UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1998
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____ to ____
Commission file number 0-13403
- --------------------------------------------------------------------------------
AMISTAR CORPORATION
(Exact name of registrant as specified in its Charter)
- --------------------------------------------------------------------------------
CALIFORNIA
(State or other jurisdiction of 95-2747332
incorporation or organization) (I.R.S. Employer
Identification Number)
237 VIA VERA CRUZ
SAN MARCOS, CA 92069-2698
(Address of principal executive offices) (Zip Code)
AREA CODE (760) 471-1700
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
------------------------
COMMON STOCK, PAR VALUE
$.01 PER SHARE
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
Aggregate market value of voting stock held by non-affiliates of the
registrant as of the close of business on March 4, 1999: $3,689,425.
The number of shares outstanding of registrant's Common Stock as of March
4, 1999: 3,136,500 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following document are incorporated by reference:
PART III Definitive Proxy Statement for Annual Meeting of Shareholders
to be held May 5, 1999 filed with the Securities and Exchange Commission.
1
<PAGE>
AMISTAR CORPORATION AND SUBSIDIARIES
FORM 10-K
TABLE OF CONTENTS
PART I
1. Business............................................................... 3
2. Properties............................................................. 7
3. Legal Proceedings...................................................... 7
4. Submission of Matters to a Vote of Security Holders.................... 7
PART II
5. Market for Registrant's Common Stock and Related Stockholder Matters... 8
6. Selected Financial Data................................................ 9
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations .................................................10
7a. Quantitative and qualitative disclosures about market risk.............13
8. Financial Statements and Supplementary Data............................14
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure...................................................27
PART III
10. Directors and Executive Officers of the Registrant......................27
11. Executive Compensation..................................................27
12. Security Ownership of Certain Beneficial Owners and Management..........27
13. Certain Relationships and Related Transactions..........................27
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.........27
2
<PAGE>
PART I
ITEM 1. BUSINESS
Amistar Corporation (the Company) designs, develops, manufactures, markets
and services a variety of automatic equipment used to assemble electronic
components to printed circuit boards. Amistar's Manufacturing Services Division
(AMS) provides manufacturing services to companies who outsource the
manufacturing of their electronic products.
Printed circuit assemblies, which are the basis for most electronic
products, start with a printed circuit board (PCB), to which electronic
components are assembled. PCB's are commonly used by manufacturers of a wide
variety of electronic systems and products to interconnect components.
Typically, these boards contain conductive layers, holes that receive the leads
of "through-hole" components, pads on the board surface that provide a
connection point for "surface mounted" components and interconnect layers that
connect the various components to form an electrical network.
The physical characteristics of modern electronic devices and printed
circuit boards are diverse. As a result, the design and manufacture of automatic
assembly equipment is highly specialized. The majority of electronic devices
fall into two general categories: surface mount devices (SMD) and leaded
through-hole components. Boards populated with surface mount devices are the
most significant and fastest growing segment of the circuit board assembly
marketplace. Components come in a large range of sizes and configurations.
Further, current printed circuit board designs are complex and use numerous
component types that must be densely placed to minimize wasted space.
Accordingly, automatic assembly equipment must be sufficiently flexible to
adjust to a wide variety of components and product designs.
Financial Information Relating to Industry Segments
- ---------------------------------------------------
The Company's operations include two business segments: manufacture and
distribution of assembly machines and related accessories and contract
electronic manufacturing services. Information concerning the Company's
operations for the two segments is found in note 11 to the consolidated
financial statements.
Products
- --------
The Company's current machine product line features four models designed
for the latest SMD assembly technologies. Amistar's machine model specifications
were chosen to serve a broad range of market requirements. Each model offers a
wide range of application-specific tools, device handlers, feeders and placement
heads. Different models offer a range of production speeds, software and
investment levels to meet a user's unique needs. This flexibility enables the
customer to order the model and features best suited to meet their assembly
requirements.
The Company's product line consists of manufactured products and
distributed private label products. The primary manufactured products are the
PlaceMaster(R) line, feeders and accessories utilized on the private label line
and through-hole machine spare parts. The primary distributed products are the
private label LaserPro(R) and PlacePro(R) lines. The private label products are
distributed under an OEM supply agreement with a manufacturer in Japan, and as a
result, the Company has significant supply dependence. A change in the
supplier's price, delivery or distribution channels could cause a loss of sales,
a decline in gross margins, or other consequences that could adversely affect
operating results. The Company also distributes other products such as solder
reflow ovens, solder paste printers, and conveying equipment.
Amistar Manufacturing Services (AMS)
- ------------------------------------
Amistar Manufacturing Services, a division of Amistar, provides electronic
manufacturing services to OEMs in various industries, such as medical, computer
peripherals, audio/video, industrial, data networking, and telecommunications.
The Company offers turnkey solutions by providing engineering services,
materials procurement and management, surface mount and through-hole board
assembly, all levels of testing, final product and systems build, distribution
and warranty depot support. Currently, the Company operates two facilities, one
in Anaheim, California and one at the corporate facility in San Marcos,
California.
3
<PAGE>
Product Development
- -------------------
The Company's products are marketed to an industry that is subject to
rapid technological change and increasingly complex methods of manufacturing.
Amistar's ability to compete and operate successfully depends, among other
things, upon its ability to react to such change. Accordingly, the Company is
committed to the continuing enhancement of its current products to allow their
use in a wider variety of applications and the development of new products to
further reduce customer labor costs and increase manufacturing efficiencies.
During 1998, 1997 and 1996, the Company's engineering, research and
development expenses were approximately $1,202,000, $1,462,000 and $1,234,000,
respectively. Development efforts were focused in 1998 on a new machine
utilizing an emerging technology in the circuit board assembly process.
Customers and Marketing
- -----------------------
The Company's machine products are sold primarily to electronic
manufacturers, both directly and through distributors. The Company's marketing
strategy is to offer flexible equipment that fulfills a variety of customer
needs and to emphasize the advanced features, ease of use, price, performance,
and reliability.
Amistar markets its machine products in the United States through a
network of strategically located sales offices and regional sales managers,
which support independent manufacturer's representatives and direct sales
personnel. In addition to the main sales and service center at the Company's
headquarters in San Marcos, California, the Company's sales and service offices
are located in Danvers, Massachusetts and Warrenville, Illinois. The Company
maintained sales and service offices in Wiesbaden, Germany and Wettingen,
Switzerland through December 1997. In December 1997, the Company decided to
pursue European activities through the use of independent distributors and as
such, closed its offices in Germany and Switzerland. In addition, the Company
maintains a field staff of applications specialists who support the sales force
by responding to complex technical and applications problems.
The Company's Amistar Manufacturing Services division is marketed through
a combination of Company personnel, electronics component distributors and
outside representatives.
Dependence on a Single Customer
- -------------------------------
During 1998, 1997 and 1996, machine sales of $2,326,000 (or 11%),
$3,751,000 (or 16%) and $3,623,000 (or 16%) of total sales were made to Smart
Modular Technologies, respectively.
Foreign Sales
- -------------
A portion of the Company's machine sales has traditionally been to foreign
customers. Profitability and product mix of foreign sales are generally
comparable to domestic sales. The Company is subject to the usual risks of
international trade, including unfavorable economic conditions, foreign currency
risk, restrictive trade policies, controls on funds and political uncertainties.
The following table illustrates the Company's sales, expressed in dollars and as
a percentage of total sales, in major geographic markets over the last three
fiscal years.
<TABLE>
<CAPTION>
(Dollars in thousands) 1998 1997 1996
------------------------- ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
United States $18,258 88% $17,348 76% $19,497 84%
Europe 2,010 10% 4,035 18% 3,350 14%
South America\Canada 258 1% 1,389 6% 240 1%
Asia 202 1% 68 0% 183 1%
------------- -------- ------------ ------- ------------ -------
TOTALS $20,728 100% $22,840 100% $23,270 100%
============= ======== ============ ======= ============ =======
</TABLE>
The Company's products can be freely exported to most countries under a
general destination (G-Dest) export classification with the U.S. Department of
Commerce. Additional information regarding foreign operations can be found in
notes 11 and 12 to the consolidated financial statements.
