UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the quarterly period ended December 31, 1997
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File No. 0-18222
COSTA RICA INTERNATIONAL, INC. AND SUBSIDIARY
-----------------------------------------------------
(Exact name of Registrant as specified in its charter)
Nevada 87-0432572
------ ----------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
95 Merrick Way, Suite 507, Coral Gables, Fl, 33134
--------------------------------------------------
(Address of principal executive offices)(Zip Code)
(305) 476-1757 or (305) 476-1758
(Registrant's telephone number including area code)
Indicate by check mark whether the Registrant (1) had 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 ___
The number of shares outstanding of Registrant's common stock, par value $.001
per share, as of February 13, 1998 was 19,809,396 shares.
<PAGE>
PART 1 - FINANCIAL INFORMATION
COSTA RICA INTERNATIONAL INC.
AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
UNAUDITED AUDITED
--------- -------
DECEMBER 1997 SEPTEMBER 1997
============= ==============
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $1,219,959 1,388,290
Short term investment 2,413,945 1,935,671
Notes and accounts receivable - net 6,921,169 5,818,760
Due from related parties 148,359 76,243
Inventories - net 7,425,757 7,106,214
Prepaid expenses 165,414 130,088
------------------------- -------------------
Total Current Assets 18,294,603 16,455,266
------------------------- -------------------
Long term notes receivable - trade 148,282 176,520
Property, plant and eq. - net 14,097,573 14,350,427
Long-term investment 4,281,902 4,385,197
Other assets 1,334,385 1,187,128
------------------------- -------------------
Total Assets $38,156,745 36,554,538
========================= ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable $11,997,373 10,126,947
Due to related party 172,401 36,870
Current installment of long term debt.
2,139,875 1,251,127
Accounts payable 4,675,642 5,191,923
Accrued expenses 1,582,281 2,137,237
-------------------- -------------------------
Total Current Liabilities 20,567,572 18,744,104
-------------------- -------------------------
Long-term debt, excluding current
installments 4,490,313 5,252,149
Due to Stockholders 20,007 20,489
-------------------- -------------------------
Total Liabilities 25,077,892 24,016,742
-------------------- -------------------------
Minority Interest 5,557,966 5,248,362
</TABLE>
(continued)
<PAGE>
COSTA RICA INTERNATIONAL INC.
AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
UNAUDITED AUDITED
--------- -------
DEC 31, 1997 SEP, 30 1997
============ ============
<S> <C> <C>
Stockholders' Equity
Common Stock - $.001 par; 60,000,000
shares authorized; 19,809,396 shares
outstanding as of December 31, 1997. $ 19,810 $ 19,810
Preferred Stock - 317,831 shares outstanding in
December 1997 2,216,072 2,216,072
Additional paid-in capital 9,375,002 9,375,002
Foreign currency translation adjustment (4,929,304) (4,675,549)
Retained earnings 2,759,100 2,122,542
Less:
Due from stockholders (1,071,826) (920,476)
Treasury stock at cost (847,967) (847,967)
Total Stockholders' Equity 7,520,887 7,289,434
Total Liabilities and
Stockholder's Equity $ 38,156,745 $ 36,554,538
============ ===============
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
COSTA RICA INTERNATIONAL INC.
AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
UNADITED UNAUDITED
DEC 31, 1997 DEC, 31 1996
============ ============
<S> <C> <C>
Net sales $ 20,826,028 $16,939,441
Cost of sales 15,610,098 12,707,667
----------------------------------------------------
Gross Profit 5,215,930 4,231,774
----------------------------------------------------
Operating expenses
Selling 1,859,410 1,601,304
General and administrative 1,468,710 1,302,376
----------------------------------------------------
Total operating expenses 3,328,120 2,903,680
----------------------------------------------------
Income from Operations 1,887,810 1,328,094
Interest expense - net 631,960 547,772
Interest income (127,517) (219,031)
Exchange gains losses (gains) - net
48,763 38,356
Miscellaneous expenses (gains) - net
(69,164) (66,618)
----------------------------------------------------
Other expenses 484,042 300,479
----------------------------------------------------
Income before income tax and
minority interest 1,403,768 1,027,615
Income taxes
248,196 140,660
----------------------------------------------------
Income before minority interest
1,155,572 886,955
Minority interest
495,847 377,827
----------------------------------------------------
Net income $ 659,725 $509,128
Preferred Stock Dividend 38,900 76,631
====================================================
Income applicable to common stock
620,825 432,497
====================================================
Earnings per share:
Net income per common share: $ 0.031 $ 0.022
----------------------------------------------------
Weighted average number of
Common shares outstanding 20,009,396 19,676,063
----------------------------------------------------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
COSTA RICA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
1997 1996
==== ====
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 659,725 $ 509,128
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 370,648 378,395
Allowance for doubtful accounts 55,066 -
Loss (gain) on sale of productive assets (22,490) (49,004)
Minority interest 495,847 377,827
Cash provided by (used for) changes in:
Notes and accounts receivable (1,308,816) (691,127)
Due from related party (92,399) (1,750,324)
Inventories (366,892) (834,259)
Prepaid expenses (38,409) 84,895
Accounts payable (267,230) 300,415
Accrued Expenses (510,670) (46,019)
Long term receivable - trade 24,367 107,986
--------------- ------------------
Net Cash Used by Operating Activities (1,001,253) (1,612,067)
--------------- ------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Increase in long term investment -- -- (118,378)
Additions to property, plant and equipment (654,547) (416,144)
Proceeds from sale of productive assets 77,127 49,004
Short term investment (530,113) (1,764,966)
Other assets (175,363) 109,136
--------------- ------------------
Net Cash Used by Investing Activities (1,282,896) (2,141,348)
--------------- ------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Short - term financing - increase in notes payable 2,137,632 1,161,905
Preferred stock dividends paid by Pipasa (23,169) (45,618)
Preferred stock dividends minority interest (15,731) (31,013)
Long term financing:
New loans 487,223 --
Payments (287,456) (323,615)
Issue of common stock - 5,000
Capital contributions - (1,289,578)
Due to related party (151) --
Due from shareholders (175,094) --
Net Cash Provided (used) by Financing Activities
$2,123,254 $(522,919)
---------- ----------
</TABLE>
(continued)
<PAGE>
COSTA RICA INTERNATIONAL INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(Continued)
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
EFFECT OF EXCHANGE RATE CHANGES
ON CASH (7,437) 54,412
<S> <C> <C>
Net Increase (Decrease) in Cash (168,331) (4,221,942)
Cash balance at beginning of period 1,388,290 5,129,312
------------------- -----------------
Cash balance at end of period $ 1,219,959 $ 907,370
=================== =================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for the period for:
Interest $ 214,637 $ 524,947
=================== =================
Income Taxes $ 25,369 $
=================== =================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. Accounting Policies
Management is responsible for preparing the Company's financial statements and
related information that appears in this report. Management believes that the
financial statements fairly reflect the form and substance of transactions and
reasonably present the Company's financial condition and results of operations
in conformity with Generally Accepted Accounting Principles in the United
States. Management has included in the Company's financial statements amounts
that are based on estimates and judgements, which it believes are reasonable
under the circumstances. The Company maintains a system of internal accounting
policies, procedures and controls intended to provide reasonable assurance, at
appropriate cost, that transactions are executed in accordance with Company
authorization and are properly recorded and reported in the financial
statements, and that assets are adequately safeguarded.
Although Management believes that the disclosures are adequate to make the
information presented not misleading, these consolidated condensed financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's latest 10K report for the
fiscal year ended September 30, 1997.
