future results. As previously reported, we have already taken actions to reduce our manufacturing costs, 10 but the cost reductions realized have not fully offset the impact of lower volumes. We will continue exploring alternatives that will yield positive changes in our cost structure and our ability to compete. Margins, at least in the near term, will remain under pressure from the combination of rising costs and increasing foreign competition. We gratefully acknowledge that the Company's success, both past and future, would not be possible without: the conscientious efforts of our employees, who consistently demonstrate their dedication to meeting the formidable and ever-changing challenges that characterize today's manufacturing environment; the loyalty of our customers, many of whom face the same set of challenges; and, the continuing support of our shareholders. ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As of December 31, 2003, the Company did not have any outstanding debt, compared to $1.6 million of outstanding debt at the prior year end, that was exposed to changes in interest rates. During 2003 the Company did not use derivative financial instruments relating to this interest rate exposure. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See the sections entitled "Consolidated Financial Statements" and "Financial Statement Schedule" which appear on pages 15 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. ITEM 9A - CONTROLS AND PROCEDURES (a) Disclosure Controls and Procedures. The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company's disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act. (b) Internal Control Over Financial Reporting. There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. 11 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 7 of the Company's 2004 Proxy Statement, is incorporated herein by reference. The information with respect to the audit committee, its financial expert and the independence of its members, which is set forth in the second paragraph of the section entitled "Additional Information Concerning the Board of Directors and Committees" on page 7 of the Company's 2004 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 in the section entitled "Section 16(a) Beneficial Ownership Reporting Compliance" on page 10 of the 2004 Proxy Statement, is incorporated herein by reference. The 2004 Proxy Statement is to be filed with the Securities and Exchange Commission in connection with the Company's 2004 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." The Company has adopted a code of ethics for its principal executive officer, chief operating officer and senior financial officers. A copy of this code is included as Exhibit 14 to this report on Form 10-K. ITEM 11 - EXECUTIVE COMPENSATION The information set forth in the section entitled "Executive Compensation" which appears on pages 11 through 15 of the Company's 2004 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 through 10 of the Company's 2004 Proxy Statement is incorporated herein by reference. The 2004 Proxy Statement is to be filed with the Securities and Exchange Commission in connection with the Company's 2004 Annual Meeting of Shareholders. ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS The information set forth in the section entitled "Principal Shareholders" on page 3 of the Company's 2004 Proxy Statement and the information with respect to security ownership of the Company's directors and officers set forth in the section entitled "Security Ownership of Management" on pages 5 through 7 of the Company's 2004 Proxy Statement is incorporated herein by reference. The 2004 Proxy Statement is to be filed with the Securities and Exchange Commission in connection with the Company's 2004 Annual Meeting of Shareholders. The Company does not have any equity compensation plans or arrangements. 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 2004 Proxy Statement is incorporated herein by reference. The 2004 Proxy Statement is to be filed with the Securities and Exchange Commission in connection with the Company's 2004 Annual Meeting of Shareholders. 12 ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES The information set forth in section entitled "Independent Certified Public Accountants" on pages 17 and 18 of the Company's 2004 Proxy Statement is incorporated herein by reference. The 2004 Proxy Statement is to be filed with the Securities and Exchange Commission in connection with the Company's 2004 Annual Meeting of Shareholders. PART IV ITEM 15 - 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, 2003. 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 29, 2004 /s/John C. Osterman President, Chief Operating ------------------- Officer, Treasurer (Chief John C. Osterman Financial Officer), Member of the Executive Committee and Director March 29, 2004 /s/John R. Madden Director, Member of the ------------------ Executive Committee and Member John R. Madden of the Audit Committee March 29, 2004 /s/Walter W. Morrissey Director, Member of Executive ---------------------- Committee Walter W. Morrissey March 29, 2004 /s/Michael J. Bourg Controller (Principal Accounting ------------------- Officer) Michael J. Bourg March 29, 2004 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 February 25, 2004, appearing on pages 5 to 11 of the accompanying 2003 Annual Report, and the section entitled "Quarterly Financial Data (Unaudited)" appearing on page 12 of the accompanying 2003 Annual Report are incorporated herein by reference. With the exception of the aforementioned information and the information incorporated in Items 1, 5, 6 and 8 herein, the 2003 Annual Report is not to be deemed filed as part of this Form 10-K Annual Report. Consolidated Financial Statements from 2003 Annual Report (Exhibit 13 hereto): Consolidated Balance Sheets (page 5 of 2003 Annual Report) Consolidated Statements of Income (page 6 of 2003 Annual Report) Consolidated Statements of Retained Earnings (page 6 of 2003 Annual Report) Consolidated Statements of Cash Flows (page 7 of 2003 Annual Report) Notes to Consolidated Financial Statements (pages 8, 9, and 10 of 2003 Annual Report) Report of Independent Auditors (page 11 of 2003 Annual Report) Quarterly Financial Data (Unaudited) (page 12 of 2003 Annual Report) 15 FINANCIAL STATEMENT SCHEDULE 2003, 2002 AND 2001 The following financial statement schedule should be read in conjunction with the consolidated financial statements and the notes thereto in the 2003 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 Independent Auditors on Financial Statement Schedule 18

16 CHICAGO RIVET & MACHINE CO. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

Balance at Additions Balance Beginning Charged to at End Classification of Year Expenses Deductions(1) of Year -------------- ---------- ---------- ------------ -------- 2003 Allowance for doubtful accounts, returns and allowances $ 240,000 $ 10,174 $ 30,174 $220,000 2002 Allowance for doubtful accounts, returns and allowances $240,000 $ 7,067 $ 7,067 $240,000 2001 Allowance for doubtful accounts, returns and allowances $ 90,000 $172,728 $ 22,728 $240,000

(1) Accounts receivable written off, net of recoveries. 17 Report of Independent Auditors 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 February 25, 2004 appearing in the 2003 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 15(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 February 25, 2004 18 CHICAGO RIVET & MACHINE CO. EXHIBITS INDEX TO EXHIBITS

Exhibit Number Page ------ ------- 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 16, 2004. 21 - 46 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, 2003. 47 - 63 14 Code of Ethics for Principal Executive and Senior Financial Officers 64 - 66 21 Subsidiaries of the Registrant. 67 31.1 Certification of CEO Pursuant to Rule 13a-14(a) or 15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 68 31.2 Certification of CFO Pursuant to Rule 13a-14(a) or 15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 69

19 32.1 Certification of CEO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 70 32.2 Certification of CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 71 * Only the portions of this exhibit which are specifically incorporated herein by reference shall be deemed to be filed herewith. 20