4
<PAGE>
Service
- -------
The Company provides installation and service for all of its machines
other than those sold by certain distributors with qualified service personnel
who undertake the installation and service responsibility. The Company provides
service personnel for its customers at the Company's San Marcos, California,
Warrenville, Illinois, and Danvers, Massachusetts offices. In Europe, the
Company's distributor, Assembly Service GmbH provides service support.
Machine Manufacturing
- ---------------------
Amistar's machines are complex devices that combine a number of electronic
and electromechanical technologies, and must function in difficult production
environments with a high degree of precision and reliability. Product designs
typically call for a high percentage of specially designed machine parts, many
of which are fabricated in-house, as well as standard, commercially available
parts. The Company utilizes its' machine shop located in San Marcos, California
for in-house fabrication.
Those parts of the Company's products that are not manufactured directly
by Amistar are purchased from outside vendors. Most parts are available from
more than one supplier. While certain parts are presently purchased from single
sources, the Company believes it would be able to locate additional sources for
such parts without material adverse effect on its business. Amistar has never
experienced a major production delay due to a parts shortage or the loss of a
single-sourced part or its tooling.
Competition
- -----------
The Company competes with a number of domestic and foreign manufacturers
of electronic component placement or insertion equipment, many of whom have more
diverse product lines and greater financial and marketing resources than the
Company. The Company's primary domestic competitors are Universal Instrument
Corporation, a subsidiary of Dover Corporation, Zevatech and Quad. Amistar also
faces competition from foreign companies, including Panasonic, Fuji, Mydata,
Philips and Siemens.
The Company believes that the key factors affecting the choice of an
insertion or surface mount machine are reliability, speed, quality and speed of
service, ability to detect errors, range of components inserted or placed, ease
of programming and price.
There are numerous companies, both large and small in size, which provide
contract electronic circuit board assembly services.
Backlog
- -------
Customer machine order lead times are usually of a short duration. Current
practice is to wait to place the purchase order until just before the equipment
is required. The Company's private label inventory supply pipeline has been
adequate to fulfill machine orders in a short lead-time. Therefore, backlog may
not necessarily be indicative of future sales. Order lead times for contract
manufacturing vary. The backlog at December 31, 1998 was $6,503,000, all of
which is expected to be shipped during the next 12 months. Backlog was
$4,279,000 at December 31, 1997.
Patents and Licenses
- --------------------
Amistar has been issued the following nine United States patents:
1) Tape Feeder for A Surface Mount Placement System
2) Surface Mount Placement System
3) Surface Mounted Component Transport System
4) Pneumatic Feed System for Axial Lead Components
5) Automatic Part Positioning System
6) Cartridge Feed Mechanism for Axial Lead Component Inserter
7) Multi-Jaw Centering Head Structure for Surface Mounted Component
Placement Machines
8) Belt drive tube feeder for a surface mount placement system
9) Surface mount placement system with a single step multiple
place carriage
5
<PAGE>
Patents and Licenses, continued
- -------------------------------
Although the Company believes that its patents have value, the Company
also believes that responding to the technological changes that characterize the
electronics industry, maintaining a strong marketing and service operation, and
continuing to produce quality products are of greater significance than patent
protection. Moreover, there can be no assurance that patents applied for will be
granted or that any patents presently held, or to be held, by the Company will
afford it commercially significant protection of its proprietary technology.
Employees
- ---------
During the week ended February 12, 1999, the Company had 144 full-time
employees and 11 temporary employees. Of the total employees, 98 were employed
in manufacturing, 26 in marketing and service, 9 in product development and 11
in administration and finance.
Forward Looking Statements
- --------------------------
This Annual Report, contains forward-looking statements within the meaning
of the Private Securities Reform Act of 1995, particularly statements regarding
market opportunities, success of research and development, customer acceptance
of products, gross profit and marketing expenses. These forward-looking
statements involve risks and uncertainties, and the cautionary statements set
forth below, identify important factors that could cause actual results to
differ materially from those in any such forward-looking statements. Such
factors include, but are not limited to, adverse changes in general economic
conditions, including changes in the specific markets for the Company's
products, product availability, decreased or lack of growth in the electronics
industry, adverse changes in customer order patterns, increased competition,
lack of acceptance of new products, pricing pressures, lack of success in
technological advancements, risks associated with foreign operations and other
factors.
6
<PAGE>
ITEM 2. PROPERTIES
The Company owns the building and 5.6 acres of land on which the building
is located in San Marcos, California. The Company's headquarters, principal
administration, machine manufacturing, electronic manufacturing services, and
research and development offices are located in this building of 80,000 square
feet which was completed in April of 1987.
The Company leases a 14,000 square foot facility in Anaheim, California
for a term of five years, expiring in March 2001, at a current monthly rental
rate of $7,112. This facility is utilized for Amistar Manufacturing Services.
The Company also leases sales and service offices at the following locations:
Danvers, Massachusetts, with a term of three years, expiring June 30, 2001 and
at a monthly rent rate of $333, Warrenville, Illinois, with a term of five
years, expiring August 2002, at a current monthly rate of $2,242.
ITEM 3. LEGAL PROCEEDINGS
The Company is not aware of any material pending legal proceedings
involving the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS AND DIRECTORS
Name Age Title
---- --- -----
Stuart C. Baker 67 Chairman of the Board, President and Director
William W. Holl 68 Vice President of Finance, Treasurer,
Secretary and Director
Harry A. Munn 47 Vice President of Sales and Marketing
Daniel C. Finn 42 Vice President of Engineering
Carl C. Roecks 65 Director
Richard A. Butcher 58 Director
Gordon S. Marshall 79 Director
Mr. Baker, a founder of the Company, has served the Company as a Director
and President since its inception in 1971 and as Chairman of the Board since
1993.
Mr. Holl, a founder of the Company, has served the Company as a Director
and as Treasurer and Secretary since its inception in 1971, and as Vice
President of Finance since 1978.
Mr. Munn has served the Company since 1985 and as Vice-President since
1997.
Mr. Finn has served the Company since 1979 and as Vice President of
Engineering since 1995.
Mr. Roecks, a founder of the Company, has served the Company in various
engineering and management capacities since its inception in 1971. Since 1989
Mr. Roecks has been semi-retired, and serves the Company on a part-time basis.
Mr. Butcher was elected a Director of the Company in February 1984. From
1977 to the present, he has been a group managing Director of Marbaix (Holdings)
Ltd., an equipment manufacturer and distributor, and the Managing Director of
Automation Ltd., a wholly-owned subsidiary of Marbaix and the Company's
exclusive distributor in Great Britain and Ireland.
Mr. Marshall has served the Company as the Chairman of the Board from 1974
to 1993. Mr. Marshall is the founder and Chairman of the Board of Marshall
Industries, an electronics distribution company.
7
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
From May 11, 1984, when Amistar had its initial public offering, until
June 18, 1985, the Company's stock was traded on the NASDAQ over the counter
market under the symbol AMTA. Since June 18, 1985 the Company's stock has traded
on the NASDAQ/NMS (National Market System). The following table reflects the
closing prices per share for the last two years:
Quarter ended High* Low*
------------- ----- ----
Mar. 31, 1998 5 3-1/4
Jun. 30, 1998 4-1/2 3-1/4
Sep. 30, 1998 3-1/2 2-1/4
Dec. 31, 1998 2-5/8 1-5/16
Mar. 31, 1997 4-7/8 3
Jun. 30, 1997 6-3/16 3-1/2
Sep. 30, 1997 6-3/16 4
Dec. 31, 1997 4-3/8 3-1/8
* The prices indicated are as reported by the National Association of
Security Dealers.
The Company had approximately 100 shareholders of record on December 31,
1998, however, the Company believes there are over 1,000 beneficial owners based
on the number of requests for proxies.
The Company has not paid cash dividends on its common stock and does not
plan to pay cash dividends to its shareholders in the foreseeable future.