2. Inventories
Inventories stated at the lower of market cost, determined using the
weighted-average method, except for inventories in transit which are valued at
specific cost, are as follows:
DEC 31, SEP 30,
1997 1997
Finished products $ 970,485 $ 686,423
Poultry 1,807,830 2,269,993
Production poultry 1,599,431 1,708,071
Materials and Supplies
1,252,317 1,134,115
Raw materials 2,027,392 1,639,527
In transit 364,383 131,188
--------- ---------
$8,021,838 $7,569,317
---------- ----------
<PAGE>
Allowance for Renewal of
Production poultry (587,901) (463,103)
Allowance for obsolescence (8,180) -
------------- ---------
$ 7,425,757 7,106,214
============= =========
3. Short Term Notes Payable
Short Term Notes payable consist of the following:
Dec 31, 1997 Sep 30, 1997
------------------------------------------
Loans Payable $8,351,193 6,188,036
Bank Overdrafts 39,911 371,193
Commercial paper 3,601,272 3,562,721
Other 4,997 4,997
------------------------------------------
$11,997,373 $10,126,947
NOTE: As disclosed in this quarterly report, due to the private placement
offering partially closed on January 23, 1998 part of short-term secured debt is
in the process of being freed of such liens.
4. Long-term Debt
Long-term debt is as follows:
Dec 31, 1997 Sep 30, 1997
--------------------------------------
Bank loans $5,437,396 5,395,152
Commercial paper-unsecured 45,598 46,698
Other 1,147,194 1,061,426
--------------------------------------
$6,630,188 $6,503,276
Less current installments 2,139,875 1,251,127
--------------------------------------
$4,490,313 $5,252,149
========== ==========
<PAGE>
will have a material impact on the Company's financial position,
results of operations, or liquidity.
5. Reclassifications
Certain accounts in the quarter ended December 1996 Consolidated Cash Flow, have
been reclassified to conform to the December 1997 presentation.
6. Earnings Per Share
Earnings per share is computed on the basis on the weighted average number of
common stock outstanding plus the effect of outstanding warrants using the
treasury stock method.
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
COMPANY OVERVIEW.
Pipasa, the Company's operating subsidiary, is the largest poultry company in
Costa Rica with aproximatly 50% market share of the chicken meat market. The
main activities of Pipasa are the production and sales of broiler chickens,
poultry meat, processed chicken products, commercial eggs, and premixed feed and
concentrate for livestock and domestic animals. Pipasa has been in the poultry
business for more than 28 years with more than 11 years of experience in
exports. It owns 38 urban and rural outlets throughout Costa Rica, two modern
procesing plants and an animal feed plant. Today, Pipasa enjoys a vertically
integrated operation, which begins with the fertilized egg and ends with the
preparation and distribution of fresh whole chickens to fast-frozen and cooked
chicken patties and sausages.
ENVIRONMENTAL COMPLIANCE:
Pipasa is not subject to any material costs for compliance with any
environmental laws in any jurisdiction in which it operates. However, in the
future, Pipasa could become subject to material costs to comply with
environmental laws in jurisdictions in which it does not now do business. At the
present time, Pipasa cannot assess the potential impact of any such potential
environmental regulation. The Company has been and is practicing for several
years sustainable environmental policies such as reforesting approximately 500
hectares with hardwood trees, processing and recycling its wastes, producing
organic fertilizer, and building oxidation lagoons and sewage treatment plants.
GOVERNMENT REGULATION:
The poultry hatcheries and processing plants are subject to regulation under
Costa Rican law regarding cleanliness and health standards. Exports of Pipasa
poultry products are regulated in the countries in which Pipasa makes sales.
Such regulation is not considered to be a burden on Pipasa or to have a material
effect on Pipasa's ability to make a profit. Otherwise, Pipasa is not subject to
any material governmental regulation or approvals.
YEAR 2000 ISSUE
The Company established a formal Year 2000 oversight committee in December,
1997. The members of this committee are the Information
<PAGE>
System Manager, the Corporate Auditor, the Administrative Director, an
Information Systems Auditor, and the Company's External Information Systems
Adviser. Along with this committee, the Company has a written certificate that
its Information Systems tools that are developed by Oracle are "FULLY COMPLIANT"
with the Year 2000 changes. The Company has begun the conversion, testing and
implementation stages of the entity's Year 2000 plan. This plan includes
vendors, customers and intermediaries. Testing and implementation is being
documented, in software, hardware and electronic devices. Management expects to
complete its Year 2000 plan during fiscal 1998 and fiscal 1999. To the extent
that the Company could not implement effectively the plan, adverse results
could arise.
