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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, 2000
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AMISTAR CORPORATION
(Exact name of registrant as specified in its Charter)
--------------------------------------------------------------------------------
STATE OF CALIFORNIA 95-2747332
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
237 VIA VERA CRUZ 92069
SAN MARCOS, CALIFORNIA (Zip Code)
(Address of principle executive offices)
(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 27, 2000
Common Stock $.01 Par Value 3,136,500
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Part I
ITEM 1. FINANCIAL STATEMENTS
AMISTAR CORPORATION
Condensed Balance Sheets
(In thousands)
Sept. 30,* Dec. 31,
2000 1999
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 3,934 $ 2,476
Trade accounts and contracts receivable, net 3,152 3,539
Income taxes receivable 202 208
Inventories 3,049 3,047
Demonstration equipment 162 118
Prepaid expenses 79 72
---------- ----------
Total current assets 10,578 9,460
Property and equipment, net 4,968 5,382
Restricted cash 1,329 1,329
Other assets 104 114
---------- ----------
$ 16,979 $ 16,285
========== ==========
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 809 $ 515
Accrued liabilities 596 683
---------- ----------
Total current liabilities 1,405 1,198
Industrial development bonds 4,500 4,500
Shareholders' equity:
Common stock 31 31
Additional paid-in capital 4,589 4,589
Retained earnings 6,454 5,967
---------- ----------
Total shareholders' equity 11,074 10,587
---------- ----------
$ 16,979 $ 16,285
========== ==========
*Unaudited
See accompanying notes to condensed financial statements.
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<TABLE>
AMISTAR CORPORATION
Condensed Statements of Earnings
(Unaudited and In thousands, except per share data)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 4,025 $ 3,056 $ 14,271 $ 10,964
Cost of sales 3,249 4,003 10,953 10,523
------------ ------------ ------------ ------------
Gross profit (loss) 776 (947) 3,318 441
Operating expenses:
Selling 299 596 1,331 2,057
General and administrative 205 740 806 1,285
Research and development 239 238 770 897
------------ ------------ ------------ ------------
743 1,574 2,907 4,239
------------ ------------ ------------ ------------
Earnings (loss) from operations 33 (2,521) 411 (3,798)
Other income (expense), net 23 (5) 85 (37)
------------ ------------ ------------ ------------
Earnings (loss) before
income taxes 56 (2,526) 496 (3,835)
Income taxes 9 588 9 65
------------ ------------ ------------ ------------
Net earnings (loss) $ 47 $ (3,114) $ 487 $ (3,900)
============ ============ ============ ============
Earnings (loss) per common share:
Basic $ 0.02 $ (0.99) $ 0.16 $ (1.24)
============ ============ ============ ============
Diluted $ 0.01 $ (0.99) $ 0.15 $ (1.24)
============ ============ ============ ============
Weighted average shares
outstanding: Basic 3,137 3,137 3,137 3,137
============ ============ ============ ============
Diluted 3,241 3,137 3,222 3,137
============ ============ ============ ============
</TABLE>
See accompanying notes to condensed financial statements.
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AMISTAR CORPORATION
Statements of Cash Flows
(Unaudited and In thousands)
Nine months ended September 30, 2000 1999
--------------------------------------------------------------------------------
Cash flows provided by operating activities:
Net earnings (loss) $ 487 $(3,900)
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation and amortization 564 548
Gain on sale of equipment - (6)
Valuation allowance for deferred income taxes - 461
Changes in assets and liabilities:
Trade accounts and contracts receivable, net 387 3,276
Income taxes receivable 6 (412)
Inventories (2) 1,585
Demonstration equipment (44) 23
Prepaid expenses and other assets 3 121
Accounts payable and accrued liabilities 207 (632)
-------- --------
Net cash provided by operating activities 1,608 1,064
Cash flows from investing activities:
Capital expenditures (150) (191)
Proceeds from sale of equipment - 6
-------- --------
Net cash used in investing activities (150) (185)
Net increase in cash and cash equivalents 1,458 879
Cash and cash equivalents at the beginning of the period 2,476 1,477
-------- --------
Cash and cash equivalents at the end of the period $ 3,934 $ 2,356
======== ========
Supplemental disclosure of cash flow information-
Cash paid during the period for:
Interest $ 133 $ 115
Income tax $ 4 $ 16
See accompanying notes to condensed financial statements
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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 1999 annual report on Form 10-K as filed with the Securities and
Exchange Commission on March 17, 2000.
