FORM 10-QSB
SECURITY AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997.
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ____________ to _______________.
Commission file number: 33-90696
ANDEAN DEVELOPMENT CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 65-0648697
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1900 Glades Road, Suite 351, Boca Raton, Florida 33431
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 416-8930
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 report(s), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. As of September 30, 1997, 2,820,000
shares of $.0001 par value common stock were outstanding.
<PAGE>
ANDEAN DEVELOPMENT CORPORATION
INDEX
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Part II. Other Information
<PAGE>
<TABLE>
<CAPTION>
ANDEAN DEVELOPMENT CORPORATION
Consolidated Balance Sheets
September 30, 1997 and December 31, 1996
A S S E T S
1997 1996
--------------- ---------
<S> <C> <C>
Current Assets:
Cash $ 114,889 $ 168,156
Invested cash 1,373,915 3,598,760
Accounts receivable, net 3,115,569 2,912,723
Note receivable - current portion 109,936 -
Due from related parties 270,675 17,072
Employee advances 26,060 -
Deferred income taxes 4,589 4,589
Other current assets 631,364 140,010
--------------- -------------
Total Current Assets 5,646,997 6,841,310
--------------- -------------
Furniture and equipment, net 225,753 165,557
--------------- -------------
Other Assets:
Undeveloped real estate, held for investment 789,447 789,447
Note receivable - long term portion 1,229,827 -
Note receivable from related party 606,031 606,031
Deferred income taxes 5,501 5,501
Investment in affiliated companies 956,377 425,250
Other assets 342,093 6,901
--------------- -------------
3,929,276 1,833,130
--------------- -------------
$ 9,802,026 $ 8,839,997
=============== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
ANDEAN DEVELOPMENT CORPORATION
Consolidated Balance Sheets (Continued)
September 30, 1997 and December 31, 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
1997 1996
--------------- ---------
<S> <C> <C>
Current Liabilities:
Obligations with banks $ 5,686 $ -
Current portion of long-term debt 31,393 39,578
Accounts payable 170,906 262,671
Due to related parties 119,851 7,562
Income taxes payable 225,566 143,451
Accrued expenses and withholdings 34,190 26,978
Current portion of staff severance indemnities 21,469 17,977
--------------- -------------
Total Current Liabilities 609,061 498,217
--------------- -------------
Long-Term Liabilities:
Long-term debt, excluding current portion 130,806 145,344
Staff severance indemnities, long-term portion 62,844 36,674
--------------- -------------
193,650 182,018
--------------- -------------
Shareholders' Equity:
Common stock, $.0001 par value, 20,000,000 shares authorized, 2,820,100
shares issued and outstanding at September 30, 1997 and
December 31, 1996, respectively 282 282
Additional paid-in capital 5,566,066 5,724,320
Retained earnings 3,480,409 2,479,810
Cumulative translation adjustment (47,442) (44,650)
------------- -------------
8,999,315 8,159,762
--------------- -------------
$ 9,802,026 $ 8,839,997
=============== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
ANDEAN DEVELOPMENT CORPORATION
Consolidated Statements of Income
Nine Months Ended September 30, 1997 and 1996
1997 1996
--------------- ---------
<S> <C> <C>
Revenues from Operations:
Revenues $ 3,568,286 $ 2,187,541
Cost of operations (1,689,404) (635,337)
--------------- -------------
Gross Profit 1,878,882 1,552,204
Selling and Administrative Expenses 674,008 333,209
--------------- -------------
Income from Operations 1,204,874 1,218,995
--------------- -------------
Other Income (Expense), net (25,686) (169,586)
-------------- --------------
Income Before Income Taxes 1,179,188 1,049,409
Income Taxes 178,589 147,361
--------------- -------------
Net Income $ 1,000,599 $ 902,048
=============== =============
Net Income Per Common Share $ .36 $ .60
=============== =============
Weighted Average Shares Outstanding 2,752,411 1,500,100
=============== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
ANDEAN DEVELOPMENT CORPORATION
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1997 and 1996
1997 1996
--------------- ---------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 1,000,599 $ 902,048
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Depreciation 14,322 6,944
Profit on sale of fixed assets (6,031) -
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (202,846) (538,843)
Note receivable (1,339,763) -
Other current assets (491,354) 80,537
Employee advances (26,060) -
Other assets (335,192) (200)
Increase (decrease) in:
Accounts payable (91,765) (37,728)
Provision for severance indemnity 29,663 10,331
Accrued expenses and withholdings 7,212 (22,956)
Income taxes payable 82,115 145,914
--------------- -------------
Net Cash Provided by (Used in) Operating Activities: (1,359,100) 546,047
--------------- -------------
Cash Flows from Investing Activities:
Purchase of fixed assets (73,283) (75,772)
Investment in subsidiaries (531,127) -
Payments for purchase of property under construction
or land for sale - 22,402
Proceeds from sale of fixed assets 4,797 -
Proceeds from sale of subsidiary (ITL) - 193,359
Purchase of bridge loan warrants (87,000) -
Invested cash 2,224,845 260
--------------- -------------
Net Cash (Used in) Investing Activities 1,538,232 140,249
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</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
ANDEAN DEVELOPMENT CORPORATION
Consolidated Statements of Cash Flows (Continued)
Nine Months Ended September 30, 1997 and 1996
1997 1996
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<S> <C> <C>
Cash Flows from Financing Activities:
Cost of public offering (71,255) (355,377)
(Advances to) repayments from related parties (141,315) (71,808)
Proceeds from (payments on) notes payable to banks 5,686 116,942
Principal borrowings (payments) on long-term debt (22,723) (152,713)
Dividends paid - (300,000)
Proceeds from bridge loan - 65,000
--------------- -------------
Net Cash Provided by (Used in) Financing Activities (229,607) (697,956)
------------- -------------
Effect of Exchange Rate Changes (2,792) -
Net Increase (Decrease) in Cash (53,267) (11,660)
Cash at Beginning of Period 168,156 52,574
--------------- -------------
Cash at End of Period $ 114,889 $ 40,914
=============== =============
Supplemental Disclosure:
The Company paid $13,963 and $141,933 for
interest and $97,023 and $29,507 for income
taxes in 1997 and 1996, respectively.
