<PAGE> 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, 1999 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 (630)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, 1999
- ----- -----------------------------
COMMON STOCK, $1.00 PAR VALUE 1,153,496 SHARES
- ----------------------------- ----------------
DOCUMENTS INCORPORATED BY REFERENCE
- -----------------------------------
(1) Portions of the Company's Interim Report to Shareholders for the Quarter
ended March 31, 1999 are incorporated by reference in Part I of this Report.
<PAGE> 2
CHICAGO RIVET & MACHINE CO.
INDEX
PART I. FINANCIAL INFORMATION Page
----
Consolidated Balance Sheets at March 31, 1999
and December 31, 1998 2-3
Consolidated Statements of Operations for the Three
Months Ended March 31, 1999 and 1998 4
Consolidated Statements of Retained Earnings for the
Three Months Ended March 31, 1999 and 1998 5
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1999 and 1998 6
Notes to the Consolidated Financial Statements 7-8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-11
PART II. OTHER INFORMATION 12-16
1
<PAGE> 3
CHICAGO RIVET & MACHINE CO.
Consolidated Balance Sheets
March 31, 1999 and December 31, 1998
Assets
March 31, December 31,
1999 1998
---- ----
(Unaudited)
Current Assets:
Cash and cash equivalents $ 3,167,280 $ 3,181,471
Certificates of deposit 1,151,521 550,254
Accounts receivable - net of allowances 7,363,438 6,483,214
Inventories:
Raw materials 1,711,551 1,656,179
Work in process 1,849,131 1,777,584
Finished goods 3,106,081 3,095,984
----------- -----------
Total inventories 6,666,763 6,529,747
----------- -----------
Deferred income taxes 700,191 691,191
Other current assets 156,795 235,149
----------- -----------
Total Current Assets 19,205,988 17,671,026
----------- -----------
Property, Plant and Equipment
Land and improvements 1,008,901 1,008,901
Buildings and improvements 5,656,315 5,634,144
Production equipment, leased
machines and other 23,848,263 23,737,405
----------- -----------
30,513,479 30,380,450
Less accumulated depreciation 16,643,510 16,235,695
----------- -----------
Net Property, Plant and Equipment 13,869,969 14,144,755
----------- -----------
Total Assets $33,075,957 $31,815,781
=========== ===========
See Notes to the Consolidated Financial Statements
2
<PAGE> 4
CHICAGO RIVET & MACHINE CO.
Consolidated Balance Sheets
March 31, 1999 and December 31, 1998
Liabilities and Shareholders' Equity
March 31, December 31,
1999 1998
---- ----
(Unaudited)
Current Liabilities:
Current portion of note payable $ 1,800,000 $ 1,800,000
Accounts payable 2,065,562 1,272,462
Wages and salaries 900,959 745,158
Contributions due profit sharing plan 190,182 546,078
Other accrued expenses 605,100 546,068
Unearned lease revenue 18,426 43,267
Federal and state income taxes 912,274 354,814
----------- -----------
Total Current Liabilities 6,492,503 5,307,847
Note payable 2,700,000 3,150,000
Deferred income taxes 1,329,275 1,345,275
----------- -----------
Total Liabilities 10,521,778 9,803,122
----------- -----------
Shareholders' Equity:
Preferred stock, no par value-authorized
500,000 shares-none outstanding -- --
Common stock, $1.00 par value;
authorized 4,000,000 shares;
issued and outstanding 1,153,496
and 1,153,496, respectively 1,153,496 1,153,496
Additional paid-in capital 453,184 453,184
Retained earnings 20,947,499 20,405,979
----------- -----------
Total Shareholders' Equity 22,554,179 22,012,659
----------- -----------
Commitments and Contingencies (Note 4)
Total Liabilities and Shareholders' Equity $33,075,957 $31,815,781
=========== ===========
See Notes to the Consolidated Financial Statements
3
<PAGE> 5
CHICAGO RIVET & MACHINE CO.
