UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
Quarterly Report pursuant to Section 13 or 15(d)
of the Securities Act of 1934
For the quarter ended Commission File No. 0-13403
September 30, 1999
- --------------------------------------------------------------------------------
AMISTAR CORPORATION
(Exact name of registrant as specified in its Charter)
- --------------------------------------------------------------------------------
STATE OF CALIFORNIA 95-2747332
(State or other jurisdiction of Incorporation (I.R.S. Employer
or organization) Identification No.)
237 VIA VERA CRUZ
SAN MARCOS, CALIFORNIA 92069
(Address of principle executive offices) (Zip Code)
(760) 471-1700
(Registrant's telephone number, including area code)
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
--- ---
CLASS OUTSTANDING AT OCTOBER 29, 1999
Common Stock $.01 Par Value 3,136,500
1
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<TABLE>
Part I
ITEM 1. FINANCIAL STATEMENT
AMISTAR CORPORATION
Condensed Balance Sheets
(In thousands)
<CAPTION>
SEPT. 30,* DEC. 31,
1999 1998
-------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 2,356 $ 1,477
Trade accounts receivable, net 2,864 5,992
Income taxes receivable 701 289
Inventories 3,100 4,835
Demonstration equipment 251 274
Prepaid expenses 102 217
Deferred income taxes - 461
-------------- ---------------
Total current assets 9,374 13,545
Property and equipment, net 5,561 5,768
Contracts receivable 839 987
Restricted cash 1,329 1,329
Other assets 124 130
-------------- ---------------
$ 17,227 $ 21,759
============== ===============
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 342 $ 678
Accrued liabilities 862 1,158
-------------- ---------------
Total current liabilities 1,204 1,836
Industrial development bonds 4,500 4,500
Shareholders' equity:
Common stock 31 31
Additional paid-in capital 4,589 4,589
Retained earnings 6,903 10,803
-------------- ---------------
Total shareholders' equity 11,523 15,423
-------------- ---------------
$ 17,227 $ 21,759
============== ===============
</TABLE>
*Unaudited
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
2
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AMISTAR CORPORATION
Condensed Statements of Earnings
(Unaudited and In thousands)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 3,056 $ 4,547 $ 10,964 $ 14,743
Cost of sales 4,003 3,489 10,523 10,721
----------- ----------- ----------- -----------
Gross profit (947) 1,058 441 4,022
Operating expenses:
Selling 596 751 2,057 2,491
General and administrative 740 262 1,285 810
Research and development 238 271 897 873
----------- ----------- ----------- -----------
1,574 1,284 4,239 4,174
----------- ----------- ----------- -----------
Earnings (loss) from operations (2,521) (226) (3,798) (152)
Other income (expense), net (5) - (37) 28
----------- ----------- ----------- -----------
Earnings (loss) before
income taxes (2,526) (226) (3,835) (124)
Income tax expense (benefit) 588 (78) 65 (44)
----------- ----------- ----------- -----------
Net earnings (loss) $ (3,114) $ (148) $ (3,900) $ (80)
=========== =========== =========== ===========
Basic and diluted earnings
per common share $ (0.99) $ (0.05) $ (1.24) $ (0.03)
=========== =========== =========== ===========
Weighted average shares
outstanding 3,137 3,190 3,137 3,190
=========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
3
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AMISTAR CORPORATION
Statements of Cash Flows
(Unaudited and In thousands)
Nine months ended September 30, 1999 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (3,900) $ (80)
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation and amortization 548 470
Gain on sale of equipment (6) (21)
Valuation allowance for deferred income taxes 461 -
Changes in assets and liabilities:
Trade accounts receivable, net 3,128 2
Income taxes receivable (412) -
Inventories 1,585 514
Demonstration equipment 23 264
Prepaid expenses and other assets 121 65
Contracts receivable 148 459
Accounts payable and accrued liabilities (632) (666)
Income taxes payable - (216)
-------------- --------------
Cash provided by operating activities 1,064 791
Cash flows from investing activities:
Capital expenditures (191) (571)
Proceeds from sale of equipment 6 27
-------------- --------------
Cash flows used in investing activities (185) (544)
Cash flows from financing activities-
repurchase of common stock - (136)
-------------- --------------
Net increase in cash 879 111
Cash at the beginning of the period 1,477 2,521
-------------- --------------
Cash at the end of the period $ 2,356 $ 2,632
============== ==============
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 115 $ 133
Income tax $ 16 $ 230
</TABLE>
Supplemental disclosure of non-cash activities-the Company transferred inventory
valued at $ 150 to property and equipment in 1999.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
4
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AMISTAR CORPORATION
Notes to Condensed Financial Statements
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
- ---------------------
The Interim Condensed Financial Statements of Amistar Corporation, a
California corporation (the "Company") have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in the financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to such rules and
regulations. These Interim Condensed Financial Statements should be read in
conjunction with the audited financial statements and notes thereto included in
the Company's 1998 annual report on Form 10-K as filed with the Securities and
Exchange Commission on March 23, 1999.
