<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 EXCHANGE ACT OF 1934
For the quarterly period ended September 26, 1998
Commission File No. 0-23204
VISTA 2000, INC.
----------------
(Exact name of registrant as specified in its charter)
Delaware 58-1972066
- -------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
221 West First Street
Kewanee, Illinois 61443
-----------------------
(Address of principal executive offices)
(309) 856-8068
--------------
(Issuer's telephone number)
Check 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 at least
the past 90 days. Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at October 30, 1998
- ----- --------------------------------
<S> <C>
Common Stock, $.01 par value 48,253,932
</TABLE>
<PAGE>
PART I.- FINANCIAL INFORMATION
Item 1. Financial Statements
2
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
September 26, December 27,
1998 1997
------------- ------------
<S> <C> <C>
Current Assets
Cash and cash equivalents .......................... $ 2,290 $ 2,122
Accounts receivable, net ........................... 5,137 7,729
Inventories ........................................ 14,577 12,493
Prepaid expenses & other ........................... 448 650
-------- --------
Total current assets .......................... 22,452 22,994
-------- --------
Property and Equipment, net .............................. 4,509 4,270
Note Receivable, net ..................................... 1,038 1,042
Other Assets ............................................. 33 256
-------- --------
$ 28,032 $ 28,562
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable ................................... $ 992 $ 1,390
Current portion of long-term obligations ........... 899 137
Accrued payroll and related expenses ............... 581 548
Accrued liabilities & other ........................ 2,208 3,481
-------- --------
Total current liabilities ..................... 4,680 5,556
-------- --------
Long-term obligations, net of current portion ............ 3,673 3,883
Commitments and Contingencies ............................ -- --
Stockholders' Equity
Common Stock ....................................... 486 448
Additional paid-in capital ......................... 67,453 67,370
Accumulated deficit ................................ (46,406) (46,875)
Currency translation ............................... (104) (70)
-------- --------
21,429 20,873
Less: treasury shares and warrants - at cost ....... 1,750 1,750
-------- --------
Total Stockholders' equity .................... 19,679 19,123
-------- --------
$ 28,032 $ 28,562
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Quarter ended Quarter ended ended ended
Sept 26, 1998 Sept 27, 1997 Sept 26, 1998 Sept 27, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Sales ................................. $ 8,583 $ 16,101 $ 27,114 $ 63,392
Cost of Sales ............................. 6,246 11,185 19,477 43,933
------------ ------------ ------------ ------------
Gross profit .............................. 2,337 4,916 7,637 19,459
Operating expenses ........................ 2,573 5,479 7,870 19,411
------------ ------------ ------------ ------------
(236) (563) (233) 48
Gain (loss) on sale of operating assets ... 893 (1,521) 893 (2,876)
------------ ------------ ------------ ------------
Operating profit (loss) ................... 657 (2,084) 660 (2,828)
Other income and (expense)
Interest .............................. (82) (355) (182) (1,466)
Other ................................. 0 (106) 16 (126)
------------ ------------ ------------ ------------
Income (loss) before income tax ........... 575 (2,545) 494 (4,420)
Income tax (expense) benefit ............ (3) 17 (24) (10)
------------ ------------ ------------ ------------
Net income (loss) ......................... $ 572 $ (2,528) $ 470 $ (4,430)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted average shares outstanding ....... 48,095,278 40,250,643 47,473,621 28,303,647
Basic earnings (loss) per common share .... $ 0.01 $ (0.06) $ 0.01 $ (0.16)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Diluted earnings (loss) per common share .. $ 0.01 $ (0.06) $ 0.01 $ (0.16)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
VISTA 2000, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months ended Nine Months ended
Sept 26, 1998 Sept 27, 1997
----------------- -----------------
<S> <C> <C>
Cash flows provided (used) by operating activities:
Net income (loss) ........................................ $ 470 $ (4,430)
Adjustments to reconcile net loss to net cash used
by operations:
Depreciation and amortization ........................ 241 1,479
(Gain) Loss on disposal of property and equipment ..... (893) 2,876
Stock based compensation expense ...................... 53
(Increase) decrease in operating assets:
Accounts receivable ................................ 2,592 1,089
Inventories ........................................ (2,084) (1,376)
Prepaid expenses and other current assets .......... 202 815
Deferred charges and other assets .................. 227 (1,200)
Increase (decrease) in operating liabilities:
Accounts Payable ................................... (398) (741)
Accrued liabilities ................................ (1,240) (2,556)
-------- --------
Net cash used by operating activities ......... (883) (3,991)
-------- --------