Consolidated Statements of Operations
For the Three Months Ended March 31, 1999 and 1998
(Unaudited)
March 31, March 31,
1999 1998
---- ----
Net sales $12,435,788 $11,580,739
Lease revenue 81,692 92,210
----------- -----------
12,517,480 11,672,949
Cost of goods sold and costs
related to lease revenue 8,656,687 8,271,340
----------- -----------
Gross profit 3,860,793 3,401,609
Shipping, selling and
administrative expenses 1,915,906 1,822,305
Profit sharing expense 190,000 120,299
----------- -----------
1,754,887 1,459,005
Other income and expenses:
Interest income 47,794 83,982
Interest expense (77,439) (105,525)
Gain from sale of leased
machines and other equipment 11,428 14,311
Other income (expense) 3,790 (26,953)
----------- -----------
Income before income taxes 1,740,460 1,424,820
Provision for income taxes 588,000 510,000
----------- -----------
Net income $ 1,152,460 $ 914,820
=========== ===========
Average common shares outstanding 1,153,496 1,169,100
=========== ===========
Per share data:
Net income per share $ 1.00 $ .78
=========== ===========
Cash dividends declared per share $ .53 $ .58
=========== ===========
See Notes to the Consolidated Financial Statements
4
<PAGE> 6
CHICAGO RIVET & MACHINE CO.
Consolidated Statements of Retained Earnings
For the Three Months Ended March 31, 1999 and 1998
(Unaudited)
March 31, March 31,
1999 1998
---- ----
Retained earnings at beginning of period $20,405,979 $18,882,418
Net income for the three months ended 1,152,460 914,820
Treasury stock retired at cost -- (5,371)
Cash dividends declared in the period,
$.53 per share in 1999 and $.58 per
share in 1998 (610,940) (679,034)
----------- -----------
Retained earnings at end of period $20,947,499 $19,112,833
=========== ===========
See Notes to the Consolidated Financial Statements
5
<PAGE> 7
CHICAGO RIVET & MACHINE CO.
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 1999 and 1998
(Unaudited)
March 31, March 31,
1999 1998
---- ----
Cash flows from operating activities:
Net income $1,152,460 $ 914,820
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 424,305 374,071
Net gain on the sale of properties (11,428) (14,311)
Deferred income taxes (25,000) 9,392
Changes in working capital components:
Accounts receivable (880,224) (402,863)
Inventories (137,016) (346,445)
Other current assets 78,354 (114,248)
Accounts payable 389,376 (26,910)
Accrued wages and salaries 155,801 294,129
Accrued profit sharing (355,896) (547,586)
Other accrued expenses 59,032 155,543
Unearned lease revenue (24,841) (24,747)
Income taxes payable 557,460 299,315
---------- -----------
Net cash provided by operating activities 1,382,383 570,160
---------- -----------
Cash flows from investing activities:
Capital expenditures (163,843) (761,329)
Proceeds from the sale of properties 25,752 18,806
Proceeds from held-to-maturity securities 550,254 2,467,715
Purchases of held-to-maturity securities (1,151,521) (1,359,038)
---------- -----------
Net cash provided by (used in)
investing activities (739,358) 366,154
---------- -----------
Cash flows from financing activities:
Payments under term loan agreement (450,000) (450,000)
Purchase of treasury stock -- (5,650)
Cash dividends paid (207,216) (210,761)
---------- -----------
Net cash used by financing activities (657,216) (666,411)
---------- -----------
Net increase (decrease) in cash and
cash equivalents (14,191) 269,903
Cash and cash equivalents at beginning
of period 3,181,471 3,983,471
---------- -----------
Cash and cash equivalents at end of period $3,167,280 $ 4,253,374
========== ===========
Cash paid during the period for:
Income taxes $ 55,540 $ 201,293
Interest $ 77,438 $ 105,060
See Notes to the Consolidated Financial Statements
6
<PAGE> 8
CHICAGO RIVET & MACHINE CO.
NOTES TO THE CONSOLIDATED 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, 1999 and December 31, 1998 and the
results of operations and changes in cash flow for the indicated periods.
The Company uses estimated gross profit rates to determine the cost of goods
sold during interim periods. Actual results could differ from those estimates
and will be adjusted, as necessary, following the Company's annual physical
inventory in the fourth quarter.
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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. The results of operations for the three month period ended March 31, 1999 are
not necessarily indicative of the results to be expected for the year.
3. The Company extends credit primarily on the basis of 30-day terms to various
companies doing business primarily in the automotive and appliance industries.
The Company has a concentration of credit risk primarily within the automotive
industry and in the Midwestern United States.
4. The Company is, from time to time involved in litigation, including
environmental claims, in the normal course of business. With respect to
environmental claims, the Company has recorded a liability of approximately
$40,000. The adequacy of this reserve will be reviewed periodically as more
definitive cost information becomes available. In addition, the Company was
recently notified that certain fasteners it manufactured may not conform to
customer specifications. These fasteners become part of an assembly that is
ultimately used in the braking system of certain vehicles. The Company believes
that approximately 19,000 vehicles that include these assemblies may be
recalled. The Company may incur potentially significant costs related to this
issue. At this time, the Company cannot quantify its potential financial
exposure due to uncertainties regarding the number of vehicles involved, the
ultimate costs that may be incurred and the allocation of those costs among the
parties involved. 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, therefore no amount has been accrued at March 31,
1999.
