SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to ___________
Commission file number 33-90696
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ANDEAN DEVELOPMENT CORPORATION
(Name of small business issuer as specified in its charter)
Florida 65-0648697
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1 Brickell Square
801 Brickell Avenue, Suite 900
Miami, Florida 33131
(Address of principal executive offices)
(305) 371-0056
(Issuer's telephone number)
----------------
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 No X
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. As of June 30, 2000, 2,820,100 shares
of $.0001 par value common stock were outstanding.
Transitional Small Business Disclosure Format (check one) Yes No X
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<PAGE>
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.
The accompanying notes are an integral part of these financial statements.
<PAGE>
PART I
FINANCIAL INFORMATION
ANDEAN DEVELOPMENT CORPORATION
Consolidated Balance Sheets
June 30, 2000 and December 31, 1999
A S S E T S
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
(Unaudited) (Audited)
------------- -----------------
<S> <C> <C>
Current Assets:
Cash $ 228,114 $ 125,163
Short-term investments 23,561 145,794
Accounts receivable 4,352,110 4,243,673
Inventory 1,665,774 923,393
Notes receivable 30,881 -
Other current assets 886,106 -
--------------- ---------------
Total Current Assets 7,186,546 5,743,882
--------------- ----------------
Property, Plant and Equipment, net 3,422,999 3,362,741
--------------- ----------------
Other Assets:
Real estate held for investment 372,510 98,872
Goodwill 2,598,467 2,631,359
Due from related parties 29,152 197,183
Note receivable from related party 213,750 213,750
Note receivable - other 253,000 890,000
Investment in unconsolidated subsidiaries 2,543 392,435
Deferred charges 193,126 138,984
Deposits and other 444,426 329,501
--------------- ----------------
4,106,974 4,890,084
--------------- ----------------
$ 14,716,519 $ 13,996,707
=============== ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ANDEAN DEVELOPMENT CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (Continued)
June 30, 2000 and December 31, 1999
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
(Unaudited) (Audited)
------------- -----------------
<S> <C> <C>
Current Liabilities:
Obligations with banks $ 775,766 $ 441,553
Current portion of long-term debt 21,804 603,628
Accounts payable 3,784,837 1,843,189
Current portion due to public entities 501,243 760,881
Due to related parties 585,952 114,304
Income taxes payable 5,897 8,610
Accrued expenses and withholdings 122,046 223,924
Current portion of staff severance indemnities - 34,946
Dividends payable 423,020 423,018
Deferred revenue - 511,489
----------------- ----------------
Total Current Liabilities 6,220,565 4,965,542
----------------- ----------------
Long-Term Liabilities:
Long-term debt, excluding current portion 305,258 404,846
Staff severance indemnities, excluding current portion 98,298 66,685
Due to public entities 2,172,420 2,566,409
----------------- ----------------
2,575,976 3,037,940
----------------- ----------------
Minority interest 440,418 540,442
----------------- ----------------
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 (30,300) (36,268)
Cumulative translation adjustment (214,742) (235,551)
----------------- ----------------
Total Shareholders' Equity 5,479,560 5,452,783
----------------- ----------------
$ 14,716,519 $ 13,996,707
================= ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ANDEAN DEVELOPMENT CORPORATION
Consolidated Statements of Income
Three Months Ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
-------------- --------------
<S> <C> <C>
Revenues from Operations:
Revenues $ 2,629,698 $ 205,777
Cost of operations (1,997,477) (103,330)
----------------- -----------------
Gross Profit 632,221 102,447
Selling and Administrative Expenses (279,167) (285,954)
----------------- -----------------
Income (Loss) from Operations 353,054 (183,507)
----------------- -----------------
Other (Expenses) Income, net (464,648) 133,264
----------------- -----------------
Loss Before Income Taxes and Minority Interest (111,594) (50,243)
Income Taxes (3,509) 21,657
----------------- -----------------
Loss Before Minority Interest (115,103) (28,586)
Minority Interest (60,338) (4,423)
----------------- -----------------
Net Loss $ (54,765) $ (24,163)
================= =================
Net Loss per Common Share $ (.02) $ (.01)
================= =================
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 Income
Six Months Ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
------------- -------------
<S> <C> <C>
Revenues from Operations:
Revenues $ 5,018,801 $ 322,373
Cost of operations (3,929,738) (195,008)
----------------- -----------------
Gross Profit 1,089,063 127,365
Selling and Administrative Expenses (519,042) (663,130)
----------------- -----------------
Income (Loss) from Operations 570,021 (535,765)
----------------- -----------------
Other (Expenses) Income, net (542,887) 629,337
----------------- -----------------
Income Before Income Taxes and Minority Interest 26,134 93,572
Income Taxes (3,509) (12,700)
----------------- -----------------
Income Before Minority Interest 22,625 80,872
Minority Interest 16,657 3,227
----------------- -----------------
Net Income $ 5,968 $ 77,645
================= =================
Net Income per Common Share $ .002 $ .03
================= =================
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
Six Months Ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
-------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 5,968 $ 77,645
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 66,637 41,037
Translation adjustment 20,809 43,434
Minority interest (100,024) (39,810)
Gain on sale of real estate held for investment - (532,059)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (108,437) 707,409
Inventory (742,381) -