On October 10, 1998, the Company was notified by NASDAQ that the Company's
common stock failed to maintain a market value of public float greater than or
equal to $5,000,000 during the period reviewed in accordance with the NASDAQ
Marketplace Rule 4450(a)(2) under Maintenance Standard 1. The Company was given
a deadline of January 15, 1999 to meet the requirement or face de-listing
action.
The Company did not demonstrate compliance with the requirement by the
deadline, and was unsuccessful in its efforts to stay the de-listing of the
Company's securities. The Company will apply for listing under the NASDAQ Small
Cap market, which the Company believes it will qualify.
8
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
Consolidated Statements of Earnings Data:
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------
(In thousands, except per share data)
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 20,728 $ 22,840 $ 23,270 $ 25,361 $ 17,978
Cost of sales 15,109 14,738 14,634 16,732 11,584
------------ ------------ ------------ ------------ ------------
Gross profit 5,619 8,102 8,636 8,629 6,394
------------ ------------ ------------ ------------ ------------
Operating expenses:
Selling 3,222 4,155 4,402 4,109 3,526
General & administrative 1,067 1,014 1,145 1,171 920
Engineering, research & development 1,202 1,462 1,234 951 1,431
------------ ------------ ------------ ------------ ------------
5,491 6,631 6,781 6,231 5,877
Income from operations 128 1,471 1,855 2,398 517
Other income (expense):
Interest, net (8) 86 (67) (99) (82)
Miscellaneous 61 41 51 78 122
------------ ------------ ------------ ------------ ------------
Earnings before income taxes 181 1,598 1,839 2,377 557
Income tax (benefit) expense (50) 505 117 300 37
------------ ------------ ------------ ------------ ------------
Net earnings $ 231 $ 1,093 $ 1,722 $ 2,077 $ 520
============ ============ ============ ============ ============
Basic and diluted earnings per
common share $ 0.07 $ 0.34 $ 0.53 $ 0.65 $ 0.17
============ ============ ============ ============ ============
Weighted-average shares
outstanding (in thousands) 3,206 3,236 3,228 3,193 3,137
============ ============ ============ ============ ============
</TABLE>
<TABLE>
Selected Consolidated Balance Sheet Data:
<CAPTION>
December 31,
--------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Working capital $ 11,709 $ 12,632 $ 11,938 $ 10,815 $ 5,291
Total assets 21,759 22,236 21,551 19,742 17,429
Long-term obligations 4,500 4,500 4,500 4,500 -
Retained earnings 10,803 10,573 9,480 7,758 5,682
Total shareholders' equity 15,424 15,448 14,338 12,613 10,485
</TABLE>
9
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)
Quarterly Financial Information (unaudited)
<CAPTION>
Quarter Ended,
-------------------------------------------------------------
3/31 6/30 9/30 12/31
------------ ------------- ------------ ------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
1998
Net sales $ 5,306 $ 4,890 $ 4,547 $ 5,985
Gross profit 1,731 1,233 1,058 1,597
Net earnings (loss) 177 (111) (148) 313
Basic and diluted earnings
(loss) per common share 0.05 (0.03) (0.05) 0.10
1997
Net sales $ 6,415 $ 5,053 $ 4,454 $ 6,918
Gross profit 2,310 1,893 1,338 2,561
Net earnings (loss) 337 277 (129) 608
Basic and diluted earnings
(loss) per common share 0.10 0.09 (0.04) 0.19
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
1998 Compared to 1997
- ---------------------
Sales decreased to $20,728,000, from $22,840,000 in 1997, a decrease of
9%. During the second and third quarters of 1998, sales were negatively impacted
by delays in supplier deliveries and customer acceptance of the newest private
label model. The latest model was substantially redesigned, including a new
generation operating system. After initial deliveries, it was discovered that
the early production units required modifications in order to be suitable for
applications required by the Company's customer base. Modifications were
completed late in the third quarter and shipments resumed, ending the year at a
robust level in December. The Company also experienced sluggish sales in the
Mid-West and Eastern regions during 1998.
The table on page 13 shows that sales of Amistar manufactured machines,
parts, and service declined during 1998, as in 1997 and 1996. The Company has
continued to experience difficulty marketing its PlaceMaster(R) surface mount
machine models. During 1998, no PlaceMaster(R) machines were sold compared to
one unit sold in both 1997 and 1996. Currently, three PlaceMaster(R) machines
remain in inventory which the Company plans to either sell at aggressive pricing
or transfer to AMS plant equipment in the next 24 months. During 1998, three
PlaceMaster(R) machines were transferred to AMS as plant equipment as part of a
planned expansion of assembly line capacity. The Company continues to evaluate
the marketability of its products and establishes appropriate inventory
allowances for obsolescence as required. The Company's through-hole machines in
the field generate a significant portion of parts and service sales. As the
population of the Company's through-hole technology machines has declined in the
field, demand for spare parts and out-of-warranty field service has continued to
follow a parallel trend. The Company's primary sales and gross margin
contributions have come from the distributed private label machine line for each
of the years in the three-year period ended December 31, 1998.
Sales generated from the AMS division increased 14% in 1998 as compared to
an increase of 28% in 1997. No portion of sales is attributable to inflation for
1998.
10
<PAGE>
Results of Operations-1998 Compared to 1997 (continued)
- -------------------------------------------------------
Gross profit decreased $2,483,000 and 8.4% as a percentage of sales in
1998, compared to 1997. This decrease was due to a negative gross profit
realized by the AMS division, additions to inventory reserves related to
PlaceMaster(R) machines, and excess plant capacity in the machine division. The
gross profit was also negatively affected by a greater degree of machine sales
discounting in 1998, compared to 1997, due to competitive conditions. The
negative gross profit of $336,000 generated by AMS in 1998 compared to a gross
profit of $165,000 in 1997. The decline in AMS gross profit is primarily due to
increased management and support personnel costs in order to support a higher
level of volume than presently experienced.
Selling expenses decreased $933,000 in the current year due to the closure
of the Company's European operations in 1997. Lower machine sales volume and the
resulting lower commission expense, which generally ranges from 7% to 12% of
selling price also resulted in reduced selling expenses.
Engineering, research and development decreased $260,000 in 1998,
primarily due to the conclusion of development of the PlaceMaster(R) machines.
Development efforts in 1998 were focused on a new machine, which will support
the circuit board assembly process. The Company does not have any firm
commitments to continue funding product research and development, however,
management anticipates that spending on development will continue at existing
levels during 1999.
Interest income decreased $93,000 in 1998, compared to 1997, as the
Company settled a contract, which generated interest income with a customer from
the Company's German subsidiary in 1997. Gain on the sale of assets and
dividends from workers compensation insurance represent the majority of
miscellaneous income during 1998 and 1997.
The income tax benefit in 1998 was generated primarily from deductions
related to liquidation of the Company's German subsidiary.
1997 Compared to 1996
- ---------------------
Sales decreased to $22,840,000, from $23,270,000 in 1996, a decrease of
2%. During the third quarter of 1997, sales were negatively impacted by delays
in the delivery of the new 1997 private label model. This delay in delivery
resulted in a shortage of its highest volume private label machine model. The
Company also experienced sluggish sales in the Mid-West region during 1997.
Sales generated from the Amistar Manufacturing Services division increased
28% in 1997 as compared to an increase of 29% in 1996. The addition of the
Anaheim facility in 1996 contributed to the Amistar Manufacturing Services
division sales growth. No portion of sales is attributable to inflation for 1997
or 1996.
Gross margin percentage decreased 1.5% in 1997. This was due to the
greater mix of Amistar Manufacturing Services sales, partially offset by the
favorable effects of improved dollar/yen exchange rate on private label machine
purchases. Gross margin dollars decreased $535,000 in 1997 due to lower sales
and the factors mentioned above. In addition, gross margin dollars contributed
by the Amistar Manufacturing Services division declined in 1997 compared to 1996
due to costs related to the additional facility and increased mix of turn-key
sales, which earn lower margins.
Selling expenses decreased $247,000 in the current year due to lower
machine sales volume and the resulting lower commission expense. Costs of
approximately $120,000 related to closing the Company's direct sales and service
facilities in Europe were recorded in 1997.