7
<PAGE> 9
CHICAGO RIVET & MACHINE CO.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. Segment Information-The Company operates in two business segments as
determined by its products. The fastener segment includes rivets, cold-formed
fasteners and screw-machine products. The assembly equipment segment includes
automatic rivet setting machines, parts and tools for such machines and the
leasing of automatic rivet setting machines. Information by segment is as
follows:
<TABLE>
<CAPTION>
Three months ended Assembly
March 31, 1999: Fastener Equipment Other Consolidated
-------- --------- ----- ------------
<S> <C> <C> <C> <C>
Net sales and lease revenue $ 9,737,327 $ 2,780,153 $ -- $12,517,480
Depreciation 299,508 65,517 59,280 424,305
Segment profit 2,284,680 1,146,653 -- 3,431,333
Selling and administrative
expenses 1,661,228 1,661,228
Interest expense 77,439 77,439
Interest income (47,794) (47,794)
-----------
Income before income taxes 1,740,460
-----------
Capital expenditures 106,599 1,024 56,220 163,843
Segment assets:
Inventory 3,777,597 2,889,166 -- 6,666,763
Property, plant and equipment 10,385,719 1,721,228 1,763,022 13,869,969
Other assets -- -- 12,539,225 12,539,225
-----------
33,075,957
-----------
Three Months Ended
March 31, 1998:
Net sales and lease revenue $ 8,800,610 $ 2,872,339 $ -- $11,672,949
Depreciation 269,665 62,255 39,151 374,071
Segment profit 1,762,184 1,296,782 -- 3,058,966
Selling and administrative
expenses 1,612,603 1,612,603
Interest expense 105,525 105,525
Interest income (83,982) (83,982)
-----------
Income before income taxes 1,424,820
-----------
Capital expenditures 604,039 20,574 136,716 761,329
Segment assets:
Inventory 3,920,270 2,780,782 -- 6,701,052
Property, plant and equipment 10,275,428 1,560,095 1,501,336 13,336,859
Other assets -- -- 13,373,844 13,373,844
-----------
33,411,755
-----------
</TABLE>
8
<PAGE> 10
CHICAGO RIVET & MACHINE CO.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Financial results for the first quarter of 1999 were excellent. Driven by
continued strength in the automotive industry, the net sales and lease revenues
increased to $12,517,480 during the quarter, compared with $11,672,949 recorded
during the first quarter of 1998. All of the increase is attributable to the
fastener segment of our operations, where revenues increased 10.6% to $9,737,327
compared with $8,800,610 during the same period in 1998. Revenues within the
assembly equipment segment declined slightly to $2,780,153 in the first quarter
of 1999, compared to $2,872,339 during the first quarter of 1998.
Net income improved significantly, amounting to $1,152,460 or $1.00 per
share on 1,153,496 average shares outstanding during the quarter, compared with
$914,820, or $.78 per share on 1,169,100 average shares outstanding during the
first quarter of 1998. The success of ongoing efforts to control manufacturing
costs, combined with the significant increase in volumes, are the major factors
contributing to the quarter to quarter improvement in results within the
fastener segment. Within the assembly equipment segment, operating results trail
the year earlier period primarily due to reduced unit sales and a somewhat less
favorable product mix compared to the first quarter of 1998.
Selling, general and administrative expenses increased by approximately
$163,000, or 8.4%, compared to the first quarter of 1998. This change is
primarily comprised of higher profit sharing expense, proportionate with
increased profitability, and higher state tax expense. These changes were
partially offset by reductions in commission and consulting expenses associated
with the Company's subsidiary, H & L Tool Company.
During the quarter, working capital increased by approximately $0.3 million
and totaled $12.7 million at the end of the quarter. Accounts receivable
increased compared to the year-end 1998 balances, largely due to the increase in
sales during the first quarter compared with the fourth quarter of 1998. As
previously disclosed, the Company was recently notified that certain fasteners
it manufactured may not conform to customer specifications. These fasteners
become part of an assembly that is ultimately used in the braking system of
certain vehicles. The Company believes that approximately 19,000 vehicles that
include these assemblies may be recalled. The Company may incur potentially
significant costs related to this issue. At this time, the Company cannot
quantify its potential financial exposure due to uncertainties regarding the
number of vehicles involved, the ultimate costs that may be incurred and the
allocation of those costs among the parties involved.