Other receivables (611,128) -
Other current assets 637,000 382,683
Note receivable (54,142) -
Deferred charges (114,925) -
Other assets - (232,608)
Increase (decrease) in:
Accounts payable 1,941,648 23,431
Provision for severance indemnity - 3,993
Accrued expenses and withholdings (101,878) (32,230)
Income taxes payable (2,713) (84,105)
Deferred revenue (511,489) -
Staff severance (3,333) -
----------------- ----------------
Net Cash Provided by Operating Activities 321,612 358,820
----------------- -----------------
Cash Flows from Investing Activities:
Purchase of fixed assets (94,003) (151,618)
Investment in unconsolidated subsidiaries 389,892 -
Cash acquired from short-term investments - 260,916
Proceeds from short-term investments 122,235 1,028
Real estate held for investment (275,638) -
----------------- ----------------
Net Cash Provided by Investing Activities 142,486 110,326
----------------- -----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ANDEAN DEVELOPMENT CORPORATION
Consolidated Statements of Cash Flows (Continued)
Six Months Ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
-------------- --------------
<S> <C> <C>
Cash Flows from Financing Activities:
Borrowings from (advances to) related parties $ 639,679 $ (103,461)
Proceeds from notes payable to bank 334,213 8,295
Principal payments on long-term debt (681,412) 12,372
Payments on due to public entities (653,627) -
Dividends paid - (141,000)
--------------- -----------------
Net Cash (Used in) Financing Activities (361,147) (223,794)
--------------- -----------------
Net Increase in Cash 102,951 245,352
Cash at Beginning of Period 125,163 65,036
--------------- -----------------
Cash at End of Period $ 228,114 $ 310,388
=============== =================
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 102,012 $ 33,886
Cash paid during the period for taxes 3,509 15,796
Supplemental Disclosure of Non-Cash Investing Activities:
Details of acquisition:
Assets acquired 8,142,896
Liabilities assumed 7,704,678
Minority interest 671,074
</TABLE>
The accompanying notes are an integral part of these financial statements.
<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, 1999.
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 June 30, 2000 and 1999, 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.
The accompanying notes are an integral part of these financial statements.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis contains various "forward looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, regarding future events or the future financial performance of
the Company that involve risks and uncertainties. Certain statements included in
this Form 10-QSB, including, without limitation, statements related to
anticipated cash flow sources and uses, words including but not limited to
"anticipates", "believes", "plans", "expects", "future" and similar statements
or expressions identify forward looking statements. Any forward-looking
statements herein are subject to certain risks and uncertainties in the
Company's business, including but not limited to, reliance on key customers and
competition in its markets, market demand, product performance, technological
developments, maintenance of relationships with key suppliers, difficulties of
hiring or retaining key personnel, all of which may be beyond the control of the
Company. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth herein.
Management's Discussion and Analysis of Financial Condition and Results
of Operations ("MD&A") should be read in conjunction with the consolidated
financial statements included herein. Further, this quarterly report on Form
10-QSB should be read in conjunction with the Company's Consolidated Financial
Statements and Notes to Consolidated Financial Statements included in its 1999
Annual Report on Form 10-KSB.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000
COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
Gross Revenues and Costs of Operations
Gross revenues increased from $205,777 for the three months ended June 30, 1999
to $2,629,698 for the three months ended June 30, 2000, an increase of
$2,423,921. The increase in gross revenues is due to the revenues generated by
the Company's subsidiary, a manufacturing facility in Spain, Construcciones
Electromecanicas Consonni S.A. ("Consonni"), which produces revenues of
approximately $600,000 to $700,000 per month.
Cost of Operations increased from a $103,330 for the three months ended June 30,
1999 to $1,997,477 for the three months ended June 30, 2000, an increase of
$1,894,147. This increase comes primarily from Consonni operational costs and is
directly related to the increase in gross revenue from Consonni product sales.
Selling and Administrative Expenses, Incomes from Operations and Other Income
(Expenses)
Income (loss) from Operations increased from a loss of ($183,507) for the three
months ended June 30, 1999 to income of $353,054 for the three months ended June
30, 2000, an increase of $536,561.
Other Income (Expenses) decreased from $133,264 for the three months ended June
30, 1999 to a loss of ($464,648) for the three months ended June 30, 2000, a
decrease of $597,912. The decrease is a consequence of the sale of income
producing property and certain assets in 1999 and amortization charges related
to Consonni operations (not included in the three months ended March 31, 1999).
Net Income and Income Tax
Income tax retention decreased from $21,657 for the three months ended June 30,
1999 to $3,509 for the three months ended June 30, 2000, as a consequence of
lower profits.
Net (Loss) Income decreased from a loss of $24,163 for the three months ended
June 30, 1999 to a loss of $54,765 for the three months ended June 30, 2000.
SIX MONTHS ENDED JUNE 30, 2000
COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
Gross Revenues and Costs of Operations
--------------------------------------
Gross revenues increased from $322,373 for the six months ended June 30, 1999 to
$5,018,801 for the six months ended June 30, 2000, an increase of $4,696,428.
