Back to GetFilings.com
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, 2004
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.
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, 2004 WAS $21,567,015.
AS OF MARCH 24, 2005 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, 2004 (THE "2004 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 2005 ANNUAL MEETING OF SHAREHOLDERS ARE INCORPORATED BY REFERENCE IN
PART III OF THIS REPORT.
CHICAGO RIVET & MACHINE CO.
PERIOD ENDING DECEMBER 31, 2004
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, Related Stockholder
Matters and Issuer Purchases of Equity Securities 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 12
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 12
9a. Controls and Procedures 12
Part III
10. Directors and Executive Officers of the Registrant 12
11. Executive Compensation 13
12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters 13
13. Certain Relationships and Related Transactions 13
14. Principal Accountant Fees and Services 13
Part IV
15. Exhibits and Financial Statement Schedules 14
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 pages 9 and 10
of the Company's 2004 Annual Report to Shareholders. The 2004 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 2004, sales to two customers exceeded 10% of the Company's
consolidated revenues. Sales to Fisher & Company accounted for approximately
22%, 21% and 17% of the Company's consolidated revenues in 2004, 2003, and 2002,
respectively. Sales to TI Group Automotive Systems Corporation accounted for
approximately 13% of the Company's consolidated revenues in 2004, 13% in 2003
and 18% in 2002.
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 due to increased global demand, primarily in Asia.
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.
At December 31, 2004, the Company employed 296 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's headquarters office is located in Naperville, Illinois. It
conducts its manufacturing and warehousing operations at four additional
facilities. All of these facilities are described below. Each facility is owned
by the Company and considered suitable and adequate for its present use. The
Company also currently maintains a small sales and engineering 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 2004.
4
Executive Officers of the Registrant
The names, ages and positions of all executive officers of the Company, as
of March 25, 2005, 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 69 Chairman, Chief 24
Executive Officer
John C. Osterman 53 President, Chief Operating 21
Officer and Treasurer
Nirendu Dhar 63 General Manager, 4
H & L Tool Company, Inc.
Donald P. Long 53 Vice President-Sales 10
Kimberly A. Kirhofer 46 Secretary 14
Michael J. Bourg 42 Controller 6
- - 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, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
The Company's common stock is traded on the American Stock Exchange
(trading privileges only, not registered). As of March 4, 2005 there were
approximately 281 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 2004 Annual Report is incorporated herein by
reference. The 2004 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.
Under the terms of a stock repurchase authorization originally approved by
the Board of Directors of the Company in February of 1990, as amended, the
Company is authorized to repurchase up to an aggregate of 200,000 shares of its
common stock, in the open market or in private transactions, at prices deemed
reasonable by management. Cumulative purchases under the repurchase
authorization have amounted to 162,996 shares at an average price of $15.66 per
share. The Company has not purchased any shares of its common stock since 2002.
ITEM 6 - SELECTED FINANCIAL DATA
The section entitled "Selected Financial Data" which appears on page 11 of
the 2004 Annual Report is incorporated herein by reference. The 2004 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
Overall, results for 2004 show considerable improvement compared with the
results posted for 2003. Revenues within the fastener segment improved
significantly. However, only a portion of the increase was due to higher unit
6
volume. The largest portion of the revenue increase reflects recovery of higher
raw material costs. Our success within the fastener segment was tempered by
continuing weakness in demand for products within the assembly equipment
segment, where revenues declined compared to the prior year.
2004 COMPARED TO 2003
Within the fastener segment, revenues increased by 4.7%, or nearly $1.5
million. Approximately $1.0 million of this increase represents the recovery of
higher material costs related to the increase in the price of steel wire and rod
which are our primary raw materials. The balance of the increase is primarily
due to an increase in units shipped. Increases in the price of raw materials
consumed in production amounted to $1,195,000. This was partially offset by an
increase of $205,000 in scrap recovery and purchase discounts. In addition,
perishable tooling expense increased $244,000 due to expenses related to the
initial production of a number of new parts, while wage and fringe benefit costs
increased $122,000. These higher costs were partially offset by a $317,000
reduction in outside material processing costs, due to a change in product mix,
and by savings of $193,000 realized by handling the majority of our routine
maintenance internally, rather than outsourcing as had previously been the
practice. The net effect of these changes contributed to a $693,000 improvement
in gross margin for this segment compared with 2003.
