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 March 31, 1998.
( ) 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 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 March 31, 1998, 2,820,100
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>
ANDEAN DEVELOPMENT CORPORATION
Consolidated Balance Sheets
March 31, 1998 and December 31, 1997
A S S E T S
<TABLE>
<CAPTION>
1998 1997
---------------------- ----------------------
<S> <C> <C>
Current Assets:
Cash $ 213,810 $ 324,556
Short-term investments 82,227 528,575
Accounts receivable 2,353,008 3,205,385
Due from related parties 596,100 520,000
Other receivables 35,250 -
Other current assets 142,343 118,038
------------- --------------
Total Current Assets 3,422,738 4,696,554
------------- --------------
Furniture and Equipment, net 663,796 672,875
------------- --------------
Other Assets:
Undeveloped real estate, held for investment 1,147,389 789,447
Note receivable from related party 493,158 606,031
Note receivable - other 1,339,766 1,339,766
Investment in unconsolidated subsidiaries 1,656,911 1,629,998
Other assets 1,100,566 1,072,343
------------- --------------
5,737,790 5,437,585
------------- --------------
$ 9,824,324 $ 10,807,014
============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ANDEAN DEVELOPMENT CORPORATION
Consolidated Balance Sheets (Continued)
March 31, 1998 and December 31, 1997
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
1998 1997
---------------------- ----------------------
<S> <C> <C>
Current Liabilities:
Obligations with banks $ 574,329 $ 576,756
Current portion of long-term debt 29,583 30,320
Accounts payable 170,237 767,155
Due to related parties 41,279 24,264
Income taxes payable 193,579 197,022
Accrued expenses and withholdings 29,492 77,531
Current portion of staff severance indemnities 28,522 21,530
Dividends payable - 150,000
------------- --------------
Total Current Liabilities 1,067,021 1,844,578
------------- --------------
Long-Term Liabilities:
Long-term debt, excluding current portion 108,257 118,754
Staff severance indemnities, excluding current portion 87,317 87,317
------------- --------------
195,574 206,071
------------- --------------
Shareholders' Equity:
Preferred stock, $.0001 par value, 5,000,000 shares
authorized, 0 shares issued and outstanding at
March 31, 1998 and December 31, 1997, respectively - -
Common stock, $.0001 par value, 20,000,000 shares
authorized, 2,820,100 shares issued and outstanding 282 282
Additional paid-in capital 5,724,320 5,724,320
Retained earnings 2,921,745 3,135,713
Cumulative translation adjustment (84,618) (103,950)
------------- --------------
Total Shareholders' Equity 8,561,729 8,756,365
------------- --------------
$ 9,824,324 $ 10,807,014
============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ANDEAN DEVELOPMENT CORPORATION
Consolidated Statements of Income
Three Months Ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---------------------- ----------------------
<S> <C> <C>
Revenues from Operations:
Revenues $ 386,460 $ 909,261
Cost of operations 240,340 221,248
-------------- -------------
Gross Profit 146,120 688,013
Selling and Administrative Expenses 367,868 232,440
-------------- -------------
(221,748) 455,573
-------------- -------------
Other Income, Net 309,953 28,381
-------------- -------------
Income Before Income Taxes 88,205 483,954
Income Taxes 20,173 50,254
-------------- -------------
Net Income $ 68,032 $ 433,700
============== =============
Net Income per Common Share $ .02 $ .15
============== =============
Weighted Average Shares Outstanding 2,820,100 2,820,100
============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ANDEAN DEVELOPMENT CORPORATION
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---------------------- ----------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 68,032 $ 433,700
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 15,329 -
Translation adjustment 19,332 -
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 852,377 (803,910)
Other receivables (35,250) (78,475)
Other current assets (24,305) -
Note receivable 112,873 -
Other assets (28,223) (35,811)
Increase (decrease) in:
Accounts payable (596,918) (247,588)
Provision for severance indemnity 6,992 10,645
Accrued expenses and withholdings (48,039) (708)
Income taxes payable (3,443) 56,410
-------------- -------------
Net Cash Provided by (Used in) Operating Activities 338,757 (665,737)
-------------- -------------
Cash Flows from Investing Activities:
Purchase of fixed assets (6,250) (51,174)
Investment in unconsolidated subsidiaries (384,855) (12,520)
Proceeds from short-term investments 446,348 870,998
-------------- -------------
Net Cash Provided by Investing Activities 55,243 807,304
-------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ANDEAN DEVELOPMENT CORPORATION
Consolidated Statements of Cash Flows (Continued)
