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, 1999.
( ) 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
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(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, 1999, 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.
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<TABLE>
<CAPTION>
ANDEAN DEVELOPMENT CORPORATION
Consolidated Balance Sheets
March 31, 1999 and December 31, 1998
A S S E T S
MARCH 31, 1999 DECEMBER 31,
(UNAUDITED) 1998
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<S> <C> <C>
Current Assets:
Cash $ 187,689 $ 65,036
Short-term investments 23,479 23,483
Accounts receivable 1,548,540 2,176,462
Other current assets 320,623 230,218
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Total Current Assets 2,080,331 2,495,199
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Property, Plant and Equipment, net 1,743,709 1,689,410
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Other Assets:
Real estate held for investment 789,447 1,147,389
Due from related parties 529,942 875,550
Note receivable from related party 531,793 531,793
Note receivable - other 2,301,901 1,411,900
Investment in unconsolidated subsidiaries 1,988,079 1,772,569
Deferred charges 523,191 482,934
Deposits and other 135,242 82,132
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6,799,595 6,304,267
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$ 10,623,635 $ 10,488,876
============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
ANDEAN DEVELOPMENT CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (Continued)
March 31, 1999 and December 31, 1998
LIABILITIES AND SHAREHOLDERS' EQUITY
MARCH 31, 1999 DECEMBER 31,
(UNAUDITED) 1998
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<S> <C> <C>
Current Liabilities:
Obligations with banks $ 155,523 $ 157,659
Current portion of long-term debt 55,223 57,223
Accounts payable 173,043 181,293
Due to related parties 128,398 138,751
Income taxes payable 148,479 117,525
Accrued expenses and withholdings 33,843 57,319
Current portion of staff severance indemnities 27,940 23,954
Dividends payable 564,020 564,020
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Total Current Liabilities 1,286,469 1,297,744
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Long-Term Liabilities:
Long-term debt, excluding current portion 635,841 553,563
Staff severance indemnities, excluding current portion 65,574 65,093
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701,415 618,656
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Minority interest 37,516 62,500
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Shareholders' Equity:
Preferred stock, $.0001 par value, 5,000,000 shares
authorized, 0 shares issued and outstanding - -
Common stock, $.0001 par value, 20,000,000 shares
authorized, 2,820,100 shares issued and outstanding 282 282
Additional paid-in capital 5,724,320 5,724,320
Retained earnings 3,018,966 2,925,323
Cumulative translation adjustment (145,333) (139,949)
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Total Shareholders' Equity 8,598,235 8,509,976
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$ 10,623,635 $ 10,488,876
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
ANDEAN DEVELOPMENT CORPORATION
Consolidated Statements of Income
Three Months Ended March 31, 1999 and 1998
1999 1998
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<S> <C> <C>
Revenues from Operations:
Revenues $ 116,596 $ 386,460
Cost of operations 91,678 240,340
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Gross Profit 24,918 146,120
Selling and Administrative Expenses 377,176 367,868
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(352,258) (221,748)
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Other Income, Net 496,073 309,953
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Income Before Income Taxes and Minority Interest 143,815 88,205
Income Taxes 34,357 20,173
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Income Before Minority Interest 109,458 68,032
Minority Interest 7,650 -
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Net Income $ 101,808 $ 68,032
=============== ================
Net Income per Common Share $ .03 $ .02
=============== ================
Weighted Average Shares Outstanding 2,820,100 2,820,100
=============== ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
ANDEAN DEVELOPMENT CORPORATION
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1999 and 1998
1999 1998
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<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 101,808 $ 68,032
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 23,389 15,329
Translation adjustment (5,384) 19,332
Minority interest (24,984) -
Gain on sale of real estate held for investment (532,059) -
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 301,897 852,377
Other receivables - (35,250)
Other current assets 235,620 (24,305)
Note receivable - 112,873
Deferred charges (40,257) -
Other assets (53,110) (28,223)
Increase (decrease) in:
Accounts payable (8,250) (596,918)
Provision for severance indemnity 4,467 6,992
Accrued expenses and withholdings (23,476) (48,039)
Income taxes payable 30,954 (3,443)