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
ANDEAN DEVELOPMENT CORPORATION
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
GENERAL
On November 12, 1996, the Company completed the sale of 1,200,000
shares of its stock to the public in an offering that raised
approximately $6,150,000 for the Company. At September 30, 1996,
management capitalized approximately $355,000 of costs associated with
the public offering which was charged off to paid-in capital at
December 31, 1996.
The Company granted the bridge loan lenders 21,000 warrants to purchase
common stock of $1.70. As a result, cost associated with these warrants
in the amount of $75,600 are being charged against operations during
the period of the loan (May 1996 through January 1997). As of December
31, 1996, the Company has charged 65,000 to operations.
During this period, the Company initiated two new operations intended
to provide continuous cash flow. It has taken a 25% equity
participation, including management responsibilities in a wine bottling
and processing plant in Chile. The wine processing and bottling plant
will commence operations in March 1998 and will produce up to two
million bottles of wine during 1998, increasing to four million
annually over the next five years. The Company is presently studying
the possibility of purchasing a 500 acre vineyard, which in the future
will provide grapes for the wine processing and bottling plant.
Additionally, during this period, the Company purchased 35 acres of
beach front property ("El Peral" project) close to Santiago which has a
summertime population of approximately 500,000. The Company intends to
sell lots and develop this property including the construction of
mid-income vacation homes over a four year period. The Company has sold
approximately 55% of the 35 acres, and in doing so has recouped its
investment on this purchase.
The Company is also presently reviewing a potential investment and/or
acquisition of an electrical manufacturer located in Spain and various
water utility projects in Chile and Peru.
RESULTS OF OPERATIONS
The Company's core operations have traditionally been focused on three
areas (i) engineering services and the sale of equipment and parts for
projects throughout Chile; (ii) project management and the sale, as
agent, of major equipment for three to five large turn-key projects
during any given year and (iii) the preparation of business for third
parties. While the period between the payment by the Company for the
goods and services and the receipt of revenues in connection with the
goods and services described in (i) above is typically proximate in
time, this is not necessarily so with regard to payments and receipt
for those goods and services described in (ii) and (iii) above. Often
the interval between payments by the Company for equipment and
<PAGE>
ANDEAN DEVELOPMENT CORPORATION
services is spread over a longer period of time. Thus, the fluctuation
in the results of operations for each quarter may vary greatly,
depending on the timing of payments for major equipment (both by and to
the Company).
SEPTEMBER 30, 1997 COMPARED TO SEPTEMBER 30, 1996
Gross revenues for the quarter ended September 30, 1997 increased
$1,380,745 over the period ended September 30, 1996 from $2,187,541 to
$3,568,286 an increase of approximately 63%. This increase is due to
the first successful operations in the selling and developing of the
beach property referred to above and commissions earned from various
projects.
Costs of operations for the fiscal period ended September 30, 1997
increased $1,054,066 over the fiscal period ended September 30, 1996
from $635,337 to $1,689,403 or 166%. This increase is attributable to
the cost of preparing the beach front property for sale ("El Peral"
project) and, in general, to the policy of the Company entering into
business that will have a lower profit margin in itself but will create
a steady cash flow and obtain a more regular Cost of Operations vs.
Gross Revenue Rate.
Selling and administrative expenses for the fiscal period ended
September 30, 1997 increased $340,799 from $333,209 at September 30,
1996 to $674,008 at September 30, 1997 or 102%. This increase is
attributable to the sale of lots in the "El Peral" project and the
publicity and preparation costs related to this project and other
various projects related to the core business.