Three Months Ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---------------------- ----------------------
<S> <C> <C>
Cash Flows from Financing Activities:
Payment of public offering cost $ - $ (71,256)
Borrowings from (advances to) related parties (59,085) 24,231
Proceeds from (payments on) notes payable to bank (2,427) -
Principal payments on long-term debt (11,234) (7,863)
Dividends paid (432,000) -
-------------- ------------
Net Cash Used in Financing Activities (504,746) (54,888)
-------------- -------------
Net Increase (Decrease) in Cash (110,746) 86,679
Cash at Beginning of Period 324,556 168,156
-------------- -------------
Cash at End of Period $ 213,810 $ 254,835
============== =============
Supplemental Disclosure of Cash Flow Information:
Cash paid during the quarter for interest $ 9,316 $ 4,409
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ANDEAN DEVELOPMENT CORPORATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL - The following discussion regarding the Company and its
business and operations contains "forward-looking statements" within
the meaning of Private Securities Litigation Reform Act 1995. Such
statements consist of any statement other than a recitation of
historical fact and can be identified by the use of forward-looking
terminology such as "may", "expect", "anticipate", "estimate" or
"continue" or the negative thereof or other variations thereon or
comparable terminology.
The reader is cautioned that all forward-looking statements are
necessarily speculative and there are certain risks and uncertainties
that could cause actual events or results to differ materially from
those referred to in such forward looking statements.
The Company does not have a policy of updating or revising
forward-looking statements and thus it should not be assumed that
silence by management of the Company over time means that actual events
are bearing out as estimated in such forward looking statements.
OVERVIEW - During the first quarter of 1998, Management's efforts were
mainly focused on the acquisition and reorganization of small to medium
size companies that would provide the Company with a more stable cash
flow and would constitute a solid investment. Management believes that
these investments will be profitable and will generate cash flow in
future years, (e.g., vineyard and wine processing installation). In
addition, these acquisitions will provide the Company with highly
qualified employees and assets that would bring new ideas and state of
the art technology.
The first quarter in 1998 has been affected by two setbacks that had a
negative effect on the results expected by management for 1998.
The first was the inability of its American subsidiary, Andean
Engineering & Finance Corporation ("AEFC") to produce any revenues or
profit from inception, mainly due to the dedication of its executives
to long-term matters; a majority of those efforts were successfully
dedicated to the reorganization of Construcciones Electromecanicas
Consonni, S.A., ("Consonni"). The second setback was the effect of the
Asiatic Crisis on the investment activity during the last quarter of
1997 and first quarter of 1998. Most of the projects being handled by
the Company as well as some new contracts anticipated to be executed
during the first quarter of 1998, were postponed until the second
quarter and/or third quarter of 1998. The impact of these two problems
is clearly a factor when analyzing the results of the year.
Management is taking corrective measures to mitigate or eliminate these
problems for the remainder of 1998. Notwithstanding, management
believes that increased expenses were necessary to develop the Company
and prepare it for its new phase of activities.
1
<PAGE>
ANDEAN DEVELOPMENT CORPORATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(CONTINUED)
The Company believes that the market has already absorbed the effects
of the Asiatic Crisis during this period and the delayed activities
will come to fruition in the second and third quarters of 1998.
Moreover, the activities of INGESIS, NYSA, the two wine related
companies, and Consonni should have a positive effect on total revenues
and net income, as well as the stability of the Company. In general,
management anticipates a solid recovery starting the second quarter of
1998.
PLAN OF OPERATIONS - The Company will increase its efforts in the Core
Business area, using its facilities in Spain and by acting as a
consultant to various manufacturers who are bidding projects in Peru,
Argentine and Brazil, where the Chilean utilities have made significant
investments. The Company will also consolidate its investments and
effectively increase the production of the newly acquired subsidiaries,
improving the quality of its services to customers, its coverage of new
markets and its internal administration. Management will seek approval
of the shareholders to increase its participation in Consonni and ECESA
of Spain up to 77%.