Cash flows provided (used) by investing activities:
Purchases of property and equipment ...................... (481) (3,099)
Proceeds from sale of operating assets ................... 893 26,854
-------- --------
Net cash provided by investing activities ...... 412 23,755
-------- --------
Cash flows provided (used) by financing activities:
Net proceeds from short-term borrowings .................. 0 150
Net proceeds (payments) from long-term obligations ....... 552 (19,921)
Proceeds from issuance of common stock ................... 0 889
Proceeds from exercise of stock options and warrants ..... 121 177
Purchase of treasury stock ............................... 0 (93)
-------- --------
Net cash provided (used) by financing activities 673 (18,798)
-------- --------
Effect of exchange rates on cash and cash equivalents ....... (34) (6)
-------- --------
Net increase in cash during period .......................... 168 960
Cash and cash equivalents at the beginning of the period .... 2,122 1,165
-------- --------
Cash and cash equivalents at the end of the period .......... $ 2,290 $ 2,125
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
Vista 2000, Inc. And Subsidiaries
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 26, 1998
Note 1. Basis of Presentation
The consolidated financial statements included in this report have been
prepared by Vista 2000, Inc. (the "Company") pursuant to the rules and
regulations of the Securities and Exchange Commission for interim reporting and
include all normal and recurring adjustments which are, in the opinion of
management, necessary for a fair presentation. These financial statements have
not been audited by an independent accountant. The consolidated financial
statements include the accounts of the Company and its subsidiaries.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and regulations
for interim reporting. These financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's Annual
Report on Form 10-K, for the year ended December 28, 1997. The financial data
for the interim periods presented may not necessarily reflect the results to be
anticipated for the complete year.
Certain amounts in prior year's financial statements have been
reclassified to conform to the 1998 presentation.
Note 2. Net Earnings (Loss) Per Common Share
Basic earnings (loss) per common share has been calculated using the
weighted average number of shares of common stock outstanding during each
period. Diluted net income per common share was calculated based on total shares
of 48,645,619 and 48,270,548 for the three and nine months ended September 26,
1998 respectively. The increase in shares utilized in calculating diluted
earnings per share reflects the estimated dilutive impact of issued but
unexercised stock options based on the treasury stock method. In 1997, diluted
earnings per share excluded any impact from the exercise or exchange of common
stock equivalents because the effect of such exercise or exchange would be
antidilutive.
Note 3. Inventories
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
Sept 26, Dec 27,
1998 1997
------- -------
<S> <C> <C>
Raw materials .......... $ 1,934 $ 1,752
Work-in-process ........ 445 330
Finished goods ......... 12,198 10,411
------- -------
$14,577 $12,493
------- -------
------- -------
</TABLE>
6
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
All statements, other than statements of historical fact, included in
this Quarterly Report including, without limitation, the statements under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" are, or may be deemed to be, forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934. Important factors
that could cause actual results to differ materially from those discussed in
such forward-looking statements ("Cautionary Statements") include: the general
strength or weakness of the consumer products industry and the pricing policies
of competitors. All subsequent written and oral forward-looking statements
attributable to Vista or persons acting on the behalf of Vista are expressly
qualified in their entirety by such Cautionary Statements.
Sales
Total revenues for the three months ended September 26, 1998 were
$8,583,000, down from $16,101,000 for the comparable quarter in 1997. The
decrease in sales is primarily attributable to the sale of the Company's
American Consumer Products (ACPI) subsidiary's key manufacturing, letters,
numbers and signs manufacturing, real estate and related businesses on August
25, 1997 and the resulting absence of this activity in 1998. In addition, the
Company's Boss Manufacturing subsidiary's sales declined approximately 14% from
the comparable quarter in 1997 due to reduced volume and reduced selling prices
resulting from lower pricing on imported goods.
On a year-to-date basis, revenues were also down substantially at
$27,114,000 for the nine months ended September 26, 1998 compared to $63,392,000
in 1997. This decrease is due primarily to the absence of revenues associated
with the ACPI assets sold in August 1997. Boss Manufacturing sales were down
roughly 8% during the first nine months of 1998 in comparison to 1997 which the
Company attributes to an unusually warm winter in the mid-west and reduced sales
in the Company's manufacturing and industrial market segment during the second
and third quarters.
