<PAGE>
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
June 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 JULY 29, 1999
Common Stock $.01 Par Value 3,136,500
1
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Part I
ITEM 1. FINANCIAL STATEMENT
<TABLE>
AMISTAR CORPORATION
Condensed Balance Sheets
(In thousands)
<CAPTION>
JUNE 30,* DEC. 31,
1999 1998
--------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 1,193 $ 1,477
Trade accounts receivable, net 5,177 5,992
Income taxes receivable 826 289
Inventories 4,831 4,835
Demonstration equipment 114 274
Prepaid expenses 170 217
Deferred income taxes 461 461
--------------- ---------------
Total current assets 12,772 13,545
Property and equipment, net 5,571 5,768
Contracts receivable 948 987
Restricted cash 1,329 1,329
Other assets 127 130
--------------- ---------------
$ 20,747 $ 21,759
=============== ===============
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 582 $ 678
Accrued liabilities 1,028 1,158
--------------- ---------------
Total current liabilities 1,610 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 10,017 10,803
--------------- ---------------
Total shareholders' equity 14,637 15,423
--------------- ---------------
$ 20,747 $ 21,759
=============== ===============
</TABLE>
*Unaudited
See accompanying notes to financial statements.
2
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<TABLE>
AMISTAR CORPORATION
Condensed Statements of Earnings
(Unaudited and In thousands)
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net sales $ 3,288 $ 4,890 $ 7,908 $ 10,196
Cost of sales 2,962 3,657 6,520 7,232
--------------- --------------- --------------- ---------------
Gross profit 326 1,233 1,388 2,964
Operating expenses:
Selling 660 865 1,462 1,740
General and administrative 274 258 545 548
Research and development 310 305 658 602
--------------- --------------- --------------- ---------------
1,244 1,428 2,665 2,890
--------------- --------------- --------------- ---------------
Earnings (loss) from operations (918) (195) (1,277) 74
Other income (expense), net (21) 24 (32) 28
--------------- --------------- --------------- ---------------
Earnings (loss) before
income taxes (939) (171) (1,309) 102
Income tax expense (benefit) (375) (60) (523) 35
--------------- --------------- --------------- ---------------
Net earnings (loss) $ (564) $ (111) $ (786) $ 67
=============== =============== =============== ===============
Basic and diluted earnings
per common share $ (0.18) $ (0.03) $ (0.25) $ 0.02
=============== =============== =============== ===============
Weighted average shares
outstanding 3,137 3,222 3,137 3,222
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
3
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<TABLE>
AMISTAR CORPORATION
Statements of Cash Flows
(Unaudited and In thousands)
<CAPTION>
Six months ended June 30, 1999 1998
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (786) $ 67
Adjustments to reconcile net earnings (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 361 328
Gain on sale of equipment (6) (27)
Changes in assets and liabilities:
Trade accounts receivable, net 815 (207)
Income taxes receivable (537) -
Inventories 4 349
Demonstration equipment 160 250
Prepaid expenses and other assets 50 17
Contracts receivable 39 215
Accounts payable and accrued liabilities (226) (295)
Income taxes payable - (53)
---------------- ---------------
Cash provided by (used in) operating activities (126) 644
Cash flows from investing activities:
Capital expenditures (164) (499)
Proceeds from sale of equipment 6 27
---------------- ---------------
Cash flows used in investing activities (158) (472)
Cash flows from financing activities-
repurchase of common stock - (45)
---------------- ---------------
Net increase (decrease) in cash (284) 127
Cash at the beginning of the period 1,477 2,521
---------------- ---------------
Cash at the end of the period $ 1,193 $ 2,648
================ ===============
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 77 $ 88
Income tax $ 14 $ 88
</TABLE>
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):
June. 30,* Dec. 31,
1999 1998
--------------- ---------------
Raw Material $ 875 $ 876
Work In Process 2,014 2,016
Finished Goods 1,942 1,943
--------------- ---------------
$ 4,831 $ 4,835
=============== ===============
* Unaudited
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 June 30, 1999
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales to unaffiliated
customers 1,366 (113) 178 1,431 1,857 - 3,288
============ ========== ========== ============ =========== =========== ============
Earnings (loss) from operations (683) 7 (62) (738) (180) - (918)
============ ========== ========== ============ =========== =========== ============
Identifiable assets 8,921 1,349 124 10,394 2,842 7,511 20,748
============ ========== ========== ============ =========== =========== ============
THREE MONTHS ENDED JUNE 30, 1998
Net sales to unaffiliated
customers 2,495 807 26 3,328 1,562 - 4,890
============ ========== ========== ============ =========== =========== ============
Earnings (loss) from operations (98) 26 (14) (86) (109) - (195)
============ ========== ========== ============ =========== =========== ============
Identifiable assets 12,034 1,288 40 13,362 2,362 6,186 21,910
============ ========== ========== ============ =========== =========== ============
SIX MONTHS ENDED JUNE 30, 1999
Net sales to unaffiliated
customers 3,978 20 330 4,328 3,580 - 7,908
============ ========== ========== ============ =========== =========== ============
Earnings (loss) from operations (893) (4) (74) (971) (306) - (1,277)
============ ========== ========== ============ =========== =========== ============
SIX MONTHS ENDED JUNE 30, 1998
Net sales to unaffiliated
customers 5,888 980 224 7,092 3,104 - 10,196
============ ========== ========== ============ =========== =========== ============
Earnings (loss) from operations 236 40 9 285 (211) - 74
============ ========== ========== ============ =========== =========== ============
</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 operations and other factors.