Revenues within the assembly equipment segment declined 5.7%, or $412,000,
compared to the prior year. This change was due to lower unit volumes which
reflected lower demand for the product in this segment. Despite the reduction in
volume, gross margins improved by $138,000 compared with 2003. Factors
contributing to this improvement included: savings of $355,000 in wage and
related benefit costs arising from reductions in the workforce undertaken in the
fourth quarter of 2003; a reduction of $51,000 in material costs, primarily due
to reduced volumes; and a reduction in depreciation expense of $45,000 as more
equipment became fully depreciated.
Selling and administrative expenses declined 3.6%, or $228,000, in 2004
compared with 2003. The largest single factor contributing to this change was a
successful appeal of the Michigan single business tax paid in four prior years.
The amount of this refund was $330,000. Reductions in headcount contributed to a
net reduction of $127,000 in salary and fringe benefit expense. These savings
were partially offset by an increase of $120,000 in profit sharing expense
related to the increase in pre-tax income.
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.
Given the lower operating volumes in 2003, compared to 2002, labor costs were
disproportionately higher by $317,000. In addition to labor, related taxes and
fringe benefit costs, including employees' health insurance, were also
disproportionately higher than in 2002 by approximately $420,000. Higher tooling
expenses incurred in connection with the initial production of a variety of new
parts caused tooling expenditures to be approximately $294,000 higher than would
have been expected, given the reduction in operating levels.
7
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 labor and
benefit costs which were disproportionately higher than the prior year by
approximately $184,000. Other factors impacting margins within this segment were
increases in the cost of raw materials of approximately $94,000, offset in part
by a $55,000 decrease in depreciation expense due to some equipment becoming
fully depreciated.
Selling and administrative expenses for 2003 were 5.6% 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 of
$33,000 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.
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 2004. On
February 21, 2005, your Board of Directors declared a regular quarterly dividend
of $.18 per share, payable March 18, 2005 to shareholders of record on March 4,
2005. This continues the uninterrupted record of consecutive quarterly dividends
paid by the Company to its shareholders that extends over 71 years. At that same
meeting, the Board also declared an extra dividend of $.15 per share to be paid
April 20, 2005 to shareholders of record on April 5, 2005.
PROPERTY, PLANT AND EQUIPMENT
Capital investments totaled $1.4 million during 2004. Capital expenditures
were concentrated within the fastener segment, where investment totaled $1.3
million. Of this total, $1.1 million was invested to purchase cold-heading
machinery and related equipment used in the manufacture of fasteners. The
remainder of the expenditures within the fastener segment was for various
building improvements, additional waste treatment equipment required to meet
environmental requirements, and material handling equipment. The balance of the
Company's 2004 capital expenditures covered a variety of smaller items,
including computers and other office 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. 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.
8
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 was expended for a variety of items, including
material handling, data processing and other equipment.
Depreciation expense amounted to $1,757,962 in 2004, $1,861,600 in 2003,
and $1,915,726 in 2002.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased approximately $1.2 million between