The Company continues to make quarterly principal payments of $450,000,
plus interest at a variable rate, on its term note as scheduled. At March 31,
1999 the principal balance outstanding was $4.5 million and the interest rate
was approximately 5.9%. The Company is in full compliance with all terms of the
note. The Company also has a $1.0 million line of credit from the Bank of
America. This line remains unused and is scheduled to expire on May 30, 1999.
Although the Company believes that its current cash, cash equivalents and
existing borrowings will be sufficient to provide adequate working capital
through at least the next twelve months, consideration will be given to
extending the line of credit for an additional twelve months.
The Company continues to make ongoing assessments of its state of readiness
with respect to Year 2000 ("Y2K") issues. This process can logically be
segregated into two major categories - information technology and
non-information technology. The first category encompasses issues related to
computer equipment and software used in the operation of the business, while the
second category deals with all other aspects of Y2K issues including, but not
limited to, manufacturing equipment and systems, supplier and customer
preparedness and facility related issues such as telecommunications equipment,
HVAC systems and facility security.
The Company has determined that its information technology systems are not
Y2K compliant and has further determined that its existing software will not
meet the needs of the organization in the future. Accordingly, significant
resources have been allocated to the process of implementing a new data
processing solution that will better meet the needs of the organization while
also addressing the Y2K issues. The implementation of this solution is planned
in three phases. The first two phases include hardware and network installation
and the installation of application software related to financial reporting,
inventory control, order processing,
9
<PAGE> 11
purchasing and payroll. Hardware and network installation has been completed.
The software installation and testing is nearly completed, and training is
scheduled for completion in May 1999. Implementation of the new application
software has been deferred until July 1, 1999 due to a persistent malfunction in
the order processing module. The supplier of the software is aware of the issue
and a correction to the software is expected in the next few weeks. This delay
has also affected the implementation schedule for the final phase of this
project, which consists of implementation of the manufacturing software modules.
Training for this portion is still scheduled for completion during the second
quarter, and implementation is currently scheduled to begin during the third
quarter of 1999. This project is expected to resolve the fundamental Y2K
information technology issues, and we believe that it will also have significant
benefits to the organization in terms of more efficient operations, improved
access to information related to production control and inventory management as
well as improvements in customer service. While it is not possible to segregate
the costs of this project into segments that are solely related to resolution of
Y2K issues and costs associated with the other aspects of the project, the
overall investment in information technology is expected to total approximately
$1.1 million. Actual expenditures related to this project, through March 31,
1999, totaled approximately $780,000. This project encompasses the Company's
solution to Y2K issues as well as significant improvements in information
systems. As such, nearly all of the information technology budget is committed
to this project. No other information technology projects have been deferred
because of resources committed to this project. Funding for this project is
expected to be available from internal sources.
While we believe that the timetable for implementation is realistic and
attainable, it is not possible to be absolutely certain of completion within the
scheduled time frame. The failure to correct a material Y2K issue could result
in an interruption in, or failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. However, manual
systems currently exist for the essential functions covered by this project, and
such manual systems could be utilized on a temporary basis if the project falls
substantially behind schedule, so the potential disruption resulting from a
delay in implementation is expected to be manageable.
With respect to non-information technology issues, the Company has
completed an inventory of the production and support equipment and systems
currently in use and determined that most such equipment does not contain
microprocessors or embedded microchips and therefore will not be affected by Y2K
issues. Certain, more modern, production equipment contains microprocessors. For
the majority of that equipment, we have received the manufacturer's confirmation
that the equipment is Y2K compliant. In a limited number of cases, we are
awaiting responses from the equipment manufacturer and plan to continue efforts
to ascertain the status of that equipment with respect to Y2K issues. We believe
that we have alternative equipment available that could be utilized on an
interim basis should some of the modern equipment fail unexpectedly. This
eventuality would cause disruptions in our production schedules as the older
equipment is less efficient than the newer equipment, and our manufacturing
costs would be adversely affected as well. At this time, we are unable to
quantify the monetary impact of this potential disruption.