RESULTS OF OPERATIONS
The following table presents information related to the Company's operation:
QUARTER ENDED
Dec 31, 1997 Dec 31, 1996
Net Sales $20,826,028 $16,939,441
Operational Profit 1,887,810 1,328,094
The following table presents certain items as a percentage of net sales for the
period indicated:
QUARTER ENDED
Dec 31, 1997 Dec 31, 1996
Net Sales 100.00% 100.00%
Cost of Sales 74.95% 75.02%
Gross Profit 25.05% 24.98%
Sales Expenses 8.93% 9.45%
General and Adm. 7.05% 7.69%
QUARTER ENDED DECEMBER 31, 1997 COMPARED TO
THE QUARTER ENDED DECEMBER 31, 1996
NET SALES:
General. Net sales generated by the Company's operation for the quarters ended
December 31, 1997 and 1996 were $20,826,028 and
<PAGE>
$16,939,441 respectively, an increase of $3,886,587 or 22.94%. The following
table shows sales amounts by segment for each quarter:
US Dollars
Quarter ended
- --------------------------------------------------------------------
Segment Dec 31,1997 Dec 31, 1996 % Increase
- --------------------------------------------------------------------
Chicken $13,209,737 $11,189,020 18.06%
By- Products 2,595.628 1,882,161 37.91%
Animal Feed 1,664,633 1,627,765 2.26%
Exports 537,876 321,513 67.29%
Others 2,818,154 1,918,982 46.85%
- --------------------------------------------------------------------
Total $20,826,028 16,939,441 22.94%
- --------------------------------------------------------------------
Broiler chicken: Sales of broiler chicken were $13,209,737 and $11,189,020 for
the three months ended December 31, 1997 and 1996 respectively. The increase of
18.06% primarily is due to a 19.92% increase in tonnage which was offset by the
net effect of discounts to special customers and exchange rate variations.
By-products are the most profitable products of the Company. Total sales for
this segment were of $2,595,628 and $1,882,161 for the three months ended
December 31, 1997 and 1996 respectively. The increase of $713,467 or 37.91% is
due to a 14.97% increase in tonnage and the remaining 22.94% is due to price
increases among the products within this segment (patties, sausages,
further-processed products and processing done for others).
Animal Feed: Sales for commercial animal feed were $1,664,632 and $1,627,765 for
the quarters ended December 31, 1997 and 1996, represents an increase of $36,867
or 2.26%. This sales increase corresponds to an 8.69%% increase in tonnage
offset by a -6.43% price adjustment due to exchange rate variations. Management
has committed promotional and other resources to these products, which are among
the Company's most profitable.
Exports: The Company's exports were $537,876 and $321,513 during the quarters
ended December 31, 1997 and 1996 respectively, an increase of $216,363 or
67.29%. This increase in exports was due to the combined result of: a 61.70%
increase in net sales of chicken by products due to
<PAGE>
a 70.25% increase in total dressed pounds, offset by an exchange rate effect on
prices of -8.55%; a 64.22% increase in broiler chicken and chicken parts due to
a 48.96% increase in tonnage, with the remaining 15.26% due to price increase;
and the introduction of the pet food MIMADOS during the fourth quarter of the
previous fiscal year. The Company opened its own distribution facility in El
Salvador in January 1997, which includes cold storage and sales of sausage,
pate, bologna and other chicken and turkey products under the Company's popular
Pipasa (TM), Kimby(TM) and Supremo(TM), brands. Sales to Nicaragua were doubled,
due to a better service to the Company's clients in that country, enhanced by a
strong distribution network. Exports to San Andres Island (Colombia) increased
during this quarter, when compared to the same period of fiscal 1997.
Others: Sales Others, which include animal feed and baby chicks to integrated
producers, raw materials and baby chicks to third parties, were of $2,818,154
and $1,918,983 during the three months ended December 31, 1997 and 1996
respectively, an increase of $899,171 or 46.85%. This increase is due to a
53.84% increase in tonnage offset by a -6.99% exchange rate variation.
