EXHIBIT 99.1
To Our Shareholders:
The comparative results of operations of Chicago Rivet & Machine Co.
for the third quarter and first nine months of 2003 and 2002 are summarized
below.
Results for the third quarter were very disappointing. Although
economic conditions have improved in many sectors, manufacturing in general, and
our markets in particular, continue to be quite weak. The lack of capital
spending is reflected in our equipment segment revenues, which continue to trail
the prior year's anemic levels. Traditionally, third quarter revenues are
somewhat lower than other quarters due to the impact of vacation schedules at
our facilities as well as at those of our customers. Net sales and lease
revenues for the third quarter of 2003 amounted to $8,831,742, which is a
decline of 10.2% compared to the same period of 2002. For the third quarter of
2003, fastener segment revenues amounted to $7,130,290, which is a decline of
11.2% compared to the third quarter of 2002. Revenues within the assembly
equipment segment, for the third quarter of 2003, declined 5.7% compared to the
third quarter of 2002 and amounted to $1,701,452. On a year-to-date basis, 2003
revenues within the fastener segment totaled $23,423,470, a decline of 11.3%
compared with the first nine months of 2002, while revenues within the assembly
equipment segment amounted to $5,650,679, which is a decline of 10.5% compared
to the year earlier period.
The overriding factor adversely affecting margins continues to be lower
volumes. In addition, fastener segment profitability during the third quarter of
2003 was negatively affected by higher costs for health insurance, certain
tooling costs and variable labor and fixed overhead costs that were not reduced
in proportion to the decline in sales. Third quarter margins within the assembly
equipment segment were also adversely affected by higher costs for health
insurance and slightly higher labor costs attributable to inefficiencies related
to lower volumes. In the near term, while we expect that costs for health
insurance and tooling will remain at, or near, current levels, during the fourth
quarter, further action has been taken to reduce labor costs through a reduction
in employment levels.
Selling and administrative expenses for both the current quarter and
the first nine months of 2003 are lower than the corresponding periods in 2002
as higher costs for health insurance were more than offset by lower commission
expense and lower profit sharing expense.
Clearly, third quarter results were unsatisfactory. Our sales volume
was insufficient to cover our costs based upon the structure in place. We
continue to solicit new business and have enjoyed some recent success in the
fastener segment, but those gains have not fully offset the specific products
lost to design changes and to certain competitive situations. We anticipate that
we can continue to capture new specialty cold-headed parts in the coming months,
but we also recognize margins will remain under pressure as our customers
continue to take advantage of excess supply capacity in the industry and press
for additional price reductions. The market for assembly equipment remains very
soft, and we do not foresee any significant improvement in the near term. Early
in the fourth quarter, we began to make reductions in our workforce and
anticipate further reductions before year-end, as we adapt to what now appears
to be a smaller market for machinery and standard fasteners. We will continue
our efforts to improve our competitive position in terms of service, quality and
price, and these efforts should have a positive impact on earnings.
Respectfully yours,
John A. Morrissey John C. Osterman
Chairman President
November 7, 2003
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 has been 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;
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.
CHICAGO RIVET & MACHINE CO.
SUMMARY OF CONSOLIDATED RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30
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THIRD QUARTER FIRST NINE MONTHS
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2003 2002 2003 2002
----------- ----------- ----------- -----------
Net sales and lease revenue $ 8,831,742 $ 9,832,012 $29,074,149 $32,722,194
Income before income taxes 8,431 659,015 1,050,293 2,976,720
Net income 5,431 435,015 692,293 1,962,720
Net income per share .01 .45 .72 2.03
Average shares outstanding 966,132 966,132 966,132 966,674
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(All figures subject to year-end audit)
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