The Company has also requested that each of its major customers and
critical suppliers advise the Company of their current state of readiness as
well as their plans to resolve any open Y2K issues. The response to these
requests has been varied. In general, most firms contacted have indicated that
their systems are Y2K compliant, or that Y2K issues will be resolved during
1999. Typically, larger firms are better prepared than smaller concerns. A
number of smaller customers have not, as yet, responded to our inquiries with
respect to Y2K compliance. Ongoing follow up contacts with those vendors and
customers that have not yet indicated Y2K compliance are being made in an effort
to determine that their compliance efforts are
10
<PAGE> 12
progressing. The Company will continue to monitor the status of its key vendors
and customers and will develop appropriate contingency plans as more information
becomes available.
The Company's contingency plans related to these issues are not complete at
this time. Preliminary work in this area has focused upon information technology
issues and in-house manufacturing issues. While we continue to evaluate the
situation, based upon information currently available, we anticipate that we
will be able to maintain core operations with existing manual systems
supplemented by scheduling overtime to offset the reduced efficiency of manual
systems. Contingency planning with respect to third parties is limited by
incomplete information concerning their state of readiness and we are unable, at
this time, to make a reasonable estimate of the impact Y2K issues will have on
our customers or suppliers. We are evaluating the desirability of purchasing
additional supplies of raw material and critical operating supplies during the
second half of 1999. However, if our customers' plans include a similar
contingency, it is possible that we will use any such safety stock to satisfy
our customers' requests that we, in turn, supply them with safety stock. We are
also evaluating what action will be required to protect the Company's facilities
from the effects of cold weather in the event that utility service is disrupted.
To date, we have received notification of Y2K compliance from certain utility
companies, and most others have advised that they expect to achieve Y2K
compliance before the end of 1999. Our plans will continue to be revised as more
information becomes available.
On an overall basis, we are pleased with the excellent financial results
achieved during the first quarter. While demand within the fastener segment
exceeded our expectations, the concerted and dedicated efforts of employees in
all areas enabled us to successfully meet the needs of our customers and, to do
so profitably. Market conditions within the assembly equipment segment are not
as strong as we would like and competition continues to be a factor that
adversely affects both volume and pricing. While this segment of our business
continues to be profitable, margins are not as robust as they have been in the
past. We are increasing our efforts to solicit new business within this segment
and we continue to work toward reducing our manufacturing costs. The Company's
products and service have, over time, earned a reputation that is among the best
in the market. While recent developments will certainly affect that reputation,
our reputation is underpinned by the billions of parts we have manufactured that
consistently met the stringent specifications of our customers. Our objective,
of course, is to meet specification 100% of the time, and our manufacturing and
quality control procedures are regularly reviewed in order to identify and
implement improvements.
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, fluctuations in general
economic conditions, consumer demand, the gain or loss of a key customer, and
the price and availability of the Company's primary raw materials. Therefore,
readers are cautioned not to place undue reliance upon such forward-looking
statements.
11
<PAGE> 13
PART II -- OTHER INFORMATION
Item 4. Submission of matters to a vote of security holders
The Company's Annual Meeting of Stockholders was held on May 11, 1999.
At the meeting, 92.1% of the outstanding shares of the Company's voting stock
was represented in person or by proxy. The only proposal voted upon was the
election of six directors for a term ending at the Annual Meeting in 2000. The
six persons nominated by the Company's Board of Directors received the following
votes and were elected:
<TABLE>
<CAPTION>
NAME FOR WITHHELD
---- --- --------
<S> <C> <C>
William T. Divane, Jr. 1,060,893 3,062
Stephen L. Levy 1,055,750 6,523
John R. Madden 1,057,142 5,363
John A. Morrissey 1,060,294 3,262
Walter W. Morrissey 1,060,293 3,262
John C. Osterman 1,060,894 3,062
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
19.1 Interim Report to Shareholders for the quarter ended
March 31, 1999.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the current period.
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.
CHICAGO RIVET & MACHINE CO.
---------------------------
(Registrant)
Date: May 14, 1999
/s/ John A. Morrissey
-----------------------------------
John A. Morrissey
Chairman of the Board of Directors
and Chief Executive Officer
Date: May 14, 1999
/s/ John C. Osterman
-----------------------------------
John C. Osterman
President, Chief Operating
Officer and Treasurer
(Principal Financial Officer)
Date: May 14, 1999
/s/ Michael J. Bourg
-----------------------------------
Michael J. Bourg
Controller (Principal Accounting
Officer)
12
<PAGE> 14
CHICAGO RIVET & MACHINE CO.
