<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 June 30, 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 June 30, 1999
- ----- ----------------------------
COMMON STOCK, $1.00 PAR VALUE 1,152,496 SHARES
DOCUMENTS INCORPORATED BY REFERENCE
- -----------------------------------
(1) Portions of the Company's Interim Report to Shareholders for the Quarter
ended June 30, 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 June 30, 1999
and December 31, 1998 2-3
Consolidated Statements of Operations for the Three
and Six Months Ended June 30, 1999 and 1998 4
Consolidated Statements of Retained Earnings for the
Six Months Ended June 30, 1999 and 1998 5
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1999 and 1998 6
Notes to the Consolidated Financial Statements 7-9
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-12
PART II. OTHER INFORMATION 13-18
<PAGE> 3
CHICAGO RIVET & MACHINE CO.
Consolidated Balance Sheets
June 30, 1999 and December 31, 1998
June 30, December 31,
1999 1998
----------- -----------
Unaudited
Assets
Current Assets:
Cash and cash equivalents $ 2,209,198 $ 3,181,471
Certificates of deposit 2,401,521 550,254
Accounts receivable - net of allowances 7,352,203 6,483,214
Inventories:
Raw materials 1,583,236 1,656,179
Work in process 1,710,741 1,777,584
Finished goods 2,864,250 3,095,984
----------- -----------
Total inventories 6,158,227 6,529,747
----------- -----------
Deferred income taxes 691,191 691,191
Other current assets 149,391 235,149
----------- -----------
Total current assets 18,961,731 17,671,026
----------- -----------
Property, Plant and Equipment:
Land and improvements 1,008,901 1,008,901
Buildings and improvements 5,656,316 5,634,144
Production equipment, leased
machines and other 24,269,700 23,737,405
----------- -----------
30,934,917 30,380,450
Less accumulated depreciation 17,015,523 16,235,695
----------- -----------
Net property, plant and equipment 13,919,394 14,144,755
----------- -----------
Total assets $32,881,125 $31,815,781
=========== ===========
See Notes to the Consolidated Financial Statements
2
<PAGE> 4
CHICAGO RIVET & MACHINE CO.
Consolidated Balance Sheets
June 30, 1999 and December 31, 1998
June 30, December 31,
1999 1998
----------- -----------
Unaudited
Liabilities and Shareholders' Equity
Current Liabilities:
Current portion of note payable $ 1,800,000 $ 1,800,000
Accounts payable 1,331,340 1,272,462
Wages and salaries 1,178,760 745,158
Contributions due profit sharing plan 375,181 546,078
Other accrued expenses 1,474,743 546,068
Unearned lease revenue 29,060 43,267
Federal and state income taxes 308,274 354,814
----------- -----------
Total current liabilities 6,497,358 5,307,847
Note payable 2,250,000 3,150,000
Deferred income taxes 1,330,275 1,345,275
----------- -----------
Total liabilities 10,077,633 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 1,152,496
and 1,153,496, respectively 1,152,496 1,153,496
Additional paid-in capital 452,791 453,184
Retained earnings 21,198,205 20,405,979
----------- -----------
Total shareholders' equity 22,803,492 22,012,659
----------- -----------
Commitments and contingencies (Note 4)
Total liabilities and shareholders' equity $32,881,125 $31,815,781
=========== ===========
See Notes to the Consolidated Financial Statements
3
<PAGE> 5
CHICAGO RIVET & MACHINE CO.
Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 1999 and 1998
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
1999 1998 1999 1998
---- ---- ---- ----
Net sales $12,863,103 $10,723,985 $25,298,891 $22,304,724
Lease revenue 70,587 98,546 152,279 190,756
----------- ----------- ----------- -----------
12,933,690 10,822,531 25,451,170 22,495,480
Cost of goods sold and
costs related to lease
revenue 9,951,328 7,628,117 18,608,015 15,899,457
----------- ----------- ----------- -----------
Gross profit 2,982,362 3,194,414 6,843,155 6,596,023
Shipping, selling and
administrative
expenses 2,070,082 1,740,632 3,985,988 3,562,937
Profit sharing expense 185,000 140,000 375,000 260,299
----------- ----------- ----------- -----------
727,280 1,313,782 2,482,167 2,772,787
Other income and expenses:
Interest income 47,173 57,352 94,967 141,334
Interest expense (61,827) (103,022) (139,266) (208,547)
Gain from sale/
disposal of leased
machines and other
equipment 3,114 29 14,542 14,340
Other income 4,372 34,783 8,162 7,830
----------- ----------- ----------- -----------
Income before income
taxes 720,112 1,302,924 2,460,572 2,727,744
Provision for income
taxes 239,000 519,000 827,000 1,029,000
----------- ----------- ----------- -----------
Net Income $ 481,112 $ 783,924 $ 1,633,572 $ 1,698,744
=========== =========== =========== ===========
Average common shares
outstanding 1,152,832 1,159,793 1,153,162 1,164,421
=========== =========== =========== ===========
Per share data:
Net income per share $ 0.42 $ 0.68 $ 1.42 $ 1.46
=========== =========== =========== ===========
Cash dividends
declared per share $ 0.18 $ 0.18 $ 0.71 $ 0.76
=========== =========== =========== ===========
See Notes to the Consolidated Financial Statements
4
<PAGE> 6
CHICAGO RIVET & MACHINE CO.
Consolidated Statements of Retained Earnings
For the Six Months Ended June 30, 1999 and 1998
(Unaudited)
June 30,
1999 1998
-------------------------
Retained earnings at beginning of period $20,405,979 $18,882,418
Net income for the six months ended 1,633,572 1,698,744
Treasury stock retired at cost (22,782) (485,805)
Cash dividends declared in the period,
$.71 per share in 1999 and $.76 per
share in 1998 (818,564) (885,846)
----------- -----------
Retained earnings at end of period $21,198,205 $19,209,511
=========== ===========
See Notes to the Consolidated Financial Statements
5
<PAGE> 7
CHICAGO RIVET & MACHINE CO.
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1999 and 1998
(Unaudited)
June 30, June 30,
1999 1998
---- ----
Cash flows from operating activities:
Net income $ 1,633,572 $ 1,698,744
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 884,795 757,603
Net gain on the sale of properties (14,542) (14,340)
Deferred income taxes (15,000) 33,606
Changes in working capital components:
Accounts receivable (868,989) (41,822)
Inventories 371,520 (468,049)
Other current assets 85,758 (126,334)
Accounts payable 58,878 (469,123)
Accrued wages and salaries 433,602 183,136
Accrued profit sharing (170,897) (410,857)
Other accrued expenses 928,675 (72,634)
Unearned lease revenue (14,207) 25,033
Income taxes payable (46,540) 398
----------- -----------
Net cash provided by operating activities 3,266,625 1,095,361
----------- -----------
Cash flows from investing activities:
Capital expenditures (684,297) (1,406,210)
Proceeds from the sale of properties 39,405 19,557
Proceeds from held-to-maturity securities 950,254 3,777,715
Purchases of held-to-maturity securities (2,801,521) (2,364,038)
----------- -----------
Net cash provided by (used in)
operating activities (2,496,159) 27,024
----------- -----------
Cash flows from financing activities:
Payments under term loan agreement (900,000) (900,000)
Purchase of treasury stock (24,175) (504,888)
Cash dividends paid (818,564) (885,846)
----------- -----------
Net cash used by financing activities (1,742,739) (2,290,734)
----------- -----------
Net decrease in cash and cash equivalents (972,273) (1,168,349)
Cash and cash equivalents at beginning of period 3,181,471 3,983,471
----------- -----------
Cash and cash equivalents at end of period $ 2,209,198 $ 2,815,122
=========== ===========
Cash paid during the period for:
Income taxes $ 888,540 $ 995,099
Interest $ 145,542 $ 208,547
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 June 30, 1999 and December 31, 1998 and the
results of operations and changes in cash flows 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 ending June 30, 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. 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.