3
<PAGE>
The increase in gross revenues is due to the revenues generated by Consonni,
which produces revenues of approximately $600,000 to $700.000 per month. The
core business (business derived from engineering and sales) gross revenues
increased from $322,373 for the six months ended June 30, 1999 to $697,041 for
the six months ended June 30, 1999, an increase of $374,668. This increase in
core business gross revenues was primarily due to the Company expanding its
business outside of Chile to neighboring countries.
Cost of Operations increased from $195,008 for the six months ended June 30,
1999 to $3,929,738 for the six months ended June 30, 2000, an increase of
$3,734,730. This increase comes primarily from Consonni operational costs and is
directly related to the increase in gross revenue from Consonni product sales.
Core business cost of operations increased minimally from $195,008 for the six
months ended June 30, 1999 to $201,291 for the six months ended June 30, 2000.
Selling and Administrative Expenses, Incomes from Operations and Other Income
-----------------------------------------------------------------------------
(Expenses)
----------
Selling and Administrative Expenses decreased from $663,130 for the six months
ended June 30, 1999 to $519,042 for the six months ended June 30, 2000, a
decrease of $144,088. Selling and Administration Expenses in the core business
decreased from $663,130 for the six months ended June 30, 1999, to $261,857 for
the six months ended June 30, 2000, a decrease of $401,283. This is a
consequence of certain cost reduction measures.
Income (loss) from Operations, increased $1,105,786 from a loss of $(535,765)
for the six months ended June 30, 1999 to income of $570,021 for the six months
ended June 30, 2000, an increase of $1,105,786. The income is derived from
income of $352,531 from the core business and $217,490 from Consonni and "ECESA"
(Equipos de Control Electrico S.A.), the international marketing and sales arm
of Consonni (ECESA, and collectively with Consonni, "Consonni/ECESA").
Other Income (Expenses) decreased from $629,337 for the six months ended June
30, 1999 to a loss of ($543,887) for the six months ended June 30, 2000, a
decrease of $1,173,224. The decrease is a consequence of the sale of income
producing property and certain assets in 1999 and amortization included in
Consonni operations (not included in the six months ended March 31, 1999).
Net Income and Income Tax
-------------------------
Income tax retention decreased from $12,700 for the six months ended June 30,
1999 to $3,509 for the six months ended June 30, 2000, as a consequence of lower
profits.
Net Income decreased from $77,645 for the six months ended June 30, 1999 to
$5,968 for the six months ended June 30, 2000.
Liquidity and Capital Resources
-------------------------------
The Company has financed its operations and other working capital
requirements principally from operating cash flow.
4
<PAGE>
Current Assets
--------------
Accounts receivable increased from $4,243,673 at December 31, 1999 to $4,352,110
at June 30, 2000, as a consequence of an increase in the activity of Consonni
during the first two quarters of 2000.
Property, plant and equipment increased from $3,362,741 at December 31, 1999 to
$3,422,999 at June 30, 2000.
Other assets decreased from $4,890,084 at December 31, 1999 to $4,106,974 at
June 30, 2000. This decrease is a consequence of amortization of the goodwill of
the Company, adjustments to receivables, and the sale of Biwater, offset by the
acquisition of certain property.
Liabilities
-----------
Current liabilities increased from $4,965,542 at December 31, 1999, to
$6,220,565 at June 30, 2000, as a result of the increase of Consonni's debt to
suppliers.
Long-term liabilities decreased from $3,037,940 at December 31, 1999 to
$2,575,976 at June 30, 2000. This decrease is due to the payment of the long
termm debt to Banco Sudamericano and payments of certain obligations of Consonni
to the government entities in Spain.
The Company anticipates that its cash requirements will continue to increase as
it continues to expend substantial resources to build its infrastructure,
develop its modified business plan, establish its sales and marketing network
operations, customer support and administrative organizations. The Company
currently anticipates that its available cash resources and cash generated from
operations will be sufficient to meet its presently anticipated working capital
and capital expenditure requirements for the next twelve months. As of June 30,
2000, there were no commitments for long term capital expenditures. If the
Company is unable to maintain profitability, or seeks further expansion,
additional funding will become necessary. No assurances can be given that either
equity or debt financing will be available.
5
<PAGE>
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 Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) The following Exhibits are filed as part of the Quarterly Report on Form
10-QSB
27 Financial Data Schedule
(b) Reports on Form 8-K:
A report on Form 8-K was filed with the Commission on June 19, 2000. On
June 13, 2000, the Company engaged Spear, Safer, Harmon & Co. to act as the
Company's independent certified public accountant. Spear, Safer, Harmon & Co.
replacing PricewaterhouseCoopers. There have been no disagreements with
PricewaterhouseCoopers on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure or any reportable
events.
6
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ANDEAN DEVELOPMENT CORPORATION
By: /s/ Pedro Pablo Errazuriz
-------------------------------------
Date: November 16, 2000 Pedro Pablo Errazuriz
President and Chief Executive Officer
7
<PAGE>
Exhibit Index
Exhibit 27 - Financial Data Schedule
8