December 31, 2003 and December 31, 2004. The Company's holdings in cash, cash
equivalents and certificates of deposit amounted to nearly $6.3 million at the
end of 2004. This is an increase of $.3 million compared with the prior
year-end. Inventories increased by just over $1.0 million, reflecting both
higher material prices and an increase in quantities on hand. Accounts
receivable increased approximately $.3 million compared with the prior year-end,
reflecting higher shipments during the latter portion of 2004 compared with the
same period in 2003. Accruals for profit sharing contributions increased $.1
million compared to the prior year, due to increased income, and other accrued
expenses increased $.2 million primarily due to an increase in income taxes
payable. The Company has a $1.0 million line of credit, which expires May 31,
2005. This line of credit remains unused.
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, 2004:
Payments Due By Period
- ---------------------------------------------------------------------------------------------
Less Than 1 - 3 4 - 5 More Than
Contractual Obligation Total 1 Year Years Years 5 Years
- ------------------------- -------- --------- --------- -------- ---------
Long-term Debt $ -- $ -- $ -- $ -- $ --
Capital Lease Obligations -- -- -- -- --
Operating Leases 9,164 9,164 -- -- --
Purchase Obligations 254,770 133,428 117,950 3,392 --
-------- --------- --------- -------- ---------
Total $263,934 $ 142,592 $ 117,950 $ 3,392 $ --
======== ========= ========= ======== =========
Management believes that current cash, cash equivalents, operating cash
flow and available line of credit will be sufficient to provide adequate working
capital for the foreseeable future.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of December 31, 2004, the Company did not have any outstanding debt.
The Company did not use any derivative financial instruments during 2004.
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
9
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 small 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.
A summary of critical accounting policies can be found in Note 1 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.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The firm of PricewaterhouseCoopers LLP served as the Company's independent
registered public accounting firm for the year ended December 31, 2004.
On February 28, 2005, the Company was notified by PricewaterhouseCoopers LLP,
the Company's independent registered public accounting firm, that
PricewaterhouseCoopers LLP declined to stand for re-election as the Company's
independent registered public accounting firm for the year ending December 31,
2005. PricewaterhouseCoopers LLP agreed, however, to continue to serve as the
Company's independent registered public accounting firm until completion of its
procedures on the financial statements of the Company for the year ended
December 31, 2004. On March 21, 2005, PricewaterhouseCoopers LLP completed its
procedures on the financial statements of the Company for the year ended
December 31, 2004, and PricewaterhouseCoopers LLP ceased serving as the
Company's independent registered public accounting firm.
On March 23, 2005, the Audit Committee engaged Grant Thornton LLP to serve as
the Company's independent registered public accounting firm for the year ending
December 31, 2005.
The reports of PricewaterhouseCoopers LLP on the Company's financial statements
for the years ended December 31, 2004 and 2003 did not contain an adverse
opinion or a disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principle. During the years ended
December 31, 2004 and 2003 and through March 21, 2005, there have been no
disagreements with PricewaterhouseCoopers LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of
PricewaterhouseCoopers LLP, would have caused PricewaterhouseCoopers LLP to make
reference thereto in its report on the Company's financial statements for such
years. During the years ended December 31, 2004 and 2003 and through March 21,
2005, there have been no "reportable events" (as defined in SEC Regulation S-K
Item 304(a)(1)(v)).
Between January 1, 2003 and the engagement of Grant Thornton LLP on March 23,
2005, neither the Company nor anyone acting on behalf of the Company consulted
with Grant Thornton LLP regarding either (i) the application of accounting
principles to a specified completed or contemplated transaction or the type of
audit opinion that might be rendered on the Company's financial statements; as
such, no written or oral advice was provided or (ii) any matter that was either
the subject of a disagreement with PricewaterhouseCoopers LLP or a "reportable
event."
10
OUTLOOK FOR 2005
Conditions within our markets remain unsettled. While the manufacturing
segment of the economy has shown improvement overall, activity within the
automotive sector, which is our major market, has not improved significantly.
Published reports indicate that the "Big Three" domestic automobile
manufacturers, which directly or indirectly represent our primary market,
experienced a decline of nearly 4% in production during 2004. Although we do not
anticipate a significant improvement in that market in 2005, we will continue to
pursue opportunities within that market. In addition, we will continue pursuing
opportunities that exist related to the North American operations of
foreign-owned automobile manufacturers. We believe the size of the market
warrants continued efforts to bolster our participation in this market.
Activity within the assembly equipment segment continues to be a cause for
concern. Demand for our products remains at very low levels, and we have seen
little to suggest meaningful improvement in the near term. To the contrary,
activity within the markets we serve is increasingly subject to foreign
competition either from foreign-owned companies exporting finished products to
the U.S., or indirectly as U.S. based companies outsource their assembly
operations to countries with lower manufacturing costs. This trend obviously
also has adverse consequences for the fastener segment, as well.
