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 March 31, 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)
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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
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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, 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>
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>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
ANDEAN DEVELOPMENT CORPORATION
Consolidated Balance Sheets
March 31, 2000 and December 31, 1999
A S S E T S
<TABLE>
<CAPTION>
December 31,
March 31, 2000 1999
(Unaudited) (Audited)
-------------- ------------
<S> <C> <C>
Current Assets:
Cash $ 318,923 $ 125,163
Short-term investments 34,668 145,794
Accounts receivable 3,739,468 4,243,673
Inventory 1,163,107 923,393
Other current assets 734,444 305,859
--------------- ----------------
Total Current Assets 5,990,610 5,743,882
--------------- ----------------
Property, Plant and Equipment, net 3,473,111 3,362,741
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Other Assets:
Real estate held for investment 96,872 96,872
Goodwill 2,614,914 2,631,359
Due from related parties 145,762 197,183
Note receivable from related party 213,750 213,750
Note receivable - other 890,000 890,000
Investment in unconsolidated subsidiaries 392,435 392,435
Deferred charges 154,907 138,984
Deposits and other 433,509 329,501
--------------- ----------------
4,942,149 4,890,084
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$ 14,405,870 $ 13,996,707
=============== ================
</TABLE>
<PAGE>
ANDEAN DEVELOPMENT CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (Continued)
March 31, 2000 and December 31, 1999
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31,
March 31, 2000 1999
(Unaudited) (Audited)
-------------- ------------
<S> <C> <C>
Current Liabilities:
Obligations with banks $ 1,016,290 $ 441,553
Current portion of long-term debt 30,279 603,628
Accounts payable 2,854,484 1,843,189
Due to related parties 332,151 114,304
Current portion due to public entities - 760,881
Income taxes payable 8,272 8,610
Accrued expenses and withholdings 14,613 223,924
Current portion of staff severance indemnities - 34,946
Dividends payable 423,020 423,018
Deferred revenue 511,489 511,489
----------------- -----------------
Total Current Liabilities 5,190,598 4,965,542
----------------- -----------------
Long-Term Liabilities:
Long-term debt, excluding current portion 390,641 404,846
Staff severance indemnities, excluding current portion 107,440 66,685
Due to public entities 2,782,233 2,566,409
----------------- -----------------
3,280,314 3,037,940
----------------- -----------------
Minority interest 530,348 540,442
----------------- -----------------
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 (172,479) (36,268)
Cumulative translation adjustment (147,513) (235,551)
----------------- -----------------
Total Shareholders' Equity 5,404,610 5,452,783
----------------- -----------------
$ 14,405,870 $ 13,996,707
================= =================
</TABLE>
<PAGE>
ANDEAN DEVELOPMENT CORPORATION
Consolidated Statements of Income
Three Months Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
-------------- -------------
<S> <C> <C>
Revenues from Operations:
Revenues $ 2,389,103 $ 116,596
Cost of operations 1,932,261 91,678
----------------- -----------------
Gross Profit 456,842 24,918
Selling and Administrative Expenses 436,819 377,176
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20,023 (352,258)
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Other Income (Expense), Net (79,239) 496,073
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(Loss) Income Before Income Taxes and Minority Interest (59,216) 143,815
Income Taxes - 34,357
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(Loss) Income Before Minority Interest (59,216) 109,458
Minority Interest 76,995 7,650
----------------- -----------------
Net (Loss) Income $ (136,211) $ 101,808
================= =================
Net (Loss) Income per Common Share $ (.05) $ .03
================= =================
Weighted Average Shares Outstanding 2,820,100 2,820,100
================= =================
</TABLE>
<PAGE>
ANDEAN DEVELOPMENT CORPORATION
Consolidated Statements of Cash Flows
Three Months Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
-------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net (loss) income $ (136,211) $ 101,808
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 32,858 23,389