General and administrative expenses decreased $131,000 in 1997, compared
to 1996, primarily due to lower levels of management bonuses earned in 1997.
Engineering, research and development increased $227,000 in 1997, due to
additional development projects related to the PlaceMaster(R) machines.
Interest income increased $154,000 in 1997, due to a settlement of a
contract with a customer from the Company's German subsidiary. Gain on the sale
of assets and dividends from workers compensation insurance represent the
majority of miscellaneous income during 1997 and 1996.
The effective income tax rate in 1997 was 31.6% compared to 6.4% in 1996,
due to the recognition of a deferred income tax benefit in 1996.
11
<PAGE>
Year 2000 Issues
- ----------------
The Year 2000 problem concerns the inability of certain computer systems
to appropriately recognize the year 2000 when the last two digits of the year
are entered in the date field. The Company has assessed its Year 2000
requirements and believes that its major computer systems, its products, and
capital equipment are Year 2000 compliant. Therefore, the Company believes that
its costs to become Year 2000 compliant have been immaterial and will continue
to be immaterial in the future.
The Company, however, could be adversely affected by the Year 2000 problem
if computer systems of third parties such as customers, suppliers, banks,
utilities, and others with which the Company does business fail to address the
Year 2000 problem successfully. While the Company continues to gather data on
the Year 2000 compliance status of its customers and suppliers, there can be no
assurance that the Year 2000 problem, if experienced by such third parties, will
not have a material adverse effect upon the Company's business, operating
results or financial condition. The Company expects to have completed gathering
data on its key customers and suppliers by June 30, 1999. Of the key suppliers
identified, Tenryu Technics, the manufacturer of the private label line, has
confirmed that their Tenyru built machines are Year 2000 compliant and that they
are currently evaluating their enterprise information system for Year 2000
compliance.
The company has not yet developed a contingency plan for a worst case Year
2000 scenario, but expects to develop such a plan by June 30, 1999.
The above Year 2000 disclosure constitutes a "Year 2000 Readiness
Disclosure" as defined in The Year 2000 Information and Readiness Disclosure Act
(the "Act"), which was signed into law on October 19, 1998. The Act provides
added protection from liability for certain public and private statements
concerning a company's Year 2000 readiness.
Liquidity and Capital Resources
- -------------------------------
The Company's liquidity decreased slightly during 1998 compared to
increases in both 1997 and 1996. Working capital declined $923,000 in 1998
compared to increases of $694,000 in 1997 and $1,123,000, in 1996. Operating
activities generated $.4 million, $1.4 million and $.7 million in cash flow
during the years ended 1998, 1997 and 1996, respectively. The current year
decrease in working capital was primarily due to the utilization of cash for
capital expenditures and the repurchase of common stock. Surplus cash is
invested in money market accounts.
The Company sets aside cash to finance additional machine sales with
contracts receivable. The Company believes these financing arrangements will
provide increased interest income and additional sales advantages. A significant
portion of the contacts receivable balance at December 31, 1998 originated from
sales to customers that the Company believes are of moderate risk. The Company
regularly evaluates the collectability associated with these balances and
provides allowances as deemed necessary.
As in 1997, investment activities in 1998 consisted primarily of capital
expenditures to support the continued growth the Amistar Manufacturing Services
division. During 1998, the AMS division doubled surface mount capacity, added
optical inspection, occupied a greater portion of the building square footage,
and re-engineered the factory work and materials flow at the San Marcos,
California facility.
The Company has financed its 80,000 square foot manufacturing and office
facility located in San Marcos, California through $4,500,000 of bonds issued by
the Industrial Development Authority of the City of San Marcos. The bonds carry
a variable interest rate and mature in December 2005. Payments of principal and
interest are unconditionally guaranteed by an irrevocable letter of credit
issued by the Company's bank. The terms of the present irrevocable letter of
credit required the Company in 1995 to establish a $1,329,000 interest-bearing
cash collateral account in order to meet a required loan to value ratio.
The Company's primary sources of liquidity consist of cash, working
capital, and a two million dollar line of credit with its bank, which was
available but not utilized. The line of credit, originally set to expire on
December 31, 1998, was extended until March 31, 1999. The Company believes it
will be successful in renewing its' credit facility after delivery of the 1998
annual report to its bank. The Company believes that cash provided from
operations, cash balances at December 31, 1998, and available drawings from its
line of credit as renewed, will be adequate to support its operating and
investing requirements through 1999.
12
<PAGE>
The following table sets forth the consolidated statements of earnings as a
percentage of net sales:
<TABLE>
<CAPTION>
Percentage of Net Sales
-----------------------
1998 1997 1996
-------------- --------------- ------------
<S> <C> <C> <C>
Net sales 100.0 100.0 100.0
Cost of sales 72.9 64.5 63.0
-------------- --------------- ------------
Gross profit 27.1 35.5 37.0
Operating expenses:
Selling 15.5 18.2 18.8
General & administrative 5.1 4.5 4.9
Engineering, research & development 5.8 6.4 5.3
-------------- --------------- ------------
26.4 29.1 29.0
-------------- --------------- ------------
Income from operations 0.7 6.4 8.0
Other income (expense):
Interest, net .0 .4 (.3)
Miscellaneous .2 .2 .2
-------------- --------------- ------------
Earnings before income taxes 0.9 7.0 7.9
Income tax (benefit) expense (.2) 2.2 0.5
-------------- --------------- ------------
Net earnings 1.1 4.8 7.4
============== =============== ============
</TABLE>
The following table sets forth sales (in thousands) by product classification:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Amistar machines,
parts and service $ 4,346 21% $ 5,532 24% $ 6,140 26%
Private label machines 10,193 49% 11,869 52% 12,894 56%
Manufacturing services 6,189 30% 5,439 24% 4,236 18%
----------- -------- ----------- -------- ----------- --------
$20,728 100% $22,840 100% $23,270 100%
=========== ======== =========== ======== =========== ========
</TABLE>
ITEM 7a. QUANTITATIVE AND QUALITATIVE DATA ABOUT MARKET RISK
The Company is exposed to a variety of risks, including foreign currency
fluctuations and changes in interest rates affecting the cost of its debt.
Approximately 40% of the Company's cost of goods sold for the year ended
December 31, 1998, represents purchases of private label product denominated in
Yen. During the year ended December 31, 1998, the Yen versus the U.S. Dollar
exchange rate experienced on purchases ranged from a low of 115.58 Yen to a high
of 143.35 Yen. A significant decrease in the exchange rate of Yen versus the
U.S. Dollar could have an adverse effect on the Company's financial condition or
results of operations.
The Company's only long-term debt at December 31, 1998, is comprised of
Industrial Development bonds. The Company financed the construction of a
manufacturing and office facility in San Marcos, California through $4,500,000
of bonds issued by the Industrial Development Authority of City of San Marcos on
December 19, 1985. The bonds mature in December 2005, and interest is accrued at
a variable monthly rate. Interest was paid at a weighted average variable rate
of 3.88% during 1998. A significant increase in interest rates could have an
adverse effect on the Company's financial condition or results of operations.