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
June 30, 1999: Fastener Equipment Other Consolidated
-------- --------- ----- ------------
<S> <C> <C> <C> <C>
Net sales and lease revenue $ 9,900,233 $ 3,033,457 $ -- $12,933,690
Depreciation 335,694 65,516 59,280 460,490
Segment profit 1,279,682 1,276,499 -- 2,556,181
Selling and administrative
expenses 1,821,415 1,821,415
Interest expense 61,827 61,827
Interest income (47,173) (47,173)
-----------
Income before income taxes 720,112
-----------
Capital expenditures 368,987 132,889 18,578 520,454
Segment assets:
Inventory 3,305,761 2,852,466 -- 6,158,227
Property, plant and
equipment 10,425,610 1,771,463 1,722,321 13,919,394
Other assets -- -- 12,803,504 12,803,504
-----------
32,881,125
-----------
Three Months Ended
June 30, 1998:
Net sales and lease revenue $ 8,103,638 $ 2,718,893 $ -- $10,822,531
Depreciation 280,807 61,505 41,220 383,532
Segment profit 1,747,547 1,114,737 -- 2,862,284
Selling and administrative
expenses 1,513,690 1,513,690
Interest expense 103,022 103,022
Interest income (57,352) (57,352)
-----------
Income before income taxes 1,302,924
-----------
Capital expenditures 369,995 88,202 186,684 644,881
Segment assets:
Inventory 4,058,874 2,763,782 -- 6,822,656
Property, plant and
equipment 10,349,169 1,601,518 1,646,799 13,597,486
Other assets -- -- 11,257,774 11,257,774
-----------
31,677,916
-----------
</TABLE>
8
<PAGE> 10
CHICAGO RIVET & MACHINE CO.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Six months ended Assembly
June 30, 1999: Fastener Equipment Other Consolidated
-------- --------- ----- ------------
Net sales and lease revenue $19,637,560 $ 5,813,610 $ -- $25,451,170
Depreciation 635,202 131,033 118,560 884,795
Segment profit 3,564,362 2,423,152 -- 5,987,514
Selling and administrative
expenses 3,482,643 3,482,643
Interest expense 139,266 139,266
Interest income (94,967) (94,967)
-----------
Income before income taxes 2,460,572
-----------
Capital expenditures 475,586 133,913 74,798 684,297
Six Months Ended
June 30, 1998:
Net sales and lease revenue $16,904,248 $ 5,591,232 $ -- $22,495,480
Depreciation 550,472 126,760 80,371 757,603
Segment profit 3,509,731 2,411,519 -- 5,921,250
Selling and administrative
expenses 3,126,293 3,126,293
Interest expense 208,547 208,547
Interest income (141,334) (141,334)
-----------
Income before income taxes 2,727,744
-----------
Capital expenditures 974,034 108,776 323,400 1,406,210
9
<PAGE> 11
CHICAGO RIVET & MACHINE CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
Net sales and lease revenues for the second quarter of 1999 amounted to
$12,933,690, which represents an increase of 19.5% compared with the second
quarter of 1998. Revenues from the assembly equipment segment increased 11.6%,
compared with the second quarter of 1998, while revenues in the fastener segment
increased 22.2%. These increases are largely attributable to the continued
strength in the automobile industry, which is the Company's primary market. It
should be noted that during the second quarter of 1998, revenues were negatively
affected by a work stoppage experienced by one of the major automobile
manufacturers, which significantly limited revenues during that period.
Nevertheless, revenues have increased appreciably compared to the prior year.
As previously announced, the Company's 1999 second quarter earnings were
adversely impacted by costs incurred in connection with a recall of vehicles
that contained certain non-conforming parts which were manufactured by the
Company. The Company has negotiated a settlement related to the recall and also
incurred certain internal costs related to repair of the affected vehicles. The
total costs incurred in connection with the recall, and the related settlement,
amounted to $944,000, before taxes ($623,000, after taxes.) Of the pre-tax
amount, approximately $910,000 was charged to cost of goods sold, and is the
primary factor contributing to the reduction in gross profits during the second
quarter of 1999. Gross margins, excluding this adjustment, were approximately
equal to those reported during the second quarter and first six months of 1998.