Inventories
-----------
Inventories are stated at the lower of cost (first-in, first-out) or
market and include material, labor and manufacturing overhead costs. Inventories
consist of the following (in thousands):
Sept. 30,* Dec. 31,
2000 1999
------------ ------------
Raw Material $ 966 $ 965
Work In Process 995 1,074
Finished Goods 1,088 1,008
------------ ------------
$ 3,049 $ 3,047
============ ============
* Unaudited
Income taxes
------------
During the year ended December 31, 1999, the Company recorded a 100%
valuation allowance against its deferred income tax assets. This valuation was
based on the 1999 year-to-date loss position and management's belief that it is
more likely than not that the Company will not be able to utilize the benefits
of the deferred tax assets in the future. The tax provision for the nine months
ended September 30, 2000 reflects the utilization of existing federal and state
net operating loss carry-forwards.
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AMISTAR CORPORATION
Notes to Condensed Financial Statements
Earnings (Loss) Per Common Share
--------------------------------
The Company calculates net income per share in accordance with SFAS No.
128, Earnings Per Share. Under SFAS No. 128, basic net earnings per common share
is calculated by dividing net earnings by the weighted-average number of common
shares outstanding during the reporting period. Diluted net earnings per common
share reflects the effects of potentially dilutive securities. Weighted average
shares used to compute net earnings (loss) per share are presented below (in
thousands):
Three months ended Nine months ended
Sept. 30, Sept. 30,
2000 1999 2000 1999
--------- --------- --------- ---------
Weighted-average shares basic 3,137 3,137 3,137 3,137
Dilutive effect of stock options 104 - 85 -
--------- --------- --------- ---------
Weighted-average shares,
diluted 3,241 3,137 3,222 3,137
========= ========= ========= =========
Options to purchase 11,000 shares of common stock were not included in
the calculation of diluted net earnings per share for the nine months ended
September 30, 2000 because the effects of these instruments was anti-dilutive.
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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
(AMS). 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 SEPTEMBER 30, 2000
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales to unaffiliated
customers $ 1,615 $ 39 $ 293 $ 1,947 $ 2,078 $ - $ 4,025
=========== =========== =========== =========== =========== =========== ===========
Earnings (loss) from operations 127 3 24 154 (121) - 33
=========== =========== =========== =========== =========== =========== ===========
Total assets 4,927 174 576 5,677 2,671 8,631 16,979
=========== =========== =========== =========== =========== =========== ===========
THREE MONTHS ENDED SEPTEMBER 30, 1999
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)
=========== =========== =========== =========== =========== =========== ===========
Total assets 7,408 1,120 103 8,631 2,360 6,236 17,227
=========== =========== =========== =========== =========== =========== ===========
NINE MONTHS ENDED SEPTEMBER 30, 2000
Net sales to unaffiliated
customers $ 6,569 $ 158 $ 1,188 $ 7,915 $ 6,356 $ - $ 14,271
=========== =========== =========== =========== =========== =========== ===========
Earnings (loss) from operations 762 18 138 918 (507) - 411
=========== =========== =========== =========== =========== =========== ===========
NINE MONTHS ENDED SEPTEMBER 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)
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
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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 three months ended September 30, 2000 were $4,025,000
compared to $3,056,000 for the same period in the prior year. The current
quarter sales improvement was due to a 6% increase in machine sales and a 70%
increase in manufacturing services sales over the same quarter in 1999. During
the current quarter, machine shipments slowed compared to the second quarter of
2000. The continuing transition from marketing machines for surface mount
placement (SMD) to providing machines for product identification resulted in the
temporary vacancy of several key sales and service positions. The Company did
not have the assistance of manufacturer's representatives, whose agreements were
terminated as the Company moved to consolidate its strategic position with the
Brady Corporation. The Amistar Manufacturing Services division (AMS) received
increased labor sales orders from a major customer in addition to first time
orders from a new major customer. AMS sales were negatively affected by delays
in obtaining certain electronic components. Components are supplied by our
consignment customers and through the Company's own supply channels for turnkey
customers. Certain high-demand components have been in tight supply throughout
the electronics industry primarily due to the proliferation of hand held
consumer products.
Gross Profit
------------
The machine division gross profit improved over the comparable quarter
in 1999 due to the higher margins realized on the DataPlace machines and due to
inventory obsolescence write-downs taken in the third quarter of 1999. The AMS
division gross margin improved over the third quarter of 1999 due to an increase
in more profitable labor billings. The significant increase in labor sales
volume led to greater labor efficiencies.