13
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Stockholders
Amistar Corporation:
We have audited the accompanying consolidated balance sheets of Amistar
Corporation and subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of earnings, shareholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Amistar Corporation
and subsidiaries as of December 31, 1998 and 1997 and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
San Diego, California \s\ KPMG LLP
February 10, 1999
14
<PAGE>
AMISTAR CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, 1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS (notes 4 & 5)
Current assets:
Cash and cash equivalents $ 1,476,611 $ 2,521,449
Trade accounts receivable, less allowance for doubtful
accounts of $164,839 in 1998 and $276,126 in 1997 4,852,762 5,255,393
Contracts receivable (note 3) 1,139,686 318,973
Income taxes receivable (note 6) 289,204 -
Inventories (note 2) 4,834,863 5,326,809
Demonstration equipment 273,630 531,251
Prepaid expenses 216,703 271,402
Deferred income taxes (note 6) 461,000 695,000
-------------- --------------
Total current assets 13,544,459 14,920,277
-------------- --------------
Property and equipment, at cost
Land 981,875 981,875
Building and building improvements 4,043,098 3,989,919
Machinery and equipment 6,589,604 5,925,015
Computer software and equipment 707,525 670,830
Leasehold improvements 11,767 7,425
-------------- --------------
12,333,869 11,575,064
Less accumulated depreciation and amortization (6,565,582) (6,428,851)
-------------- --------------
Net property and equipment 5,768,287 5,146,213
-------------- --------------
Contracts receivable (note 3) 987,085 699,945
Restricted cash (note 5) 1,329,000 1,329,000
Other assets 130,087 140,693
-------------- --------------
$ 21,758,918 $ 22,236,128
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 652,161 $ 659,679
Accrued payroll and related costs 180,163 263,392
Accrued liabilities 460,206 517,510
Accrued product installation and warranty costs 115,000 125,000
Accrued commissions 427,766 505,954
Income taxes payable (note 6) - 216,408
-------------- --------------
Total current liabilities 1,835,296 2,287,943
Industrial development bonds (note 5) 4,500,000 4,500,000
Shareholders' equity (note 7):
Preferred stock, $.01 par value. Authorized 2,000,000
shares; none outstanding - -
Common stock, $.01 par value. Authorized 20,000,000
shares; 3,136,500 and 3,236,500 shares issued and
outstanding in 1998 and 1997, respectively 31,365 32,365
Additional paid-in capital 4,589,043 4,843,244
Retained earnings 10,803,214 10,572,576
-------------- --------------
Total shareholders' equity 15,423,622 15,448,185
-------------- --------------
Commitments (note 8)
$ 21,758,918 $ 22,236,128
============== ==============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
15
<PAGE>
AMISTAR CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Earnings
<TABLE>
<CAPTION>
Years ended December 31, 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 20,727,734 $ 22,839,985 $ 23,270,402
Cost of sales 15,109,123 14,738,210 14,633,993
--------------- --------------- ---------------
Gross profit 5,618,611 8,101,775 8,636,409
Operating expenses:
Selling 3,221,907 4,154,762 4,402,427
General and administrative 1,066,993 1,014,350 1,144,561
Engineering, research and development 1,201,919 1,461,524 1,234,212
--------------- --------------- ---------------
5,490,819 6,630,636 6,781,200
--------------- --------------- ---------------
Income from operations 127,792 1,471,139 1,855,209
Other income (expense):
Interest expense (173,497) (172,461) (171,061)
Interest income 164,875 257,706 103,616
Miscellaneous 61,468 41,314 51,015
--------------- --------------- ---------------
Earnings before income taxes 180,638 1,597,698 1,838,779
Income tax (benefit) expense (note 6) (50,000) 505,000 117,000
--------------- --------------- ---------------
Net earnings $ 230,638 $ 1,092,698 $ 1,721,779
=============== =============== ===============
Basic and diluted earnings per common share $ 0.07 $ 0.34 $ 0.53
=============== =============== ===============
Weighted-average shares
outstanding (in thousands) 3,206 3,236 3,228
=============== =============== ===============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
16
<PAGE>
AMISTAR CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Years Ended December 31, 1998, 1997 and 1996
- -------------------------------------------------------------------------------------------------------------------------------
Common Stock
---------------------------- Additional Total
Shares Paid-in Retained Shareholders'
(in 000's) Par value capital Earnings Equity
------------- ------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1995 3,227 $ 32,270 $ 4,822,761 $ 7,758,099 $ 12,613,130
Shares issued in connection with
the stock option plan 1 12 2,644 - 2,656
Net income - - - 1,721,779 1,721,779
------------- ------------- ----------------- ----------------- -----------------
Balances at December 31, 1996 3,228 32,282 4,825,405 9,479,878 14,337,565
Shares issued in connection with
the stock option plan 9 83 17,839 - 17,922
Net income - - - 1,092,698 1,092,698
------------- ------------- ----------------- ----------------- -----------------
Balances at December 31, 1997 3,237 32,365 4,843,244 10,572,576 15,448,185
Repurchase of common shares (100) (1,000) (254,201) - (255,201)
Net income - - - 230,638 230,638
------------- ------------- ----------------- ----------------- -----------------
Balances at December 31, 1998 3,137 $ 31,365 $ 4,589,043 $ 10,803,214 $ 15,423,622
============= ============= ================= ================= =================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
17
<PAGE>
AMISTAR CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended December 31, 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows (used in) provided by operating activities:
Net earnings $ 230,638 $ 1,092,698 $ 1,721,779
Adjustments to reconcile net earnings to net cash
(used in) provided by operating activities:
Depreciation and amortization 615,946 610,571 439,056
Gain on sale of equipment (21,000) (39,368) (8,700)
Provision for deferred income taxes 234,000 (37,000) (658,000)
Changes in assets and liabilities:
Trade accounts receivable, net 402,631 1,279,784 (1,266,378)
Income taxes receivable (289,204) - -
Inventories (255,742) (199,766) (124,335)
Demonstration equipment 257,621 235,511 783,084
Prepaid expenses 54,699 35,193 (72,633)
Contracts receivable (1,107,853) (1,186,849) (224,523)
Other assets 10,606 14,270 (7,346)
Accounts payable (7,518) 120,224 28,479
Accrued payroll and related costs (83,229) (153,128) 17,623
Accrued liabilities (57,304) (211,463) (64,283)
Customer deposits - - (105,356)
Accrued product installation and warranty costs (10,000) (25,000) -
Accrued commissions (78,188) (95,162) 208,454
Income taxes payable (216,408) (60,529) (1,062)
------------------ ----------------- ------------------
Net cash (used in) provided by operating activities (320,305) 1,379,986 665,859
Cash flows from investing activities:
Proceeds from sale of equipment 26,694 44,919 8,700
Capital expenditures (496,026) (812,896) (768,180)
------------------ ----------------- ------------------
Net cash used in investing activities (469,332) (767,977) (759,480)
Cash flows from financing activities:
Repurchase of common stock (255,201) - -
Common stock issued upon exercise of stock options - 17,922 2,656
------------------ ----------------- ------------------
Net cash (used in) provided by financing activities (255,201) 17,922 2,656
Net (decrease) increase in cash and cash equivalents (1,044,838) 629,931 (90,965)
Cash and cash equivalents at the beginning of the year 2,521,449 1,891,518 1,982,483
------------------ ----------------- ------------------
Cash and cash equivalents at the end of the year $ 1,476,611 $ 2,521,449 $ 1,891,518
================== ================= ==================
Supplemental disclosure of cash flow information
Cash paid during the year for:
Interest $ 173,978 $ 171,012 $ 172,904
================== ================= ==================
Income taxes $ 108,205 $ 602,529 $ 777,000
================== ================= ==================
</TABLE>
Supplemental disclosure of non-cash investing activities:
The Company transferred inventory valued $747,688 and $129,191 to property
and equipment during 1998 and 1996 respectively.
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
18
<PAGE>
AMISTAR CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three years ended December 31, 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
-----------------------
Amistar Corporation (the Company) manufactures and markets assembly
machinery for the electronics industry. In addition, the Company is a
contract assembler of printed circuit board assemblies, operating as a
separate division under the name Amistar Manufacturing Services (AMS). The
Company's customers are predominately located in the United States and
Europe. The Company's headquarters and primary manufacturing facility is
located in San Marcos, California. The Company's raw materials are readily
available, and the Company is not dependent on a single supplier or only a
few suppliers, except for the private label equipment line as disclosed in
12.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, Amistar AG (a Swiss corporation), Amistar
GmbH (a German corporation) and Amistar Ltd., a foreign sales corporation
(FSC). In December 1997, the Company decided to pursue European activities
through the use of independent distributors and as such, closed its own
direct sales and service offices in Germany and Switzerland. The liquidation
of the legal entities was substantially concluded in 1998. All significant
inter-company balances and transactions have been eliminated in
consolidation.
Revenue Recognition
-------------------
The Company recognizes sales upon shipment of machinery and parts and upon
performance of billable service labor. At the time of shipment, the Company
also provides for all estimated non-billable installation, training and
warranty repair costs to be incurred.