Shipping, selling and administrative expenses increased approximately $329,000
compared to the second quarter of 1998. The primary factors contributing to this
increase included $76,000 for consulting expenses related to data processing,
higher state tax expense of $64,000, higher freight and shipping expenses of
$50,000, $34,000 in expenses related to the product recall, increases in salary
expense of $30,000 and depreciation expense of $22,000.
The Company's financial condition continues to be sound. During the
quarter, working capital decreased by approximately $0.2 million and totaled
$12.5 million at the end of the quarter. Accounts receivable balances were
essentially unchanged during the quarter, although the balance has increased
compared to the year-end 1998 balances, largely due to the increase in sales
during the most recent period compared with the fourth quarter of 1998. Capital
expenditures during the second quarter amounted to $520,000, including $81,000
related to computer system conversion costs. Other major expenditures included
$247,000 for cold-heading equipment, $76,000 for a lathe used in production of
tooling for assembly equipment, $60,000 for various test equipment utilized in
quality control and $38,000 for new telephone and voice mail systems at two
facilities.
The Company continues to make scheduled quarterly principal payments of
$450,000 plus interest at a variable rate on its term note. At June 30, 1999,
the principal balance was $4.05 million and the interest rate was approximately
5.9%. 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, 2000.
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.
During the second quarter of 1999, the Company repurchased 1,000 shares of
its stock under the terms of its existing stock repurchase program, which
provides for the repurchase of an aggregate of 200,000 shares, with such
purchases to be made, from time to time, in the open market, or in private
transactions. The most recent purchases were made in the open market, at an
aggregate purchase price of $24,175, bringing the total purchases made under the
current program to 136,196 shares at an average price of $14.51 per share. It is
management's intention to continue this program, provided conditions are
favorable and funding for repurchases is available.
10
<PAGE> 12
YEAR 2000 COMPLIANCE
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, purchasing and payroll. Hardware and
network installation has been completed. The software testing and training has
been completed, and one facility has successfully completed implementation and
is now utilizing the new software. Other facilities, which were originally
scheduled to complete implementation during the second quarter, have delayed
implementation until September 1, 1999 due to unanticipated issues related to
data conversion. This delay has resulted in the necessity of delaying
implementation of the final phase, which consists of implementation of the
manufacturing software modules and, while this final phase is currently
underway, implementation is now scheduled to begin late in the fourth quarter.
Given the delays experienced to date, the Company is in the process of
identifying certain mission critical features of its existing data processing
systems that may need to be modified so that they are Y2K compliant in the event
that the final phase of the new software implementation is delayed beyond
December 31, 1999. Implementation of the new data processing systems 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 $1.3 million. Actual expenditures
related to this project, through the first half of 1999, totaled approximately
$955,000. 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
11
<PAGE> 13
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 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 materials 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, but others have yet to respond to our requests for information. Our
plans will be revised as more information becomes available.
Overall, our outlook for the second half of the year is positive. Backlogs,
while somewhat lower than one year ago, are adequate for normal operations, and
demand for our products continues to be fairly strong. In general, the overall
economic outlook is for continued growth, and we expect that the Company will
continue to do well in the months ahead.
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, THE
PRICE AND AVAILABILITY OF THE COMPANY'S PRIMARY RAW MATERIALS, OR Y2K ISSUES
THAT MAY AFFECT THE COMPANY, OR ITS KEY SUPPLIERS OR CUSTOMERS. THEREFORE,
READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE UPON SUCH FORWARD-LOOKING
STATEMENTS.
12
<PAGE> 14
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
19.1 Interim Report to Shareholders for the quarter ended
June 30, 1999
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the current period.
13
<PAGE> 15
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: August 9, 1999
/s/ John A. Morrissey
-----------------------------
John A. Morrissey
Chairman of the Board of Directors
and Chief Executive Officer
Date: August 9, 1999
/s/ John C. Osterman
-----------------------------
John C. Osterman
President, Chief Operating
Officer and Treasurer (Principal
Financial Officer)
Date: August 9, 1999
/s/ Michael J. Bourg
-----------------------------
Michael J. Bourg
Controller (Principal Accounting
Officer)
14
<PAGE> 16
CHICAGO RIVET & MACHINE CO.
