EXHIBIT 99.1
To Our Shareholders:
The comparative results of operations of Chicago Rivet & Machine Co.
for the second quarter and first six months of 2002 and 2001 are summarized
below.
Results for the second quarter were stronger than expected. Net revenue
for the second quarter of 2002 totaled $12,437,856, which represents an
improvement of nearly 11% compared with the second quarter of 2001. Within the
fastener segment of our operations, revenues improved 8.4% compared with the
second quarter of 2001 reflecting a combination of new business and modest net
increases in orders from existing customers. Second quarter revenues within the
assembly equipment segment improved sharply compared with the depressed levels
of the second quarter of 2001. However, this increase is attributable to a few
large equipment orders and does not, in our opinion, indicate a near term return
to historical levels of activity within this segment.
Overall, net income for the second quarter of 2002 improved to
$902,589, or $.93 per share on 966,768 average shares outstanding. Increased
volume, especially within the equipment segment, was the major factor
contributing to the increase in net income during the second quarter of 2002
compared with the second quarter of 2001. The gains from higher volumes were
offset, to some extent, by a variety of factors, including those described
below. Within the fastener segment, competitive pressures on selling prices
continued to limit our ability to obtain the margin levels that we have enjoyed
in the past. Fastener segment margins were also impacted by higher labor costs.
Margins within both segments were adversely impacted by higher costs for health
insurance. Overall, selling and administrative expenses for the second quarter
increased slightly compared to the prior year primarily due to higher commission
and profit sharing expense.
Despite a relatively strong first half, our outlook for the near term
remains cautious. The improvements that we have seen in our markets continue to
be customer specific and not indicative of widespread strength in the economy in
general, or our markets in particular. Recently imposed tariffs on imported
steel have resulted in spot shortages, increased lead-times and higher prices
for both domestic and imported raw material. While the impact has been small so
far, we believe the situation has the potential to have a greater impact in the
coming months. Conditions in our markets will likely limit our ability to
successfully pass higher costs on to our customers. We expect that revenues from
our assembly equipment segment will remain below historical levels until
economic conditions show more sustained improvement. We plan to continue our
efforts to control costs, to invest resources in areas that will improve our
competitive position or will allow us to expand our capabilities and to solicit
profitable business from both new and existing customers.
Respectfully yours,
John A. Morrissey John C. Osterman
Chairman President
August 12, 2002
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 may cause such differences
in events include, among other things, our ability to maintain our relationships
with our significant customers; 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.
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CHICAGO RIVET & MACHINE CO.
SUMMARY OF CONSOLIDATED RESULTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30
Second Quarter First Six Months
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2002 2001 2002 2001
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Net sales and lease revenue $12,437,856 $11,216,249 $22,890,182 $21,844,080
Income before taxes 1,370,589 1,123,438 2,317,705 1,636,679
Net income 902,589 737,438 1,527,705 1,076,679
Net income per share .93 .76 1.58 1.11
Average shares outstanding 966,768 967,132 966,949 967,132
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(All figures subject to year end audit)
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