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Inventories
-----------
Inventories are valued at the lower of cost (first-in, first-out) or market
(net realizable value) and are reviewed regularly for obsolescence.
Demonstration Equipment
-----------------------
Demonstration equipment represents short-term transfers of inventory for
purposes of participating in trade shows and demonstrations with customers.
This equipment is typically sold or returned to inventory within six months.
Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation is recorded using
the straight-line method over the estimated useful lives of the assets as
follows:
Building 40 years
Building improvements 10 years
Machinery and equipment 4-7 years
Computer software and equipment 3-5 years
Leasehold improvements Shorter of lease term or useful life
19
<PAGE>
AMISTAR CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Deferred Bond Refinancing Costs
-------------------------------
Costs incurred in connection with refinancing the Industrial Development
Bonds are amortized on the effective interest method basis over the life of
the bonds. Deferred costs are included in prepaid expenses and other assets.
Research and Development Costs
------------------------------
Research and development costs are expensed in the period incurred.
Income Taxes
------------
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Stock Option Plan
-----------------
The Company applies the intrinsic value-based method of accounting
prescribed by Accounting Principles Board (APB) Opinion No. 25, ACCOUNTING
FOR STOCK ISSUED TO EMPLOYEES, and related interpretations, in accounting
for its fixed plan stock options. As such, compensation expense would be
recorded on the date of grant only if the current market price of the
underlying stock exceeded the exercise price.
Earnings per Common Share
-------------------------
The Company computes basic and diluted earnings per share in accordance with
SFAS No. 128, "Earnings per Share"
Use of Estimates
----------------
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets, liabilities and revenues and expenses,
and the disclosure of contingent assets and liabilities to prepare these
consolidated financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those estimates.
Foreign Currency Translation
----------------------------
The accounts of foreign subsidiaries are measured using the U.S. dollar as
the functional currency. Gains and losses are not significant and are
included in general and administrative expenses in the Consolidated
Statements of Earnings.
Fair Value of Financial Instruments
-----------------------------------
The carrying amount of cash and cash equivalents, trade and income tax
receivables, accounts payable and accrued expenses approximate fair values
because of the short maturity of those instruments. The carrying amounts of
contracts receivable approximate fair value because the contract interest
rates reflect market rates on similar instruments. The carrying amount of
the Company's Industrial Development Bonds approximates fair value due to
the variable interest rate provision, which effectively re-prices the
instruments to market values on a monthly basis.
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
-----------------------------------------------------------------------
Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the carrying amount of
the assets to future net cash flows (undiscounted and without interest)
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying amount or
fair value less costs to sell.
20
<PAGE>
AMISTAR CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) INVENTORIES
Inventories at December 31, 1998 and 1997, consist of the following:
<TABLE>
<CAPTION>
1998 1997
------------------ -------------------
<S> <C> <C>
Raw Material $ 876,236 $ 884,494
Work In Process 2,016,344 2,669,525
Finished Goods 1,942,283 1,772,790
------------------ ------------------
$ 4,834,863 $ 5,326,809
================== ==================
</TABLE>
(3) CONTRACTS RECEIVABLE
The Company sells machines to certain customers with payment terms extending
beyond one year. The Company charges interest on these sales contracts, at
rates ranging from 9% to 13%. The Company regularly evaluates the
collectability associated with these balances and provides allowances as
deemed necessary.
(4) REVOLVING CREDIT LINE
The Company maintains a $2,000,000 revolving line of credit with a bank to
finance short-term working capital. The terms provide for interest payable
at the bank reference rate (7.75% at December 31, 1998) plus 1%. The line is
secured by substantially all assets of the Company and matures in March
1999. During 1998, 1997 and 1996, no amounts had been advanced on this line.
(5) INDUSTRIAL DEVELOPMENT BONDS
The Company financed the construction of a manufacturing and office facility
in San Marcos, California through $4,500,000 of bonds issued by the
Industrial Development Authority of City of San Marcos on December 19, 1985.
The bonds originally matured in December 1995. In October 1995, the Company
secured an extension of the maturity date to December 2005. The bonds bear
interest at a variable rate (3.65% at December 31, 1998), with interest
payable monthly. The bonds are guaranteed by an irrevocable letter of
credit, which is secured by substantially all assets of the Company. The
terms of the irrevocable letter of credit required the Company to establish
a $1,329,000 interest-bearing cash collateral account in order to meet a
loan-to-value ratio covenant. Costs incurred in connection with the bond
refinancing primarily consists of loan origination fees, broker's
commission, legal and other fees, which have been capitalized and included
in prepaid expenses and other assets. The bond costs will be amortized over
the term of the bonds. Deferred bond-refinancing costs were $96,000 and
$110,000 at December 31, 1998 and 1997, respectively. Ongoing fees related
to the bonds and the irrevocable letter of credit will approximate 2% of the
bond principal annually.
21
<PAGE>
AMISTAR CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(6) INCOME TAXES
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
Federal State Foreign Total
---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
1998 Current $ (286,000) $ 2,000 $ - $ (284,000)
Deferred 211,000 23,000 - 234,000
---------------- ---------------- --------------- ----------------
$ (75,000) $ 25,000 $ - $ (50,000)
================ ================ =============== ================
1997 Current $ 323,000 $ 85,000 $ 134,000 $ 542,000
Deferred (29,000) (8,000) - (37,000)
---------------- ---------------- --------------- ----------------
$ 294,000 $ 77,000 $ 134,000 $ 505,000
================ ================ =============== ================
1996 Current $ 564,000 $ 165,000 $ 46,000 $ 775,000
Deferred (505,000) (153,000) - (658,000)
---------------- ---------------- --------------- ----------------
$ 59,000 $ 12,000 $ 46,000 $ 117,000
================ ================ =============== ================
</TABLE>
Actual income taxes for 1998, 1997 and 1996 differ from "expected" income taxes
for those years (computed by applying the U.S. federal statutory rate of 34% to
earnings before taxes) as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------------- ---------------- ---------------
<S> <C> <C> <C>
Income taxes (federal statutory rate) $ 61,000 $ 543,000 $ 625,000
State and foreign income taxes, net of federal
income tax benefit 17,000 67,000 54,000
Change in valuation allowance - - (641,000)
Permanent differences (142,000) (33,000) -
Other, net 14,000 (72,000) 79,000
---------------- ---------------- ---------------
$ (50,000) $ 505,000 $ 117,000
================ ================ ===============
</TABLE>
The tax effects of significant temporary differences, which comprise deferred
tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
1998 1997
-------------- ---------------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 76,000 $ 160,000
Reserve for returns - 30,000
Warranty reserves 46,000 50,000
Inventory reserves 252,000 182,000
Depreciation and amortization - 72,000
Accrued vacation 16,000 18,000
State income tax loss carryforwards 12,000 26,000
Foreign tax credits and loss carryforwards 145,000 139,000
Other 29,000 18,000
-------------- ---------------
Gross deferred tax assets 576,000 695,000
Deferred tax liabilities-depreciation and
amortization 115,000 -
-------------- ---------------
Net deferred tax assets $ 461,000 $ 695,000
============== ===============
</TABLE>
22
<PAGE>
AMISTAR CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(6) INCOME TAXES (CONTINUED)
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the amount and timing of scheduled reversal of deferred tax
liabilities, projected future taxable income and projections for future
taxable income over the periods, which the deferred tax assets are
deductible. Management believes it is more likely than not that the Company
will realize the benefits of these deductible differences.
The Company has foreign tax credits totaling $145,000, which are expected to
begin expiring in 2000.
(7) STOCK OPTION PLAN
In 1994, the Company adopted an incentive stock option plan (the "Plan") for
employees. The Plan allows for grants of options to purchase up to 310,000
shares of authorized but un-issued common stock. Stock options are granted
with an exercise price equal to the stock's fair market value, generally
vest over five years from the date of grant, and expire ten years after the
date of grant.
The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized in the accompanying
consolidated financial statements for its stock options issued to employees
of the Company. Had the Company determined compensation cost based on the
fair value at the grant date for its stock options under SFAS No. 123, the
effect on earnings and basic and diluted earnings per share would not have
been material.