Inventories
- -----------
Inventories are stated at the lower of cost (first-in, first-out) or market
and include material, labor and manufacturing costs. Inventories consist of the
following (in thousands):
Sept. 30,* Dec. 31,
1999 1998
--------------- ---------------
Raw Material $ 818 $ 876
Work In Process 478 2,016
Finished Goods 1,804 1,943
--------------- ---------------
$ 3,100 $ 4,835
=============== ===============
* Unaudited
During the quarter ended September 30, 1999, the Company recorded an
allowance for inventory obsolescence of $1,480,000.
Income taxes
- ------------
During the quarter ended September 30, 1999, the Company recorded a 100%
valuation allowance against the deferred income tax assets. This valuation was
based on the year-to-date loss position and management's belief that it is not
more likely than not that the Company will be able to utilize the benefits of
the deferred tax assets in the future.
5
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AMISTAR CORPORATION
Notes to Condensed Financial Statements, Continued
Industry Segments and Geographic Information
- --------------------------------------------
The following table summarizes the Company's two operating segments:
Machine Sales and Service, which encompass 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>
MACHINE SALES AND SERVICE
---------------------------------------
UNITED REST OF MFG.
STATES EUROPE WORLD TOTAL SERVICES CORPORATE TOTAL
- --------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SEPT. 30, 1999
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales to unaffiliated
customers $ 1,750 $ 84 $ (3) $ 1,831 $ 1,225 $ - $ 3,056
========= ========= ========= ========= ========= ========= =========
Earnings (loss) from operations (1,429) (51) (105) (1,585) (936) - (2,521)
========= ========= ========= ========= ========= ========= =========
Identifiable assets 7,408 1,120 103 8,631 2,360 6,236 17,227
========= ========= ========= ========= ========= ========= =========
THREE MONTHS ENDED SEPT. 30, 1998
Net sales to unaffiliated
customers $ 2,285 $ 398 $ 71 $ 2,754 $ 1,793 $ - $ 4,547
========= ========= ========= ========= ========= ========= =========
Earnings (loss) from operations (208) 152 (2) (58) (168) - (226)
========= ========= ========= ========= ========= ========= =========
Identifiable assets 11,626 1,247 38 12,911 2,114 6,113 21,138
========= ========= ========= ========= ========= ========= =========
NINE MONTHS ENDED SEPT. 30, 1999
Net sales to unaffiliated
customers $ 5,728 $ 104 $ 327 $ 6,159 $ 4,805 $ - $ 10,964
========= ========= ========= ========= ========= ========= =========
Earnings (loss) from operations (2,322) (55) (179) (2,556) (1,242) - (3,798)
========= ========= ========= ========= ========= ========= =========
NINE MONTHS ENDED SEPT. 30, 1998
Net sales to unaffiliated
customers $ 8,173 $ 1,378 $ 295 $ 9,846 $ 4,897 $ - $ 14,743
========= ========= ========= ========= ========= ========= =========
Earnings (loss) from operations 28 192 7 227 (379) - (152)
========= ========= ========= ========= ========= ========= =========
</TABLE>
6
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AMISTAR CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward Looking Statements
- --------------------------
This Quarterly Report contains forward-looking statements within the
meaning of the Private Securities Reform Act of 1995, particularly statements
regarding market opportunities, customer acceptance of products, gross margin
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 trade and other factors.
RESULTS OF OPERATIONS
Net Sales
- ---------
Net sales for the nine months ended September 30, 1999, were $3,056,000
compared to $4,547,000 for the same period in the prior year. Surface mount
assembly machine sales were negatively affected by the continuing soft demand in
the electronics industry and particularly in the PC memory assembly sector. The
first production DataPlace(R) machine was shipped at the end of the current
quarter. Sales of manufacturing services (AMS) declined by 32% over the same
three months in the prior year primarily due to the loss of a major customer
whose financial condition deteriorated. Shipments began near the end of the
current quarter on first time orders received from several new AMS customers.