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Net Cash Provided by (Used in) Operating Activities 10,615 338,757
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Cash Flows from Investing Activities:
Purchase of fixed assets (77,688) (6,250)
Investment in unconsolidated subsidiaries (215,510) (384,855)
Proceeds from short-term investments 4 446,348
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Net Cash Provided by (Used in) Investing Activities (293,194) 55,243
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</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
ANDEAN DEVELOPMENT CORPORATION
Consolidated Statements of Cash Flows (Continued)
Three Months Ended March 31, 1999 and 1998
<S> <C> <C>
1999 1998
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Cash Flows from Financing Activities:
Borrowings from (advances to) related parties $ 335,255 $ (59,085)
Proceeds from (payments on) notes payable to bank (2,136) (2,427)
Principal payments on long-term debt 80,278 (11,234)
Dividends paid (8,165) (432,000)
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Net Cash Provided by (Used in) Financing Activities 405,232 (504,746)
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Net Increase (Decrease) in Cash 122,653 (110,746)
Cash at Beginning of Period 65,036 324,556
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Cash at End of Period $ 187,689 $ 213,810
============== ==============
Supplemental Disclosure of Cash Flow Information:
Cash paid during the quarter for interest $ 18,604 $ 9,316
Cash paid during the quarter for taxes 4,351 -
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
ANDEAN DEVELOPMENT CORPORATION
Notes to Consolidated Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - The quarterly financial information included
herein is unaudited; however, such information reflects all adjustments
(consisting solely of normal recurring adjustments) which are, in
opinion of management, necessary for a fair statement of results for
the interim period. For further information, refer to the financial
statements and notes thereto included in the Company's form 10-KSB as
of and for the year ended December 31, 1998.
FUNCTIONAL CURRENCY - The financial statements have been translated in
accordance with the provisions set forth in Statement of Financial
Accounting Standards No. 52, from Chilean pesos (the functional
currency) into US dollars (the reporting currency).
EARNINGS PER COMMON SHARE - Earnings per common share are based on the
weighted average number of shares outstanding of 2,820,100 for the
periods ended March 31, 1999 and 1998, respectively, after giving
effect to common stock equivalents which consist of warrants issued
with the initial public offering that would have a dilutive effect on
earnings per share. Warrants issued with exercise prices greater than
the existing market value of the company stock are deemed anti-dilutive
and are not components of earnings per share.
<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 1999 the Company has continued
implementing its business strategy on its subsidiaries with an effort
to increase the revenues of its Core Business as explained in its most
recent 10-K. Ingesis S.A., one of its subsidiaries in the computer
technology, has hired a new General Manager who is highly regarded
within the industry. His main focus will be attempting to improve the
subsidiaries sales volume. At the same time Ingesis S.A. has been
developing computer software that once complete would assist in
improving productivity of workers within Consonni S.A., and continuing
working with the government trying to obtain the formal approval of the
new development of Unidad de Control Fiscal ("UCF"), a software product
that will support the Chilean Internal Revenue Service IRS in
supervision and control activities. NYSA S.A., another subsidiary is in
the business of performing engineering appraisals, selecting sites for
development, and negotiations with the owners of land to be used for
various energy projects. During the first quarter the Company continued
its profitable operations. However, the Company generated over $500,000
as a result of the sale of real estate held for investment. Future
plans involve the expansion of different types of operations including
B.O.T. projects, whereby the private sector invests in public projects
such as road and port development. Bodegas Garcia Errazuriz, the
vineyard continues to development its land for the eventual growing of
grapes and ultimate production of wine. Plans continue to be to have
the first wine production during 2001.
However, with the Asiatic Crisis last year, the Company's American
markets could potentially be impacted. Several U.S. customers, usually
involved in the development of power plants in South America, are a
little more hesitant in their approach to invest as quickly as has been
seen in the past. This situation as well has recently shown signs of
recovery. We are now of the belief that the worst of the problems are
behind us.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED)
PLANS OF OPERATIONS - ADC has been requested to provide project
engineering to a consortium trying to sell a 230MW hydropower TG set
for Emgesa (Colombia) and one TG set based on an open cycle 160MW gas
turbine from Westinghouse for Cachoeira Dourada, a Brazilian Utility.