EXHIBITS
INDEX TO EXHIBITS
Exhibit
Number Page
----
19.1 Interim Report to Shareholders for the
quarter ended March 31, 1999 14-15
27.1 Financial Data Schedule 16
13
<PAGE> 1
EXHIBIT 19.1
To Our Shareholders:
The comparative results of operations of Chicago Rivet & Machine Co. for
the first quarter of 1999 and 1998 are summarized below.
Results for the first quarter of 1999 were excellent. Driven by continued
strength in the automotive industry, the net sales and lease revenues increased
to $12,517,480 during the quarter, compared with $11,672,949 recorded during the
first quarter of 1998. All of the increase is attributable to the fastener
segment of our operations, where revenues increased 10.6% to $9,737,327 compared
with $8,800,610 during the same period in 1998. Revenues within the assembly
equipment segment declined slightly to $2,780,153 in the first quarter of 1999,
compared to $2,872,339 during the first quarter of 1998.
Net income improved significantly, amounting to $1,152,460 or $1.00 per
share on 1,153,496 average shares outstanding during the quarter, compared with
$914,820, or $.78 per share on 1,169,100 average shares outstanding during the
first quarter of 1998. The success of ongoing efforts to control manufacturing
costs, combined with the significant increase in volume, are the major factors
contributing to the quarter to quarter improvement in results within the
fastener segment. Within the assembly equipment segment, operating results trail
the year earlier period primarily due to reduced unit sales and a somewhat less
favorable product mix compared to the first quarter of 1998.
On an overall basis, we are pleased with the excellent results achieved
during the first quarter. While demand within the fastener segment exceeded our
expectations, the concerted and dedicated efforts of employees in all areas
enabled us to successfully meet the needs of our customers, and, to do so
profitably. Market conditions within the assembly segment are not as strong as
we would like, and competition continues to be a factor that adversely affects
both volume and pricing. While this segment of our business continues to be
profitable, margins are not as robust as they have been in the past. We are
increasing our efforts to solicit new business within this segment, and we
continue to work toward reducing our manufacturing costs. Our products and
service are among the best in the market, and we expect to maintain, or improve,
our market position in the months ahead.
The 1999 annual meeting of shareholders will be held at the Company's
headquarters in Naperville, Illinois at 10:00 AM on Tuesday, May 11, 1999. All
shareholders are cordially invited to attend. Formal notice of the meeting and
proxy materials, including the Company's 1998 Annual Report to Shareholders were
distributed early in April. If you have not already completed and returned your
proxy, we ask that you do so at your earliest convenience, even if you plan to
attend the meeting. Thank you.
Respectfully yours,
John A. Morrissey John C. Osterman
Chairman President
April 23, 1999
The foregoing discussion is only intended to provide highlights of
operations for the periods covered. Additional information is contained in our
Form 10-Q, which
14
<PAGE> 2
will be filed with the SEC and is available to shareholders upon request from
the Company, or via the internet through the SEC's EDGAR database. 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, fluctuations in general economic
conditions, consumer demand, the gain or loss of a key customer, and the price
and availability of the Company's primary raw materials. Therefore, readers are
cautioned not to place undue reliance upon such forward-looking statements.
CHICAGO RIVET & MACHINE CO.
Summary of Consolidated Results of Operations
For the Three Months Ended:
March 31, March 31,
1999 1998
---- ----
Net sales and lease revenue................. $12,517,480 $11,672,949
Income before taxes......................... 1,740,460 1,424,820
Income after taxes.......................... 1,152,460 914,820
Net income per share........................ 1.00 .78
Average shares outstanding.................. 1,153,496 1,169,100
(All figures subject to year end audit)
15
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,167,280
<SECURITIES> 1,151,521
<RECEIVABLES> 7,440,364
<ALLOWANCES> 76,926
<INVENTORY> 6,666,763
<CURRENT-ASSETS> 19,205,988
<PP&E> 30,513,479
<DEPRECIATION> 16,643,510
<TOTAL-ASSETS> 33,075,957
<CURRENT-LIABILITIES> 6,492,503
<BONDS> 2,700,000
0
0
<COMMON> 1,153,496
<OTHER-SE> 21,400,683
<TOTAL-LIABILITY-AND-EQUITY> 33,075,957
<SALES> 12,435,788
<TOTAL-REVENUES> 12,517,480
<CGS> 8,656,687
<TOTAL-COSTS> 8,656,687
<OTHER-EXPENSES> 2,105,906
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 77,439
<INCOME-PRETAX> 1,740,460
<INCOME-TAX> 588,000
<INCOME-CONTINUING> 1,152,460
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 1,152,460
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