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AMISTAR CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
Selling Expenses
----------------
Selling expenses decreased due to marketing and field service expense
reductions made in the current and prior periods of 2000. These expense
reductions were due to the transition from SMD to product identification
machines which resulted in a reduction in sales and field service personnel.
General and Administrative Expenses
-----------------------------------
General and administrative expenses decreased in the current quarter
over the same quarter in 1999, as the third quarter in 1999 reflected an
increase to the allowance for bad debts related to a former AMS customer. The
Company is currently pursuing its' claim against this customer in litigation. In
addition, the decrease in general and administrative expenses is also due to a
reversal of a $143,000 incentive compensation accrual for key personnel recorded
in the second quarter of 2000. A portion of the $143,000 incentive compensation
accrual was classified in Cost of Sales, Selling Expenses and Research and
Development. The compensation accrual is based on a year-to-date earnings level
which management determined in the third quarter would not be achieved.
Research and Development
------------------------
Development efforts were focused during the third quarter of 2000 on
the next machine in the DataPlace product identification family. Development
costs decreased for the nine months ended 2000 compared to the same period in
1999, due to a lower level of prototype development in the first and second
quarters of 2000.
Income Tax Expense
------------------
The income tax provision for the nine months ended September 30, 2000
reflects the utilization of existing federal and state net operating loss
carry-forwards. In the quarter ended September 30, 1999, the company recorded a
100% valuation allowance against its' deferred tax assets. See income tax
footnote in the notes to condensed financial statements for further information.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flow from operating activities was $1,608,000 for
the nine months ended September 30, 2000. Trade accounts and contracts
receivable decreased primarily due to the repossession of ten private label
machines from PricePoint Micro Technologies due to default on the contract
receivable terms. The repossession occurred in January 2000 and resulted in a
transfer of $739,000 in contracts receivable to finished goods inventory. As of
June 30, 2000, all of the ten repossessed machines have been sold. The increase
in accounts payable and accrued liabilities is primary due to the purchase of
electronic components from a new AMS customer. It is a common practice for a new
turnkey customer to sell their residual inventory to AMS for consumption to meet
the initial order requirements.
During 1999, 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. Management believes that the Company will
9
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AMISTAR CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
LIQUIDITY AND CAPITAL RESOURCES, CONTINUED
be in compliance with the original financial covenants by the end of fiscal
2000. The Company is currently in compliance with revised covenants for the year
ended December 31, 2000. The Company believes that cash provided from operations
and cash balances at September 30, 2000 will be adequate to support its
operating and investing requirements through 2000.
NEW ACCOUNTING PRONOUNCEMENTS
On December 3, 1999, the Securities and Exchange Commission issued
Staff Accounting Bulletin No.101, Revenue Recognition in Financial Statements
("SAB 101"). SAB 101, as amended by SAB No. 101B, summarizes certain of the
SEC's staff's views in applying generally accepted accounting principles to
revenue recognition in financial statements. The bulletin is effective for the
Company in the fourth quarter of 2000. Adoption of the guidelines will primarily
affect how the Company recognizes revenues on certain machine sales. The
Company's current practice generally is to recognize revenue upon shipment and
transfer of title to the customer. Adoption of SAB No.101 will in some cases
require the Company to recognize revenue upon installation. This bulletin could
have a significant impact on the Company's fourth quarter and future results of
operations.
In June 1999, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities (SFAS 133), which was amended by Statement of
Financial Accounting Standards No. 137 (SFAS 137). SFAS 133 and SFAS 137 require
companies to recognize all derivatives as either assets or liabilities, with the
instruments measured at fair value. The accounting for changes in fair value
gains and losses depends on the intended use of the derivative and its resulting
designation. SFAS 133 AND SFAS 137 become effective for the Company on January
1, 2001: however, the Company does not believe the adoption will have a material
impact on its results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to a variety of risks, including foreign
currency fluctuations on spare parts purchases 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 would not have a material adverse effect on the
Company's financial condition or results of operations. The Company's only
long-term debt at September 30, 2000 is comprised of Industrial Development
bonds. The bonds mature in December 2005, and accrue interest 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.
10
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PART II.
Items 1-5 Non-Applicable
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits:
Financial data schedule
(b) Reports on form 8-K:
None
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
11