Other income (expense-net) as of September 30, 1997 decreased from
($169,586) of expenses at September 30, 1996 to ($25,686) of expenses
amounting to a difference of $143,900. This decrease is attributable to
increased interest income as a result of the approximately $2,300,000
of invested cash.
Net income increased from $902,048 at September 30, 1996 to $1,000,599
at September 30, 1997. This increase of $98,551 or 11% is attributable
to increased commissions earned during the period.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1997 accounts receivable increased $202,846 from
$2,912,723 as of year end December 1996 to $3,115,569 as of September
30, 1997 or 7%. The amount of the receivable outstanding and the number
of days outstanding is attributable to the timing of recognition of
revenues as compared to the date of payment. In particular, in the case
of equipment sales, the Company recognizes revenues on the sale of the
equipment or on a turnkey project, when the contract between the
purchasing company and the manufacturer is signed by both parties or an
"order to proceed" is issued by the buyer. While the schedule of
payment is set by contract, the time of payment may be determined by
practices of the exporting country involved in the transaction as well
as unanticipated delays caused by obtaining permits and
<PAGE>
ANDEAN DEVELOPMENT CORPORATION
export licenses and as a result it is not unusual for a transfer of
funds to take 60-180 days. The Company normally receives its
commission, which are fully earned at the time the award is made, 30
days after receipt of funds by the manufacturer it represents.
Generally, payment terms conform to the contractual payment schedule
between the buyer and the seller. The decrease in accounts receivable
is attributable to increased receipts during the six month period and
the terms of payments associated with these contracts.
Accounts payable decreased $91,765 from $262,671 as of December 31,
1996 to $170,706 as of September 30, 1997 or 35%. This decrease is
attributable to timing differences occurring in the normal course of
business.
Other current assets increased $491,354 from $140,010 as of December
31, 1996 to $631,364 as of September 30, 1997 or 350%. This increase is
attributable to works in progress to increase our office space and to a
loan to Consonni USA Inc.
Total other assets increased $2,096,146 from $1,833,130 as of December
31, 1996 to $3,929,276 as of September 30, 1997 or 114%. This increase
is attributable to the purchase of the beach front property and a note
receivable related to the subsequent sale of 55% the property.
<PAGE>
ANDEAN DEVELOPMENT CORPORATION
PART II: OTHER INFORMATION
ITEM 1: Legal Proceedings
None
ITEM 2: Changes in Securities
None
ITEM 3: Defaults upon Senior Securities
None
ITEM 4: Submission of Matters to a vote of Securities Holders
None
ITEM 5: Other Information
Subsequent Events
During this period, the Company invested in a wine processing and
bottling facility in Chile, which is scheduled to begin distributing up
to two million bottles of wine commencing in March, 1998. The Company
is currently reviewing other equity investments in South America and
Europe.
On October 1, 1997, the Company declared dividends of $.20 per share to
stockholders of record on October 31, 1997, payable in two installments
on December 31, 1997 and March 31, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form 10-QSB, and has duly caused this Form
10-QSB to be signed on its behalf by the undersigned, thereunto duly authorized
on the 13th of November, 1997.
ANDEAN DEVELOPMENT CORPORATION
BY: /s/ PEDRO P. ERRAZURIZ
------------------------------
Pedro P. Errazuriz , President
(Principal Executive Officer)
BY: /s/ JOSE LUIS YRARRAZAVAL
--------------------------
Jose Luis Yrarrazaval, Secretary/Treasurer
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Form 10-QSB has been signed by the following persons in the capacity and on
the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/PEDRO P. ERRAZURIZ President November 13, 1997
- --------------------- (Principal Executive
Pedro P. Errazuriz Officer)
/s/JOSE LUIS YRARRAZAVAL Treasurer November 13, 1997
- ------------------------ Director
Jose Luis Yrarraaval (Principal Accounting
Officer)
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,488,804
<SECURITIES> 0
<RECEIVABLES> 3,115,569
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,042,624
<PP&E> 296,702
<DEPRECIATION> (70,949)
<TOTAL-ASSETS> 9,802,026
<CURRENT-LIABILITIES> 609,061
<BONDS> 0
0
0
<COMMON> 282
<OTHER-SE> 8,999,033
<TOTAL-LIABILITY-AND-EQUITY> 9,802,026
<SALES> 0
<TOTAL-REVENUES> 3,568,286
<CGS> 1,689,404
<TOTAL-COSTS> 674,008
<OTHER-EXPENSES> 11,723
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,963
<INCOME-PRETAX> 1,179,188
<INCOME-TAX> 178,589
<INCOME-CONTINUING> 1,000,599
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,000,599
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
</TABLE>