The following table shows the Company's sales distribution, for the quarters
ended December 31, 1997 and 1996:
SALES DISTRIBUTION
QUARTER ENDED
Segment Dec 31, 1997 Dec 31, 1996
- --------------------------------------------------------------------
Chicken 63.44% 66.05%
By- Products 12.46% 11.11%
Animal Feed 7.99% 9.61%
Exports 2.58% 1.90%
Other 13.53% 11.33%
- --------------------------------------------------------------------
Total 100.00% 100.00%
Note: In April of 1997, the Company's only subsidiary, Pipasa, completed the
acquisition of the poultry division and animal feed business of Coopemontecillos
R.L. for approximately $2,700,000. Pipasa acquired the assets, including plant,
equipment, vehicle fleet, inventory, hens and raw materials and some accounts
receivable. Coopemontecillos (COOP) had a 6% market share of the Costa Rican
poultry market but was not a significant factor in the animal feed market. The
effect of this transaction on the Company's sales volume (for the segments that
are indicated) is detailed as follows:
<PAGE>
DOLLARS
QUARTER ENDED DECEMBER 31, 1997
Segment Includes COOP Without COOP % DIFFERENCE
- ---------------------------------------------------------------------
Chicken $13,209,737 11,915,925 10.86%
Animal Feed 1,664,632 1,659,226 0.3%
- ---------------------------------------------------------------------
TOTAL $14,874,369 13,575,151 9.57%
COST OF SALES:
General. Cost of sales was $15,610,098 and $12,707,667 for the quarters ended
December 31, 1997 and 1996 respectively, an increase of 22.84%. This increase in
cost of sales was due primarily to a 30.27% increase in tonnage offset by the
effect of lower cost of raw materials, such as imported grains and the advantage
of higher efficiency due to increase in volume. As a percentage of sales, cost
of sales was 74.95% for the three months ended December 31, 1997 compared to
75.02% in the same period of 1996, for a net decrease of 0.06%.
The "El Nino" phenomenon was not as harsh on the technical yields as it was
during the three months ended December 31, 1997. Nevertheless, weather
forecasters predict high temperatures during the months of March to September
1998, which could again negatively affect the incubation, reproduction and
growing yields of the Company. As disclosed in previous filings, the Company has
taken measures to mitigate the pervasive effect of these high temperatures but
cannot assure that this weather phenomenon will not affect other important
technical yields such as weigh, conversion (pounds of feed per ponds of meat)
or pathologies. The Company has continued to import fertile eggs throughout the
analyzed period and intends to continue with these imports until the
reproduction division is self-sufficient. Management expects to reach Self-
sufficiency during the month of September 1998, when a substantial number of
reproduction hens are at hatching age.
The following factors contributed in maintaining cost of sales as a percentage
of net sales at a stable level:
/bullet/ Average prices for imported corn decreased by 20% during the
first quarter of fiscal 1998 when compared to average prices
in the same period of fiscal 1997. Corn represents 55% of the
regular animal feed diet formulation.
<PAGE>
/bullet/ Sales price increases during the month of November 1997, in
the by- product segment. Higher volume, with the consequent
advantage of higher capacity utilization.
/bullet/ Return to the standard diet formulation in November 1997.
However, in January 1998, Management decided to go back to
high energy diet formulation to increase weight.
The following table presents cost of sales information by segment, with the
correspondent increase percentage, impact of volume and unit cost variations.
