CHICAGO RIVET & MACHINE CO — Interim / Quarterly Report 1996

1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter ended March 31, 1996 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 Identification No.) incorporation or organization) P. O. Box 3061 90l Frontenac Road Naperville, Illinois 60566 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code (708) 357-8500 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at March 31, 1996 COMMON STOCK, $2.00 PAR VALUE 585,748 SHARES DOCUMENTS INCORPORATED BY REFERENCE (1) Portions of the Company's Interim Report to Shareholders for the Quarter ended March 31, 1996 are incorporated by reference in Part I of this Report. 2 CHICAGO RIVET & MACHINE CO. INDEX

3 CHICAGO RIVET & MACHINE CO. Balance Sheets March 31, 1996 and December 31, 1995 Assets

See Notes to the Financial Statements -2- 4 CHICAGO RIVET & MACHINE CO. Balance Sheets March 31, 1996 and December 31, 1995 Liabilities and Shareholders' Equity

See Notes to the Financial Statements -3- 5 CHICAGO RIVET & MACHINE CO. Statements of Operations For the Three Months Ended March 31, 1996 and 1995 (unaudited)

See Notes to the Financial Statements -4- 6 CHICAGO RIVET & MACHINE CO. Statements of Retained Earnings For the Three Months Ended March 31, 1996 and 1995 (unaudited)

See Notes to the Financial Statements -5- 7 CHICAGO RIVET & MACHINE CO. Statements of Cash Flows For the Three Months Ended March 31, 1996 and 1995 (unaudited)

See Notes to the Financial Statements -6- 8 CHICAGO RIVET & MACHINE CO. NOTES TO THE FINANCIAL STATEMENTS (Unaudited) 1 In the opinion of the Company, the accompanying unaudited financial statements contain all adjustments necessary to present fairly the financial position of the Company as of March 31, 1996 and December 31, 1995 and the results of operations and changes in cash flow for the indicated periods. The unaudited financial statements reflect certain estimated inventories as of the end of the interim periods. 2. The results of operations for the three month period ending March 31, 1996 are not necessarily indicative of the results to be expected for the year. 3. The Company is, from time to time, involved in litigation, including environmental claims, in the normal course of business. With regard to environmental claims, the Company, and a former subsidiary, W.S. & W.C., Inc., have been named by state and/or federal government agencies as "potentially responsible parties" with respect to certain waste disposal sites. As a potentially responsible party, the Company, or its former subsidiary, may be considered jointly and severally liable, along with other potentially responsible parties, for the cost of remediation of these waste sites. The actual cost of remediation is presently unknown; however, estimates currently available suggest that the cost of remediation at these sites will be between $100 and $133 million. Despite the joint and several nature of the liability, these proceedings are frequently resolved on the basis of the quantity and type of waste disposed by the parties. The actual amount of liability for the Company, and its former subsidiary, is unknown due to disagreement concerning the allocation of responsibility, uncertainties regarding the amount of contribution that will be available from other parties and uncertainties related to insurance coverage. After investigation of the quantities and type of waste disposed at these sites, it is management's opinion that any liability will not be material to the Company's financial condition. Nevertheless, it is unlikely that the Company will not incur significant costs associated with these proceedings and accordingly the Company has recorded a liability of $598,075 related to these matters. The adequacy of this reserve will be reviewed periodically as more definitive cost information becomes available. 4. At March 31, 1996 significant deferred tax liabilities and assets were comprised of the following:

-7- 9 5. Other Accrued Expenses - accrued expenses consist of the following:

1. At March 31, 1996 the Company has recorded $889,471 of U. S. Government securities as held-to-maturity, and $984,040 of U. S. Government securities as available-for-sale. -8- 10 CHICAGO RIVET & MACHINE CO. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net sales and lease revenues amounted to $5,323,632 in the first quarter of 1996, well below the robust level recorded in the same period in 1995. Demand for the company's products was uncharacteristically weak throughout the first quarter of 1996. The decline was not limited to one product line, but rather was evident in both the fastener and automatic rivet setting equipment and accessory segments of our product offerings. Similarly, the decline in order activity has been encountered in all of the Company's our major markets. Net income totaled $350,629 or $.60 per share on 585,748 average shares outstanding during the first quarter of 1996. This compares to $589,243 or $1.00 per share on 586,648 average shares outstanding during the first quarter of 1995. In addition to the effects of lower sales volumes, profits were adversely affected by a change in composition of sales in 1996 compared with 1995 when we enjoyed a relatively larger percentage of business with higher operating margins. Working capital increased to approximately $13 million compared with $12.7 million at year end 1995. Inventories increased approximately 5% during the quarter. The Company's financial condition remains strong and liquidity is considered to be excellent. The Company recently announced that it has entered into a conditional agreement to purchase substantially all of the assets and assume certain liabilities of H & L Tool Company, Inc. of Madison Heights, Michigan. The transaction is subject to various conditions, including completion by the Company of its due diligence investigation and the negotiation of a satisfactory purchase and sale agreement. While the exact purchase price will be determined by the definitive contract, it is expected to be approximately $19,000,000 in a combination of cash and the assumption of certain liabilities. The transaction is expected to be financed by a combination of available cash and borrowings of approximately $8,000,000. After completion of the transaction, Chicago Rivet intends to continue operations at H & L Tool Company, Inc.'s Michigan location. H & L Tool Company, Inc. was established in 1946 and is a privately held manufacturer of specialty cold-formed fasteners and screw machine products predominately for the automotive market. The proposed acquisition is expected to significantly enhance our capabilities for the manufacture of cold-headed parts. See the Company's Interim Report to Shareholders for the Quarter ended March 31, 1996 for additional information. This section is incorporated herein by reference. The Interim Report is filed as an exhibit to this report on pages 11 and 12. -9- 11 PART II -- OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (b) Reports on Form 8-K -- No reports on Form 8-K were filed during the three months ended March 31, 1996. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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