Cost of Sales
Cost of sales for the three months ended September 26, 1998 totaled
$6,246,000 compared to a cost of sales in the corresponding 1997 period of
$11,185,000. The drop in cost of sales expense is due to the significant sales
decrease previously discussed. On a percentage of sales basis, the gross margin
for the second quarter of 1998 was approximately 27.2% compared to 30.5% in
1997. This decline in margin is due to the change in product mix resulting from
the disposal of ACPI operations in 1997. The Company's glove operations generate
a lower margin than certain of the operations sold in 1997.
On a year to date basis, through September 26, 1998 cost of sales
declined to $19,477,000 from $43,933,000 in 1997 for the same reasons discussed
above. Gross margin, on a percentage of sales basis, totaled 28.1% through nine
months for 1998, down about 2.5% from the prior year. As discussed above, the
significant change in product mix between the periods was the major cause of
this margin erosion.
7
<PAGE>
Operating Expenses
Operating expenses (selling, general and administrative expenses)
totaled $2,573,000 for the three months ended September 26, 1998, as compared to
$5,479,000 for the corresponding period of 1997. The decrease is substantially
attributable to reductions of staff, legal and auditing expenses at the
Company's corporate headquarters and the sale of ACPI operations during August
1997.
For the nine month period, operating expenses were $7,870,000 in 1998
versus $19,411,000 in 1997 due to the Company's restructuring and consolidation
efforts.
Sale of Operating Assets
During the third quarter of 1998, the Company recorded a gain of
$893,000 on the final settlement of the sale of ACPI assets sold in August
1997. This settlement reflected a payment received in August 1998 covering
certain post closing adjustments to account for changes in assets and
liabilities between the date of the sale agreement and the closing of the
sale. The Company had previously been involved in a dispute with the buyer
concerning the post-closing adjustment and certain other alleged breaches
with regard to the sales agreement. All disputes were resolved in connection
with the final settlement.
Liquidity and Capital Resources
For the nine months ended September 26, 1998, the Company's operating
activities used cash of $883,000 compared to a $3,991,000 use of cash for the
comparable period in 1997. This improvement is attributable to the substantial
reduction in the Company's net loss and reduced working capital cash
requirements during 1998. The primary working capital cash requirements through
nine months in 1998 were increased inventory and reduced accrued liabilities
partially offset by reduced accounts receivable. Inventory increased $2,084,000
reflecting the Company's normal seasonal inventory build for the fourth quarter.
Accrued liabilities were down from year end due to the payment in 1998 of
certain legal and professional, employee benefit and settlement expenses accrued
in 1997. Accounts receivable declined from year-end due to both the overall
lower level of sales in 1998 and the impact of slow summer sales.
Cash provided by investing activities declined to $412,000 for the nine
months ended September 26, 1998, down from $23,755,000 in 1997 because of the
Company's substantial asset sale in 1997. Capital expenditures of $481,000 in
1998 consisted primarily of building improvements in process to allow
consolidation of warehousing activities. In addition, the Company made certain
computer system purchases to upgrade information technology systems which should
enable the Company to become Year 2000 compliant.
Financing activities provided cash of $673,000 during the first nine
months of 1998 resulting primarily from increased borrowing to support seasonal
working capital requirements.
8
<PAGE>
Under the terms of its $10,000,000 revolving line of credit, the
Company had drawn approximately $3,250,000 as of September 26, 1998. The
Company's letters of credit totaling $2,000,000 issued in connection with the
sale of ACPI assets were released as part of the final settlement reached during
the third quarter. This left approximately $6,750,000 available under the
current credit facility which management believes should provide adequate
liquidity for the Company's expected working capital and operating needs.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
Not applicable.
PART II. --OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various lawsuits in the ordinary course of
business. These lawsuits primarily involve claims for damages arising out of
commercial disputes. In the opinion of management, the ultimate disposition of
these matters should not materially impair the Company's consolidated financial
position or liquidity.
In the second quarter of 1997, the Company sold all the stock in
Alabaster Industries, Inc. (Alabaster) for $2.0 million. Payment consisted of
$500,000 in cash and a $1.5 million note receivable secured by a mortgage on
certain Alabaster real property. In 1998, Alabaster filed for protection under
federal bankruptcy law. Accordingly, the Company established a loss allowance of
$450,000 on the Alabaster note receivable as of December 27, 1997 to reflect the
estimated net realizable value of the mortgage.