Gross Profit
- ------------
Gross profit declined in the current quarter primarily due to a $1,480,000
charge to cost of sales resulting from additions to the allowance for inventory
obsolescence. The addition to the allowance for inventory obsolescence was made
primarily due to the absence of marketability of the PlaceMaster(R) line and for
accessories related to old PlacePro(R) models. The addition to the allowance was
further necessitated by management's decision to re-direct its marketing and
sales effort on promoting the DataPlace(R) machine.
Sales, General and Administrative
- ---------------------------------
Selling expenses decreased due to reduced commission expense on the lower
level of sales. General and administrative expenses increased in the current
quarter primarily due an increase in the allowance for doubtful accounts related
to a receivable from an AMS customer whose financial condition deteriorated.
7
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AMISTAR CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
Research and development
- ------------------------
Research and development expenses in the current quarter were incurred to
enhance the Company's new DataPlace(R) label application machine.
Income tax expense
- ------------------
The current quarter income tax expense includes a 100% valuation allowance
recorded against the deferred income tax asset. This valuation was based on the
year-to-date loss position and management's belief that it is not more likely
than not that the Company will be able to utilize the benefits of the deferred
tax assets in the future.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated cash of $1,064,000 from operating activities for the
nine months ended September 30, 1999. Accounts receivable decreased primarily
due to the lower sales level and the increased allowance for doubtful accounts.
Inventory decreased primarily due to the allowance for inventory obsolescence.
Accounts payable and accrued liabilities decreased due to the lower level of
inventory purchases and lower sales volume.
The Company was in default on financial covenants related to a letter of
credit reimbursement agreement with its bank. The letter of credit supports the
$4,500,000 industrial development bonds. On November 3, 1999, the Company
received a waiver related to these covenants extending through December 31,
2000. The Company believes that cash provided from operations, and cash balances
at September 30, 1999 will be adequate to support its operating and investing
requirements through 1999.
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 critical computer systems, its products, and capital
equipment are Year 2000 compliant. Therefore, the Company believes that its
costs to become Year 2000 compliant have not been material and are not
anticipated to be material 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
8
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AMISTAR CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
YEAR 2000 ISSUES (CONT'D)
results or financial condition. Of the key suppliers identified, Tenryu
Technics, the manufacturer of the private label line, has confirmed that their
Tenryu built machines are Year 2000 compliant and their assessment of general
Year 2000 readiness has been completed. The Company has not developed a
contingency plan for a worst case Year 2000 scenario. As a result of widespread
or extended failure of systems of third parties to be Year 2000 compliant, this
could have a material adverse effect on the Company's business and financial
condition or operating results.
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.
ITEM 3. 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. 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 September 30, 1999, is
comprised of Industrial Development bonds. The bonds mature in December 2005,
and interest is accrued at a variable monthly rate. A significant increase in
interest rates could have an adverse effect on the Company's financial condition
or results of operations.
9
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AMISTAR CORPORATION
PART II.
Items 1-6 Non-Applicable
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMISTAR CORPORATION
By /s/ William W. Holl
---------------------------
William W. Holl
Chief Financial Officer,
Chief Accounting Officer &
Duly Authorized Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF SEPTEMBER 30, 1999 AND THE RELATED STATEMENT OF OPERATIONS FOR THE
PERIOD ENDED SEPTEMBER 30, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,356
<SECURITIES> 0
<RECEIVABLES> 2,864
<ALLOWANCES> 0
<INVENTORY> 3,100
<CURRENT-ASSETS> 9,374
<PP&E> 5,561
<DEPRECIATION> 0
<TOTAL-ASSETS> 17,227
<CURRENT-LIABILITIES> 1,204
<BONDS> 4,500
0
0
<COMMON> 31
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 17,227
<SALES> 10,964
<TOTAL-REVENUES> 10,964
<CGS> 10,523
<TOTAL-COSTS> 10,523
<OTHER-EXPENSES> 4,239
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (111)
<INCOME-PRETAX> (3,835)
<INCOME-TAX> 65
<INCOME-CONTINUING> (3,900)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,900)
<EPS-BASIC> (1.24)
<EPS-DILUTED> (1.24)
</TABLE>