<TABLE>
<CAPTION>
SEGMENT Quarter ended Dec Quarter ended % Increase Due to volume Due to higher
31, 1997 Dec 31, 1996 variations (lower) cost/unit
<S> <C> <C> <C> <C> <C>
Broiler Chicken $9,909,638 8,069,221 22.81% 19.92% 2.89%
Chicken By Products 1,317,535 1,176,587 11.98% 14.97% -2.99%
Animal feed 1,330,071 1,426,529 -6.76% 8.69% -15.45%
Exports 387,429 240,860 60.85% 65.05% -4.20%
Others 2,665,424 1,794,470 48.54% 53.84% -5.30%
------------------------------------------------------------------------------------
Total cost of sales $ 15,610,097 12,707,667 22.84% 30.27% -7.43%
</TABLE>
Gross profit:
Gross profit for the three months ended December 31, 1997 and 1996 was
$5,215,930 and $4,231,774 respectively, an increase of $984,157 or 23.25%. As a
percentage of net sales, gross profit was 25.05% and 24.98% respectively for the
first quarters of fiscal 1998 and 1997, due to the issues discussed above. The
following table shows gross profit for each segment for the quarters ended
December 31, 1997 and 1996:
Quarters Ended
SEGMENT Dec 31, 1997 Dec 31, 1996 Increase
--------------------------------------------------------
Broiler Chicken 24.98% 27.88% -2.81%
Chicken By Products 49.24% 37.49% 11.85%
Animal feed 20.09% 12.36% 7.83%
Exports 27.97% 25.09% 2.88%
Others 5.42% 6.49% -1.07%
- ------------------------------------------------------------------------------
Total 25.05% 24.98% 0,07%
General and administrative expenses:
General and Administrative were $1,468,710 and $1,302,376 for the quarters ended
December 31, 1997 and 1996 respectively, an increase of $166,334, or 12.77%. As
a percentage of net sales, this item decreased from 7.69% during the last
quarter of fiscal 1996 to 7.05% during the
<PAGE>
same period of fiscal 1997. Management maintained the same administrative
structure during the two periods under analysis.
Sales expenses
Sales expenses increased by $258,106 or 16.11% during the first quarter of
fiscal 1998, compared with the same period of fiscal 1997. When the market share
of Coopemontecillos R.L. (COOP) was absorbed, the Company was able to maintain
its selling expense structure with few variances, and as a result, this item
as a percentage of net sales decreased from 9.45% during the first quarter of
fiscal 1997 to 8.93% during the same period of fiscal 1998.
Other income/expenses (net)
Other income and expenses (net) increased by $183,563 or 61.08% when comparing
the three months ended December 31, 1997 and 1996. The Company's interest
expenses increased by $84,188 or 15.36% when compared to the same period of
fiscal 1997, interest income decreased $91,514 or 41.78% respectively,
exchange rate losses (gains) increased $10,407 or 27.13% when compared to the
first quarter of fiscal 1997. Along with these increases, revenues from
miscellaneous net increased $2,547 or 3.82%.
FINANCIAL CONDITION
Liquidity and capital resources.
Liquidity: The Company's liquidity is dependent upon cash flows from operations
and the ability to obtain additional financing from external sources. The
Company's cash and cash equivalents totaled $1,219,959 as of December 31, 1997
and $1,388,290 at the end of fiscal year 1997, a $168,331 decrease.
Operating activities:
For the three months ended December 31, 1997 and 1996 net cash used by operating
activities was ($1,001,253) and ($1,612,087), respectively. Operations provided
$1,558,796 and $1,216,346 in cash during the quarter ended December 31, 1997 and
1996, respectively. Cash used in operations was ($2,560,049) for the quarter
ended December 31, 1997, which is explained mainly by an 18.94% increase in
notes and accounts receivable. This item increased towards the end of the year
due to the year-end holidays and the need to extend credit terms to some clients
during this time. Accrued expenses decreased mainly due to the cancellation of
the obligatory Christmas bonus distributed at the end of November of each year.
During the quarter ended December 31, 1996, this event was offset by a higher
amount of cumulative tax payable and the accumulation of incentives for
employees.
Investing activities:
Cash used in investing activities was ($1,282,896) and ($2,141,348) for the
quarters ended December 31, 1997 and 1996 respectively. The Company has made
investments amounting to $654,547 and $416,144 in property, plant and equipment
during the quarters ended December 31, 1997 and
<PAGE>
1996 respectively, and is constantly improving its facilities and investing in
new technology. Among the most relevant investments activities in the first
quarter of fiscal 1998 were vehicles, incubation and growing equipment. The
Company made short-term investments in certificates.