RESULTS OF OPERATIONS
Net Sales
- ---------
Net sales for the three months ended June 30, 1999, were $3,288,000
compared to $4,890,000 for the same period in the prior year. Machine sales were
negatively affected by the continuing soft demand in the electronics industry
and particularly in the PC memory assembly sector. Sales of manufacturing
services grew by 19% over the same three months in the prior year. Increased
orders from the existing account base along with several new customers fueled
the manufacturing services sales growth.
Gross Profit
- ------------
Gross profit declined as a percentage of sales due to a higher mix of
manufacturing services sales, which generated a negative gross profit in the
current quarter compared to much smaller negative gross profit in the
comparative quarter last year. The manufacturing services division gross profit
decreased from the prior quarter primarily due to a lower portion of consignment
(labor only) orders compared to turnkey (labor and material) orders. Profit
margins on consignment orders are generally higher than on turnkey orders. The
machine division gross profit was negatively impacted by additions to reserves
for obsolescence related to the PlaceMaster(R) machine inventory. In addition,
the gross profit continued to be affected by excess capacity in the machine
manufacturing division.
Sales, General and Administrative
- ---------------------------------
Selling and marketing expenses declined in the current quarter primarily
due to cost-saving reductions in headcount and lower commission expenses
resulting from the decline in sales.
7
<PAGE>
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
complete the Company's new automatic label placer machine. Three machines have
been released to field beta test and production has begun on the first lot.
LIQUIDITY AND CAPITAL RESOURCES
The Company used cash of $126,000 in operating activities for the six
months ended June 30, 1999. Accounts receivable decreased primarily due to the
lower sales level. Demonstration equipment fluctuates as machines are routinely
sold and replaced. Accessories are transferred in and out of demonstration
equipment based on the specific demonstration requirements. Expenditures in the
current quarter for property and equipment were $164,000, and primarily
consisted of equipment for the final stage of the manufacturing services
division facility expansion. The Company's line of credit with its' bank matured
on March 31, 1999. The Company's bank has declined to renew the line based on
the recent operating results. Currently, the Company has no plans to seek a line
of credit with another bank. The Company believes that cash provided from
operations, and cash balances at June 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 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 not been material and are anticipated
to not 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
results or financial condition. 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 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.
8
<PAGE>
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
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF JUNE 30, 1999 AND THE RELATED STATEMENT OF OPERATIONS FOR THE PERIOD
ENDED JUNE 30, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,193
<SECURITIES> 0
<RECEIVABLES> 5,177
<ALLOWANCES> 0
<INVENTORY> 4,831
<CURRENT-ASSETS> 12,772
<PP&E> 5,571
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,747
<CURRENT-LIABILITIES> 1,610
<BONDS> 4,500
0
0
<COMMON> 31
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 20,747
<SALES> 7,908
<TOTAL-REVENUES> 7,908
<CGS> 6,520
<TOTAL-COSTS> 6,520
<OTHER-EXPENSES> 2,665
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 74
<INCOME-PRETAX> (1,309)
<INCOME-TAX> (523)
<INCOME-CONTINUING> (786)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (786)
<EPS-BASIC> (.25)
<EPS-DILUTED> (.25)
</TABLE>