The Company has been notified by Alabaster's bankruptcy counsel that
Alabaster may seek to recover the $500,000 cash down payment received by the
Company and seek to avoid the $1,500,000 note receivable and the mortgage. The
Company believes it has defenses to any such action and intends to vigorously
defend its rights in this matter. The parties are reviewing applicable documents
relating to these issues and it is too early to predict the eventual outcome of
this claim. Because of this uncertainty, no further adjustment has been made in
the financial statements concerning the valuation or collectibility of the
Alabaster note receivable.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
9
<PAGE>
Item 4. Submission of Matters to a Vote of Security holders
The 1998 Annual Meeting of the Company's stockholders was held on
Tuesday, October 8, 1998 in Kewanee, IL. At the meeting the stockholders voted
on the following items:
1) Elected six directors of the Company, each to serve until the next
annual meeting of stockholders and until his successor has been
elected and qualified or until his earlier resignation or removal.
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
G. Louis Graziadio, III 30,451,257 485,742 3,647,050
Perry A. Lerner 30,476,598 485,742 3,621,709
Lee E. Mikles 30,485,619 485,742 3,612,688
Paul A. Novelly 30,484,421 485,742 3,613,886
Richard D. Squires 30,484,278 485,742 3,614,029
Shyam H. Gidumal 30,486,267 485,742 3,612,040
</TABLE>
2) Approved the proposal for a twenty-five-for-one ("25:1") reverse
stock split; the number of shares authorized by the Articles of
Incorporation shall remain at 50,000,000.
<TABLE>
<S> <C> <C>
34,478,475 for 2,026,305 against 203,181 abstain
</TABLE>
3) Approved the proposal to adopt the Company's 1998 Incentive Stock
Option Plan and to reserve 210,000 shares for issuance thereunder
(after consideration of the 25:1 reverse stock split).
<TABLE>
<S> <C> <C>
17,687,877 for 7,120,299 against 318,501 abstain
</TABLE>
4) Approved the proposal to adopt the Company's 1998 Non-Employee
Director Stock Option Plan and to reserve 90,000 shares for
issuance thereunder (after consideration of the 25:1 reverse stock
split).
<TABLE>
<S> <C> <C>
17,515,671 for 7,293,875 against 288,612 abstain
</TABLE>
5) Approved and ratified the appointment of Grant Thornton LLP as
the Company's independent auditors for the fiscal year ending
December 26, 1998.
<TABLE>
<S> <C> <C>
35,825,642 for 501,581 against 163,177 abstain
</TABLE>
6) Approved the proposal to change the name of the Company from
Vista 2000, Inc. to Boss Holdings, Inc.
<TABLE>
<S> <C> <C>
35,271,092 for 507,434 against 735,739 abstain
</TABLE>
10
<PAGE>
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule (filed electronically with the SEC only)
(b) Reports on Form 8-K
For the current quarter, no reports on Form 8-K were filed.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
VISTA 2000, INC.
Dated: November 10, 1998 By: /s/ J. Bruce Lancaster
-----------------------
J. Bruce Lancaster
Chief Financial Officer
(principal financial officer)
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 26, 1998 UNAUDITED FINANCIAL STATEMENTS OF VISTA 2000, INC., AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS IN FORM 10-Q
FOR THE QUARTER AND NINE MONTHS ENDED JUNE 27, 1998.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> SEP-26-1998 SEP-26-1998
<PERIOD-START> JUN-28-1998 DEC-28-1997
<PERIOD-END> SEP-26-1998 SEP-26-1998
<CASH> 2,290,000 2,290,000
<SECURITIES> 0 0
<RECEIVABLES> 5,137,000 5,137,000
<ALLOWANCES> 0 0
<INVENTORY> 14,577,000 14,577,000
<CURRENT-ASSETS> 22,452,000 22,452,000
<PP&E> 4,509,000 4,509,000
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 28,032,000 28,032,000
<CURRENT-LIABILITIES> 4,680,000 4,680,000
<BONDS> 0 0
0 0
0 0
<COMMON> 486,000 486,000
<OTHER-SE> 19,193,000 19,193,000
<TOTAL-LIABILITY-AND-EQUITY> 28,032,000 28,032,000
<SALES> 8,583,000 27,114,000
<TOTAL-REVENUES> 8,583,000 27,114,000
<CGS> 6,246,000 19,477,000
<TOTAL-COSTS> 2,573,000 7,870,000
<OTHER-EXPENSES> 0 (16,000)
<LOSS-PROVISION> (893,000) (893,000)
<INTEREST-EXPENSE> 82,000 182,000
<INCOME-PRETAX> 575,000 494,000
<INCOME-TAX> 3,000 24,000
<INCOME-CONTINUING> 572,000 470,000
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 572,000 470,000
<EPS-PRIMARY> 0.01 0.01
<EPS-DILUTED> 0.01 0.01
</TABLE>