Financing activities:
During the quarter under analysis, the Company obtained external financing in
order to carry out part of its operating and investment activities. The Company
financed its operations mainly through short-term loans, used funds to amortize
long term debt and due from shareholders. On January 23, 1998, Management
concluded a negotiation to re finance part of its subsidiaries' short term debt,
with the private placement of $8 million of the Company's 11.71% Series A Senior
Notes due January 15, 2005 ("the offering"), agented by Citicorp Securities,
Inc. Proceeds from the Offering were used to repay part of the existing debt of
the Company, which will significantly improve the Company's liquidity position
and cash flow. The most important effects in the Company's financial position as
a result Offering are:
AS OF DEC 31, 1997 AS OF JAN 23, 1998
---------------------------------------------------------------
Working Capital ($2,272,968) 4,179,179
Liquidity 0.89 1.30
- -------------------------------------------------------------------------------
Note: The figures that are presened as of January 23, 1998 are the result of
substituting short-term debt with long-term debt.
Working Capital: As of December 31, 1997, working capital was ($2,272,968)
compared to working capital at September 30, 1997 of $(2,288,838) for a
$15,871 decrease. The current ratios were 0.89 and 0.88 as of December 31, 1997
and September 30, 1996 respectively.
Leverage ratio: Leverage as of December 31, 1997 and 1996 was 3.33, compared to
3.29 respectively. This ratio increased mainly due to the 8.88% increase in
current liabilities, offset by a 3.18% increase in Stockholders Equity from
$7,289,434 as of September 30, 1997, to $7,520,887 at the end of the first
quarter of fiscal 1998. This increase in Stockholders Equity is mainly due to
an increase in net income.
This management discussion and analysis of financial condition and results of
operations may include certain forward-looking statements, within the meaning of
Section 27E of the Securities Exchange Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended, including (without
limitations) statements with respect to anticipated future operations and
financial performance, growth and acquisition opportunity and other similar
forecast and statements of expectation. Words such as expects, anticipates,
<PAGE>
intends, plans, believes, seeks, estimates and should and various of those words
and similar expressions are intended to identify these forward-looking
statements. Forward-looking statements made by the Company and its management
are based on estimates, projections, beliefs and assumptions of management at
the time of such statements and are not guarantees of future performance. The
Company disclaims any obligations to update or review any forward-looking
statements based on occurrence of future events, the receipt of new information
or otherwise.
Actual future performance outcomes and results may differ materially from those
expressed in forward-looking statements made by the Company and its management
as a result of numbers of risks, uncertainties and assumptions. Representatives
examples of these factors include (without limitations) general industrial and
economic conditions; cost of capital and capital requirements; shifts in
customer demands; Changes in the continued availability of financial amounts and
at the terms necessary to support the Company's future business.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K
a) Exhibit No. 27 - Financial Data Schedule (filed herewith.
b) Reports on Form 8-K: No reports on Form 8-K have been filed during the
quarter ended December 31, 1997.
<PAGE>
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant that duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
COSTA RICA INTERNATIONAL, INC.
Dated: February 12, 1998 ------------------------------
Calixto Chaves
Chief Executive Officer
Dated: February 12, 1998 ------------------------------
Jorge Mi. Quesada
Chief Financial Officer
Dated: February 12, 1998 ------------------------------
Monica Chaves
Secretary
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,219,959
<SECURITIES> 2,413,945
<RECEIVABLES> 6,921,169
<ALLOWANCES> 0
<INVENTORY> 7,425,757
<CURRENT-ASSETS> 18,294,603
<PP&E> 14,097,572
<DEPRECIATION> 0
<TOTAL-ASSETS> 38,156,745
<CURRENT-LIABILITIES> 20,507,572
<BONDS> 4,510,320
2,216,072
0
<COMMON> 19,810,596
<OTHER-SE> 5,285,005
<TOTAL-LIABILITY-AND-EQUITY> 38,156,745
<SALES> 20,826,028
<TOTAL-REVENUES> 20,826,028
<CGS> 15,610,098
<TOTAL-COSTS> 3,328,120
<OTHER-EXPENSES> (147,918)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 631,960
<INCOME-PRETAX> 1,403,768
<INCOME-TAX> 248,196
<INCOME-CONTINUING> 659,725
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 659,725
<EPS-PRIMARY> 0.031
<EPS-DILUTED> 0.031
</TABLE>