EXHIBITS
INDEX TO EXHIBITS
Exhibit
Number Page
19.1 Interim Report to Shareholders for the
quarter ended June 30, 1999 16 - 17
27.1 Financial Data Schedule 18
15
<PAGE> 1
EXHIBIT 19.1
To Our Shareholders:
The comparative results of operations of Chicago Rivet & Machine Co. for
the second quarter and first six months of 1999 and 1998 are summarized below.
Net sales and lease revenues for the second quarter of 1999 amounted to
$12,933,690, which represents an increase of 19.5% compared with the second
quarter of 1998. Revenues from the assembly equipment segment increased 11.6%,
compared with the second quarter of 1998, while revenues in the fastener segment
increased 22.2%. These increases are largely attributable to the continued
strength in the automobile industry, which is the Company's primary market. It
should be noted that during the second quarter of 1998, revenues were negatively
affected by a work stoppage experienced by one of the major automobile
manufacturers, which significantly limited revenues during that period.
Nevertheless, revenues have increased appreciably compared to the prior year.
As previously announced, the Company's 1999 second quarter earnings were
adversely impacted by costs incurred in connection with a recall of vehicles
that contained certain non-conforming parts that were manufactured by the
Company. The Company has negotiated a settlement related to the recall and also
incurred certain internal costs related to repair of the affected vehicles. The
total costs incurred in connection with the recall, and the related settlement,
resulted in an after tax charge of $623,000, or $.54 per share in the second
quarter. Despite this charge, the Company recorded net income of $481,112, or
$.42 per share, on 1,152,832 average shares outstanding during the second
quarter. For the first six months of 1999, net income totaled $1,633,572, or
$1.42 per share, net of the costs associated with the recall, on 1,153,162
average shares outstanding, compared to $1,698,744, or $1.46 per share, on
1,164,421 average shares outstanding during the first half of 1998.
Progress continues to be made with respect to implementation of new data
processing systems which are necessary to assure Y2K compliance. One facility
has successfully completed implementation and the first phase of implementation
for our other facilities is scheduled for early September. The second phase of
the project involves manufacturing and implementation is expected to take place
late in the year. We continue to expect that our implementation will be
sufficiently completed in time to avoid any major Y2K issues.
The Company's financial condition continues to be sound, and our outlook
for the second half of the year is positive. Backlogs, while somewhat lower than
one year ago, are adequate for normal operations, and demand for our products
continues to be fairly strong. In general, the overall economic outlook is for
continued growth, and we expect that the Company will continue to do well in the
months ahead.
Respectfully yours,
John A. Morrissey John C. Osterman
Chairman President
July 28, 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 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
16
<PAGE> 2
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, the price and availability of the Company's primary raw materials, or
Y2K issues that may affect the Company, or its key suppliers or customers.
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 AND SIX MONTHS ENDED JUNE 30
SECOND QUARTER FIRST SIX MONTHS
------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- ------------
Net sales and
lease revenue $12,933,690 $10,822,531 $25,451,170 $22,495,480
Income before taxes 720,112 1,302,924 2,460,572 2,727,744
Income after taxes 481,112 783,924 1,633,572 1,698,744
Net income per share .42 .68 1.42 1.46
Average shares
outstanding 1,152,832 1,159,793 1,153,162 1,164,421
------------------------------------------------------------------------------
(All figures subject to year end audit)
17
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,209,198
<SECURITIES> 2,401,521
<RECEIVABLES> 7,435,900
<ALLOWANCES> 83,697
<INVENTORY> 6,158,227
<CURRENT-ASSETS> 18,961,731
<PP&E> 30,934,917
<DEPRECIATION> 17,015,523
<TOTAL-ASSETS> 32,881,125
<CURRENT-LIABILITIES> 6,497,358
<BONDS> 2,250,000
0
0
<COMMON> 1,152,496
<OTHER-SE> 21,650,996
<TOTAL-LIABILITY-AND-EQUITY> 32,881,125
<SALES> 25,298,891
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<CGS> 18,608,015
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<INCOME-TAX> 827,000
<INCOME-CONTINUING> 1,633,572
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<EXTRAORDINARY> 0
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<NET-INCOME> 1,633,572
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