Stock option activity during the periods indicated is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------------------
1998 1997 1996
--------------------------- --------------------------- ----------------------------
Weighted- Weighted- Weighted-
Average Average Average
No. of Exercise No. of Exercise No. of Exercise
Shares Price Shares Price Shares Price
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Beginning balance 13,750 $ 2.8466 12,000 $ 2.2552 13,250 $ 2.2429
Options granted 76,000 3.2862 10,000 3.0000 - -
Options exercised - - (8,250) 2.1250 (1,250) 2.4375
Options expired (60,000) 3.2292 - - - -
------------ ------------ ------------ ------------ ------------ ------------
Ending balance 29,750 $ 3.1980 13,750 $ 2.8466 12,000 $ 2.2552
============ ============ ============ ============ ============ ============
Balance exercisable 5,000 1,250 8,250
============ ============ ============
</TABLE>
At December 31, 1998, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $2.4375-$3.50 and 5 years,
respectively.
23
<PAGE>
AMISTAR CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(8) COMMITMENTS
The Company leases certain offices and plant facilities under operating
leases. Rental expense for operating leases approximated $114,000, $189,000,
and $242,000 for the years ended December 31, 1998, 1997 and 1996,
respectively.
A summary of future minimum lease payments under non-cancelable operating
leases follows:
Year Ending December 31:
------------------------
1999 $ 115,000
2000 116,000
2001 51,000
2002 20,000
-----------
$ 302,000
===========
(9) RELATED PARTY TRANSACTIONS
The Company purchases certain electronic components from Marshall Industries
(Marshall). Gordon Marshall, a director of the Company, is Chairman of the
Board of Marshall Industries. During 1998, 1997, and 1996, such purchases
totaled $861,000, $637,000 and $683,000, respectively. Accounts payable to
Marshall was $163,000 at December 31, 1998 and $59,000 at December 31, 1997.
The Company acts as a subcontractor to Marshall through its Amistar
Manufacturing Services division. Sales to Marshall were $1,223,000,
$1,215,000 and $924,000 in 1998, 1997 and 1996, respectively. Accounts
receivable from Marshall at December 31, 1998 and 1997 was $64,000 and
$46,000, respectively.
The Company sells its products to Automation, Ltd., the Company's exclusive
distributor for Great Britain and Ireland. Richard A. Butcher, a Director of
the Company, is Managing Director of Automation, Ltd. Sales to Automation,
Ltd. were $39,000, $73,000 and $82,000 for 1998, 1997, and 1996,
respectively. Accounts receivable from Automation, Ltd. was $1,000 at
December 31, 1998, and $17,000 at December 31, 1997.
(10) 401(K) PLAN
In 1982, the Company established a 401(k) plan for the benefit of its
employees. The plan permits eligible employees to contribute to the plan up
to 10% of annual compensation subject to the maximum allowable under the
limits of Internal Revenue Code Sections 415, 401(k) and 404. The Company
makes a matching contribution to the plan equal to 50% of the first 6% of
compensation contributed by each participant. Amounts contributed in 1998,
1997, and 1996 were $82,000, $73,000, and $73,000, respectively.
24
<PAGE>
AMISTAR CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(11) INDUSTRY SEGMENTS AND GEOGRAPHIC INFORMATION
The following table summarizes the Company's two operating segments: Machine
Sales and Service, which encompasses the manufacture and distribution of
assembly machines and related accessories, and Amistar Manufacturing
Services. The Company identifies reportable segments based on the unique:
nature of operating activities, customer base and marketing channels.
Information is also provided by major geographical area.
<TABLE>
<CAPTION>
Mfg.
Machine Sales and Service Services
----------------------------------------------- ---------
United Rest of United
States Europe World Total States Corporate Total
----------- ---------- ---------- ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
Net sales $ 12,068 $ 2,010 $ 461 $ 14,539 $ 6,189 $ - $ 20,728
=========== ========== ========== ============ ========== ========== ===========
Earnings before
income taxes 651 109 25 785 (657) 53 181
=========== ========== ========== ============ ========== ========== ===========
Depreciation and amortization 76 - - 76 329 211 616
=========== ========== ========== ============ ========== ========== ===========
Total assets 10,212 1,237 36 11,485 3,014 7,260 21,759
=========== ========== ========== ============ ========== ========== ===========
Additions to long-lived assets 25 - - 25 1,110 109 1,244
=========== ========== ========== ============ ========== ========== ===========
YEAR ENDED DECEMBER 31, 1997:
Net sales $ 11,909 $ 4,035 $ 1,457 $ 17,401 $ 5,439 $ - $ 22,840
=========== ========== ========== ============ ========== ========== ===========
Earnings before
income taxes 1,255 217 75 1,547 (76) 127 1,598
=========== ========== ========== ============ ========== ========== ===========
Depreciation and amortization 70 24 - 94 382 135 611
=========== ========== ========== ============ ========== ========== ===========
Total assets 9,099 1,581 31 10,711 2,226 9,299 22,236
=========== ========== ========== ============ ========== ========== ===========
Additions to long-lived assets 85 6 - 91 483 239 813
=========== ========== ========== ============ ========== ========== ===========
YEAR ENDED DECEMBER 31, 1996:
Net sales $ 15,261 $ 3,350 $ 423 $ 19,034 $ 4,236 $ - $ 23,270
=========== ========== ========== ============ ========== ========== ===========
Earnings before
income taxes 1,478 267 34 1,779 76 (16) 1,839
=========== ========== ========== ============ ========== ========== ===========
Depreciation and amortization 53 7 - 60 264 115 439
=========== ========== ========== ============ ========== ========== ===========
Total assets 9,929 2,080 37 12,046 1,665 7,840 21,551
=========== ========== ========== ============ ========== ========== ===========
Additions to long-lived assets 47 - - 47 517 204 768
=========== ========== ========== ============ ========== ========== ===========
</TABLE>
Occupancy costs related to the Company's San Marcos, CA facility totaling
$84,800 were allocated to the AMS division from the Machine division during
1998, and $67,500 for 1997 and 1996. This occupancy allocation is based on
square feet utilized.
25
<PAGE>
AMISTAR CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(11) INDUSTRY SEGMENTS AND GEOGRAPHIC INFORMATION (CONTINUED)
Earnings before income taxes allocated to the Corporate segment for 1998,
1997 and 1996 consists of interest income, interest expense and
miscellaneous income. The basis for attributing revenue to the segments and
geographical areas is based on where products and services are sold.
Included in total assets are amounts due from foreign customers aggregating
$1,273,000 at December 31, 1998, $709,000 at December 31, 1997, and $834,000
at December 31, 1996.
(12) BUSINESS CONCENTRATIONS
The Company distributes the private label equipment line under a long-term
OEM supply agreement with Tenryu Technics. The agreement provides the
Company with exclusive rights to sell in North America and limited rights to
sell in Europe. Private label sales comprised 49%, 52% and 56% of total
sales in 1998, 1997 and 1996, respectively, and as a result, the Company has
significant dependence on this supplier. A change in suppliers could cause a
possible loss of sales and a decline in gross margins, which would adversely
affect operating results.
Most of the Company's customers are located in the United States and Europe.
Sales to Smart Modular Technologies represented 11% of total sales in 1998
and 16% in both 1997 and 1996. The Company estimates an allowance for
doubtful accounts based on the credit worthiness of its customers as well as
general economic conditions. Consequently, an adverse change in those
factors could effect the Company's estimate of its allowance for doubtful
accounts.
26
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There is incorporated herein by reference the information from the section
entitled "Election of Directors" on pages 2 and 3 of the Company's definitive
Proxy Statement, dated March 24, 1999, filed with the Securities and Exchange
Commission. Reference is also made to the list of Executive Officers, which is
provided in Part I of this report under the caption "Executive Officers and
Directors."