The factors described above contribute to excess capacity within our
industry, which has the effect of limiting our ability to negotiate price
relief. We have had some success recovering higher raw material prices through
the implementation of raw material surcharges and, over the past few months, raw
material prices have stabilized. However, we have no assurance that this is
anything more than a temporary situation. Any increase in global demand could
easily lead to another round of material cost increases and could lead to
availability constraints as well. As a result, we anticipate that margins will
remain under pressure for the foreseeable future.
In addition to the operating challenges identified above, we anticipate
incurring significant additional costs in connection with the requirements of
the Sarbanes-Oxley Act of 2002 and related SEC rules. Assuring compliance with
these new requirements will entail a significant investment of management
resources as well as significant monetary expenditures to document and review
existing internal controls. Once the documentation phase is completed, there
will be ongoing costs in the form of internal and external testing of these
controls to assure continued compliance, and there will likely be an associated
increase in the costs of the independent audit process.
We will continue to exploit opportunities to reduce costs in all areas.
While we have successfully implemented cost savings measures in the past, and
will continue to do so, the incremental savings from future cost reduction
initiatives will be more difficult to realize. Our best opportunity to improve
bottom line performance rests with our ability to improve top line performance,
and we plan to increase our efforts in that regard in the months ahead.
We recognize that the Company's success depends upon many factors. We
express our appreciation for the loyalty of our customers, our shareholders and
for the dedicated and diligent efforts of our employees who continue to meet the
challenges that we face daily. These are critical elements of our success - both
past and future.
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of December 31, 2004, the Company did not have any outstanding debt.
During 2004 the Company did not use derivative financial instruments.
11
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the sections entitled "Consolidated Financial Statements" and
"Financial Statement Schedule" which appear on pages 16 through 19 of this
report.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On February 28, 2005, the Company was notified by PricewaterhouseCoopers
LLP, the Company's independent registered public accounting firm that it
declined to stand for re-election as the Company's independent registered public
accounting firm for the year ending December 31, 2005, as reported on the Form
8-K filed on March 4, 2005. On March 21, 2005, PricewaterhouseCoopers LLP
competed its procedures on the financial statements of the Company for the year
ended December 31, 2004, and PricewaterhouseCoopers LLP ceased serving as the
Company's independent registered public accounting firm, as reported on the Form
8-K/A filed on March 23, 2005.
On March 23, 2005, the Company engaged Grant Thornton LLP as its
independent registered public accounting firm for the year ending December 31,
2005, as reported on the Form 8-K filed on March 25, 2005.
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.
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 "Security Ownership of Management" on pages 5 through 7 of the
Company's 2005 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 third paragraph of the
section entitled "Additional Information Concerning the Board of Directors and
Committees" on page 7 of the Company's 2005 Proxy Statement, is incorporated
herein by reference. The information with regard to
12
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 2005 Proxy Statement, is incorporated herein by reference. The
2005 Proxy Statement is to be filed with the Securities and Exchange Commission
in connection with the Company's 2005 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", which appears on page 10 of this report.
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 13 of the Company's 2005 Proxy Statement and
the information relating to compensation of directors set forth in the
penultimate 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 2005 Proxy Statement is incorporated herein by reference. The 2005
Proxy Statement is to be filed with the Securities and Exchange Commission in
connection with the Company's 2005 Annual Meeting of Shareholders.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information set forth in the section entitled "Principal Shareholders"
on page 3 of the Company's 2005 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 2005 Proxy Statement is incorporated herein by reference. The 2005
Proxy Statement is to be filed with the Securities and Exchange Commission in
connection with the Company's 2005 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 2005 Proxy
Statement is incorporated herein by reference. The 2005 Proxy Statement is to be
filed with the Securities and Exchange Commission in connection with the
Company's 2005 Annual Meeting of Shareholders.
ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information set forth in section entitled "Independent Registered
Public Accounting Firm" on pages 17 and 18 of the Company's 2005 Proxy Statement
is incorporated herein by reference. The 2005 Proxy Statement is to be filed
with the Securities and Exchange Commission in connection with the Company's
2005 Annual Meeting of Shareholders.
13
PART IV
ITEM 15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(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 16 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 17 through 19 of this report.
3. Exhibits:
See the section entitled "Exhibits" which appears on page 20
of this report.
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Chicago Rivet & Machine Co. has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Chicago Rivet & Machine Co.
By /s/ John C. Osterman
------------------------
John C. Osterman, President
and Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
/s/ John A. Morrissey Chairman of the Board of
- --------------------- Directors, Chief Executive
John A. Morrissey Officer and Member of the
Executive Committee
March 29, 2005
/s/ John C. Osterman President, Chief Operating
- -------------------- Officer, Treasurer (Chief
John C. Osterman Financial Officer), Member
of the Executive Committee
and Director
March 29, 2005
/s/ Kent H. Cooney Director, Member of the
- ------------------- Audit Committee
Kent H. Cooney March 29, 2005
/s/ William T. Divane, Jr. Director, Member of the
- -------------------------- the Audit Committee
William T. Divane March 29, 2005
/s/ John R. Madden Director, Member of the
- ------------------ Executive Committee and
John R. Madden Member of the Audit Committee
March 29, 2005
/s/ Walter W. Morrissey Director, Member of Executive
- ----------------------- Committee
Walter W. Morrissey March 29, 2005
/s/ Michael J. Bourg Controller (Principal Accounting
- ----------------------- Officer)
Michael J. Bourg March 29, 2005
15
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 21, 2005, appearing
on pages 5 to 11 of the accompanying 2004 Annual Report, and the section
entitled "Quarterly Financial Data (Unaudited)" appearing on page 12 of the
accompanying 2004 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 2004 Annual Report is not to be deemed filed as
part of this Form 10-K Annual Report.
Consolidated Financial Statements from 2004 Annual Report (Exhibit 13 hereto):
Consolidated Balance Sheets (page 5 of 2004 Annual Report)
Consolidated Statements of Income (page 6 of 2004 Annual Report)
Consolidated Statements of Retained Earnings (page 6 of 2004 Annual Report)
Consolidated Statements of Cash Flows (page 7 of 2004 Annual Report)
Notes to Consolidated Financial Statements (pages 8, 9, and 10 of 2004 Annual
Report)
Report of Independent Registered Public Accounting Firm (page 11 of 2004 Annual
Report)
Quarterly Financial Data (Unaudited) (page 12 of 2004 Annual Report)
16
FINANCIAL STATEMENT SCHEDULE
2004, 2003 AND 2002
The following financial statement schedule should be read in conjunction
with the consolidated financial statements and the notes thereto in the 2004
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) 18
Report of Independent Registered Public Accounting Firm
on Financial Statement Schedule 19
17
CHICAGO RIVET & MACHINE CO.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
Balance at Additions Balance at
Beginning Charged to End
Classification of Year Expenses Deductions(1) of Year
- ------------------------ ---------- ---------- ------------ ----------
2004
Allowance for doubtful
accounts, returns
and allowances $ 220,000 $ 24,670 $ 114,670 $ 130,000
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
(1) Accounts receivable written off, net of recoveries.
18
Report of Independent Registered Public Accounting Firm 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 21, 2005 appearing in the 2004 Annual Report to Shareholders of
Chicago Rivet & Machine Co. (which report and consolidated 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
March 21, 2005
19
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. Incorporated by reference to the Company's
report on Form 10-K, dated March 29, 2004.
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, 2004. 22 - 38
14 Code of Ethics for Principal Executive and Senior
Financial Officers 39 - 40
21 Subsidiaries of the Registrant. 41
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. 42
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. 43
20
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. 44
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. 45
* Only the portions of this exhibit which are specifically incorporated herein
by reference shall be deemed to be filed herewith.
21