Management plans to dedicate more time to its Core Business and have
acquired experts to develop new businesses. Mr. Errazuriz, CEO and
Chairman, effective May 15, 1998, resigned to dedicate all of his time
to the development of new ideas, sales and promotion in the Core
Business area. He will remain as Chairman of the Board. Mr. De La
Barra, who joined the Company in September 1997 from the Inter-American
Development Bank, has been appointed to the position of President and
CEO.
RESULTS OF OPERATIONS - March 31, 1998 compared to March 31, 1997.
Gross revenues decreased from $909,261 in 1997 to $386,460 in 1998, a
decrease of 57%. This decrease is due to the Asiatic Crisis previously
mentioned that has delayed most projects being handled by the Company
as well as postponement of new contract negotiations. Management
expects to increase its gross revenues in the second and third quarters
of 1998 with the completion of the contracts delayed in the first
quarter.
Cost of operations increased from $221,248 at March 31, 1997 to
$240,340 at March 31, 1998 or 9% due to the diversification of the
Company's operations in new markets and thus as a result, additional
personnel have been hired to meet these needs.
2
<PAGE>
ANDEAN DEVELOPMENT CORPORATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(CONTINUED)
Selling and administrative expenses increased from $232,440 at March
31, 1997 to $367,868 at March 31, 1998 an increase of $135,428 or 58%
which is reflective of the above mentioned increase in personnel and
management's continued effort to increase the Company's Core business.
Management anticipates some of these investments to have profitability
at the end of 1998.
Gross profits decreased from $688,013 at March 31, 1997 to $146,120 at
March 31, 1998, a decrease of $541,893 or 79%. This is primarily due to
net income decreased from $433,700 at March 31, 1997 to $68,032 at
March 31, 1998, a decrease of $365,668 or 84%. This is due to the
aforementioned.
Income taxes have decreased from $50,254 to $20,173 or $30,081.
Although income before income taxes decreased significantly, the
Company must pay income taxes in Chile that are not offset with U.S.
affiliates for consolidated financial statement purposes.
LIQUIDITY AND CAPITAL RESOURCES - During the period ended in March 31,
1998, as compared to December 31, 1997, there were significant changes
in the liquidity, type of assets and structure of debt.
Other assets have increased from $5,437,585 for the period ended on
December 31, 1997 to $5,737,790 for the period ended March 31, 1998.
This increase corresponds to investments in new business opportunities
described above.
Current liabilities decreased from $1,844,578 as of December 31, 1997
to $1,067,021 as of March 31, 1998, due to the payments of payables
during the first quarter of 1998.
Long-term liabilities of $195,574 as or March 31, 1998, is down from
$206,071 as of December 31, 1997 due to payments made on liabilities in
the first quarter of 1998.
3
<PAGE>
ANDEAN DEVELOPMENT CORPORATION
Part II. Other Information
Item 1. Legal Proceeds
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
/bullet/ Resignation of Mr. Errazuriz as President and Chief
Executive Officer, effective May 15, 1998.
/bullet/ Appointment of Mr. Mauricio De la Barra as President and
Chief Executive Officer, effective May 15, 1998.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
None
<PAGE>
SIGNATURES
In accordance with Section 13 or 15 (d) of the Securities Exchange Act
of 1934, Andean Development Corporation has caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ANDEAN DEVELOPMENT CORPORATION
DATE: May 20, 1998 By: /s/ Mauricio De La Barra
-------------------------------
Mauricio De La Barra,
Chief Executive Officer,
Chief Financial Officer and
Authorized Signatory
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 296,037
<SECURITIES> 0
<RECEIVABLES> 2,353,008
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 773,693
<PP&E> 781,076
<DEPRECIATION> 117,280
<TOTAL-ASSETS> 9,824,324
<CURRENT-LIABILITIES> 1,067,021
<BONDS> 0
0
0
<COMMON> 282
<OTHER-SE> 9,824,042
<TOTAL-LIABILITY-AND-EQUITY> 9,824,324
<SALES> 0
<TOTAL-REVENUES> 386,460
<CGS> 240,340
<TOTAL-COSTS> 367,868
<OTHER-EXPENSES> (319,269)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,316
<INCOME-PRETAX> 88,205
<INCOME-TAX> 20,173
<INCOME-CONTINUING> 68,032
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,612
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