The Company is also consulting on the sale of a package of 1000 MW from
CIEN, an Argentinean consortium to a Brazilian utility, anticipating
the sale of an 800-km power line.
RESULTS OF OPERATIONS - March 31, 1999 compared to March 31, 1998.
Gross revenues decreased from $386,460 in 1998 to $116,596 in 1999, a
decrease of $269,864 or 70%. This decrease is due to the delay of
several projects as a direct impact of the Asian Crisis. Management
expects to increase its gross revenues in the second and third quarters
of 1999 with the completion of the contracts delayed in the first
quarter.
Cost of operations decreased from $240,340 at March 31, 1998 to $91,678
at March 31, 1999, a decrease of $148,662 or 62% due to the Company's
decrease in revenues.
Selling and administrative expenses increased from $367,868 at March
31, 1998 to $377,176 at March 31, 1999, an increase of $9,208 or 2.5%.
These are mostly fixed expenses of the Company. Gross profits decreased
from $146,120 at March 31, 1998 to $24,918 at March 31, 1999, a
decrease of $121,202 or 83% due to the reduction of revenues.
Other income, net increased from $309,953 at March 31, 1998 to $496,073
at March 31, 1999, an increase of $186,120 or 60%. This increase is due
to the sale of real estate held for investment during the first quarter
of 1999.
Income taxes have increased from $20,173 to $34,357, an increase of
$14,184 or 70%. This is primarily due to the gain on the sale of the
aforementioned real estate.
LIQUIDITY AND CAPITAL RESOURCES - During the period ended March 31,
1999, as compared to December 31, 1998 there were significant changes
in the liquidity, type of assets and structure of debt. Other assets
have increased from $6,304,267 for the period ended on December 31,
1998 to $6,799,595 for the period ended March 31, 1999. This increase
corresponds to investments in new business opportunities described
above. In addition, due to the sale of the aforementioned real estate,
the Company's notes receivable increased from $1,411,900 at December
31, 1998 to $2,301,901. Current liabilities decreased from $1,297,744
as of December 31, 1998 to $1,286,469 as of March 31, 1999 due
principally to payments made on payables during the first quarter.
Long-term liabilities of $618,656 as of December 31, 1998, increased to
$701,415 as of March 31, 1999 due to borrowings made for the
development of the vineyard. The Company declared dividends at December
31, 1998 of $.20 per share to be paid in installments between March and
August 1999. None has been paid in March.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(CONTINUED)
YEAR 2000 COMPLIANCE - The Company recognizes the need to ensure its
operations will not be adversely impacted by Year 2000 software
failures. Software failures due to processing errors potentially
arising from calculations using the year 2000 date are a known risk.
The Company is addressing this risk to the availability and integrity
of financial systems and the reliability of operational systems. The
Company has established processes for evaluating and managing the risks
and costs associated with this problem. Major areas of potential
business impact have been identified and initial conversion efforts are
underway. The Company also is communicating with suppliers, dealers,
financial institutions, and others with which it does business to
coordinate year 2000 conversion. After evaluations of the responses
from such communications, the Company will prepare a contingency plan
to mitigate year 2000 issues, if necessary. The total cost of
compliance and its effect on the Company's future results of operations
is being determined as past of the detailed conversion planning.
<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
<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
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27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 187,689
<SECURITIES> 0
<RECEIVABLES> 1,548,540
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,080,331
<PP&E> 1,991,294
<DEPRECIATION> 247,585
<TOTAL-ASSETS> 10,623,635
<CURRENT-LIABILITIES> 1,286,469
<BONDS> 0
0
0
<COMMON> 282
<OTHER-SE> 8,597,953
<TOTAL-LIABILITY-AND-EQUITY> 10,623,635
<SALES> 0
<TOTAL-REVENUES> 116,596
<CGS> 91,678
<TOTAL-COSTS> 307,176
<OTHER-EXPENSES> (507,027)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,604
<INCOME-PRETAX> 143,815
<INCOME-TAX> 34,357
<INCOME-CONTINUING> 101,808
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 108,808
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