ITEM 11. EXECUTIVE COMPENSATION
There is incorporated herein by reference the information from the section
entitled "Compensation of Directors and Executive Officers" on pages 5 to 7 of
the Company's definitive Proxy Statement, dated March 24, 1999, filed with the
Securities and Exchange Commission.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is incorporated herein by reference the information from the section
entitled "Security Ownership of Certain Beneficial Owners and Management" on
page 3 of the Company's definitive Proxy Statement, dated March 24, 1999, filed
with the Securities and Exchange Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is incorporated herein by reference the information from the section
entitled "Certain Transactions" on page 10 of the Company's definitive Proxy
Statement, dated March 24, 1999, filed with the Securities and Exchange
Commission.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following financial statements of Amistar Corporation are set forth in
item 8 of this Annual Report on Form 10-K:
1. Independent Auditors' Report
Consolidated Financial Statements:
Consolidated Balance Sheets - December 31, 1998 and 1997
Consolidated Statements of Earnings - Years Ended
December 31, 1998, 1997, and 1996.
Consolidated Statements of Shareholders' Equity-Years Ended
December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows - Years Ended
December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements - Three Years
ended December 31, 1998
2. The following Consolidated Financial Statement Schedules as of
and for the years ended December 31, 1998, 1997 and 1996 are
submitted herewith:
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not
applicable or not required.
3. Exhibits:
3.1 Restated Articles of Incorporation of Registrant, as amended.*
3.2 Bylaws of Registrant, as amended.*
27
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K,
(CONTINUED)
10.1 Lease dated July 30, 1982, between Registrant (Lessee) and
Skyway Business Park, 1978, a Limited Partnership (Lessor) with
respect to premises located at 3130 Skyway Business Park,
Building 2, Santa Maria, California 93454*
10.2 Export Distributorship Agreement dated August 17, 1981 between
the Registrant and Automation, Ltd. (England, Scotland, Wales
and Ireland).*
10.3 Form of Export Distributorship Agreement used in France, West
Germany, Switzerland, Liechtenstein and Australia.*
10.4 Form of Contract for Sales Representatives used in the United
States.*
10.5 Letter Agreement dated December 6, 1984, between Registrant and
First Interstate Bank of California.***
10.6 1984 Employee Stock Option Plan and related forms of Incentive
Stock Option Agreement and Non-Qualified Stock Option
Agreement.**
10.7 Deed of Trust with assignment of rents and promissory note dated
September 21, 1984, with respect to the purchase of land in San
Marcos, California.***
10.8 Financing documents relative to $4,500,000 of bonds issued by
the Industrial Development Authority of the City of Sam Marcos
on December 19, 1985.***
10.9 Bank agreement dated November 19, 1984.*****
10.10 Amendments to the stock option plan.****
10.11 Form of Indemnity Agreement*****
10.12 1994 Employee Stock Option Plan******
22.1 List of Subsidiaries*
23.1 Independent Auditors' Consent and Report on Schedules
- -------------------------------
*These exhibits are incorporated by reference from the exhibits of the
same number in the Company's Registration Statement on form S-1
(No. 2-897782).
**This exhibit is incorporated by reference from the exhibits numbered
28.1, 28.2 and 28.3 of the Company's Registration Statement on Form
S-8 (No. 2-94696).
****This exhibit is incorporated by reference from the exhibits of the
same number in the Company's Annual Report on form 10-K for Year
ended December 31, 1985.
****This exhibit is incorporated by reference from the exhibits of the
same number in the Company's Annual Report on form 10-K for Year
ended December 31, 1986.
*****This exhibit is incorporated by reference from the exhibits of the
same number in the Company's Annual Report on form 10-K for Year
ended December 31, 1987.
******This exhibit is incorporated by reference of the Company's
Registration Statement of Form-S-8 filed February 15, 1995.
28
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
AMISTAR CORPORATION
By /s/ Stuart C. Baker
--------------------------------
Stuart C. Baker
President
Date: March 12, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and the dates indicated.
/s/Stuart C. Baker Principal Executive Officer March 12, 1999
- -------------------------- and Director
Stuart C. Baker
/s/ William W. Holl Vice President of Finance and March 12, 1999
- -------------------------- Administration, Treasurer
William W. Holl Secretary and Director (Chief
Financial and Accounting Officer)
/s/ Carl C. Roecks Director March 12, 1999
- --------------------------
Carl C. Roecks
/s/ Gordon S. Marshall Director March 12, 1999
- --------------------------
Gordon S. Marshall
/s/ Richard A. Butcher Director March 12, 1999
- --------------------------
Richard A. Butcher
29
<PAGE>
AMISTAR CORPORATION
AND SUBSIDIARIES
Schedule II
Valuation and Qualifying Accounts
Three years ended December 31, 1998
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- ---------------------------- -------------- ------------------------------- -------------- --------------
Additions
-------------------------------
Balance at Charged to Charged Balance
beginning costs and to other at end
Description of period expenses accounts Deductions of period
- ---------------------------- -------------- ------------------------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts (a):
1998 $ 276,126 $ 75,000 $ 103,545 $ 289,832 $ 164,839
============== ============== ============== ============== ==============
1997 $ 202,756 $ 70,000 $ 13,406 $ 10,036 $ 276,126
============== ============== ============== ============== ==============
1996 $ 104,615 $ 100,000 $ 1,837 $ 3,696 $ 202,756
============== ============== ============== ============== ==============
Reserve for inventory
obsolescence:
1998 $ 458,496 $ 300,000 $ 90,226 $ 217,522 $ 631,200
============== ============== ============== ============== ==============
1997 $ 697,701 $ 55,000 $ - $ 294,205 $ 458,496
============== ============== ============== ============== ==============
1996 $ 1,098,200 $ 85,000 $ - $ 485,499 $ 697,701
============== ============== ============== ============== ==============
Accrued product installation
and warranty costs (b):
1998 $ 125,000 $ 721,962 $ - $ 731,962 $ 115,000
============== ============== ============== ============== ==============
1997 $ 150,000 $ 969,000 $ - $ 994,000 $ 125,000
============== ============== ============== ============== ==============
1996 $ 150,000 $ 914,000 $ - $ 914,000 $ 150,000
============== ============== ============== ============== ==============
</TABLE>
(a) DEDUCTIONS REPRESENT ACCOUNTS WRITTEN OFF AS UNCOLLECTIBLE.
(b) TOTAL COST OF SERVICE, WHICH INCLUDES TRADE SHOWS, CUSTOMER
DEMONSTRATIONS, PRODUCT SUPPORT AND TRAINING, AS WELL AS WARRANTY AND
INSTALLATION EXPENSE.
SEE ACCOMPANYING INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE.
30
<PAGE>
AMISTAR CORPORATION
AND SUBSIDIARIES
Exhibit 23.1
Independent Auditors' Consent and Report on Schedule
The Board of Directors
Amistar Corporation:
The audits referred to in our report dated February 10, 1999 included the
related financial statement schedule as of December 31, 1998, and for each of
the years in the three-year period ended December 31, 1998, included in the Form
10-K of Amistar Corporation. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits. In our
opinion, the financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
We consent to incorporation by reference in the registration statements on Form
S-8 (Nos. 2-94696 and 33-89554), of Amistar Corporation and subsidiaries, of our
report dated February 10, 1999 relating to the consolidated balance sheets of
Amistar Corporation and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of earnings, shareholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1998,
which appears in the December 31, 1998, annual report on Form 10-K of Amistar
Corporation. We also consent to the use of our report on the schedule
incorporated herein by reference.
San Diego, California \s\ KPMG LLP
February 19, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,477
<SECURITIES> 0
<RECEIVABLES> 5,992
<ALLOWANCES> 154
<INVENTORY> 4,834
<CURRENT-ASSETS> 13,544
<PP&E> 12,334
<DEPRECIATION> 6,566
<TOTAL-ASSETS> 21,759
<CURRENT-LIABILITIES> 1,835
<BONDS> 4,500
0
0
<COMMON> 31,365
<OTHER-SE> 15,392
<TOTAL-LIABILITY-AND-EQUITY> 21,759
<SALES> 20,728
<TOTAL-REVENUES> 20,728
<CGS> 15,109
<TOTAL-COSTS> 20,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 173
<INCOME-PRETAX> 181
<INCOME-TAX> (50)
<INCOME-CONTINUING> 231
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 231
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.07
</TABLE>