Translation adjustment 88,038 (5,384)
Minority interest (10,095) (24,984)
Gain on sale of real estate held for investment - (532,059)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 504,205 301,897
Inventory (239,714) -
Other receivables - -
Other current assets (428,585) 235,620
Note receivable - -
Deferred charges (15,924) (40,257)
Other assets (104,008) (53,110)
Increase (decrease) in:
Accounts payable 411,151 (8,250)
Provision for severance indemnity - 4,467
Accrued expenses and withholdings (209,311) (23,476)
Income taxes payable (338) 30,954
Staff severance 5,810 -
----------------- ----------------
Net Cash Provided by (Used in) Operating Activities (102,124) 10,615
----------------- -----------------
Cash Flows from Investing Activities:
Matured time deposits 111,126 -
Purchase of fixed assets (126,782) (77,688)
Investment in unconsolidated subsidiaries - (215,510)
Proceeds from short-term investments - 4
----------------- -----------------
Net Cash Provided by (Used in) Investing Activities (15,656) (293,194)
----------------- -----------------
</TABLE>
<PAGE>
ANDEAN DEVELOPMENT CORPORATION
Consolidated Statements of Cash Flows (Continued)
Three Months Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
-------------- ---------------
<S> <C> <C>
Cash Flows from Financing Activities:
Borrowings from (advances to) related parties $ 269,268 $ 335,255
Proceeds from (payments on) notes payable to bank 574,737 (2,136)
Principal payments on long-term debt (587,554) 80,278
Dividends paid 2 (8,165)
Due to public entities 55,087 -
---------------- ----------------
Net Cash Provided by (Used in) Financing Activities 311,540 405,232
---------------- -----------------
Net Increase in Cash 193,760 122,653
Cash at Beginning of Period 125,163 65,036
---------------- -----------------
Cash at End of Period $ 318,923 $ 187,689
================ =================
Supplemental Disclosure of Cash Flow Information:
Cash paid during the quarter for interest $ $ 18,604
Cash paid during the quarter for taxes 4,351
</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, 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 March 31, 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.
<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 and any changes in current accounting rules,
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 first fiscal 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
(MARCH 31, 2000 COMPARED TO MARCH 31, 1999)
Gross Revenues and Costs of Operations
--------------------------------------
Gross revenues increased from $116,596 for the three months ended March 31, 1999
to $2,389,103 for the three months ended March 31, 2000, an increase of
$2,272,507 or 1,949%.
3
<PAGE>
The increase in gross revenues is primarily 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. The core business (business
derived from engineering and sales) gross revenues increased from $116,596 for
the three months ended March 31, 1999 to $262,785 for the three months ended
March 31, 2000, an increase of $146,189 or 125%.
Cost of Operations increased from $91,678 for the three months ended March 31,
1999 to $1,932,261 for the three months ended March 31, 2000, an increase of
$1,840,583 or 2008%. This comes primarily from Consonni operational costs and is
directly related to the increase in gross revenue from products sales. Core
business cost of operations decreased from $91,678 for the three months ended
March 31, 1999 to $20,528 for the three months ended March 31, 2000, a decrease
of $71,150 or 78%. This is a consequence of certain cost reduction measures.
Selling and Administrative Expenses, Incomes from Operations and Other Income
-----------------------------------------------------------------------------
(Expenses)
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Selling and Administrative Expenses increased from $377,176 for the three months
ended March 31, 1999 to $436,819 for the three months ended March 31, 2000, an
increase of $59,643 or 16%. This is a result of the increased expenses of the
operation of Consonni. Selling and Administration Expenses in the core business
decreased from $377,065 for the three months ended March 31, 1999, to $179,632
for the three months ended March 31, 200, a decrease of $197,433 or 47.6%. This
is a consequence of certain cost reduction measures.
Income (loss) from Operations, increased from a loss of ($352,258) for the three
months ended March 31, 1999 to income of $20,023 for the three months ended
March 31, 2000. The income of $20,023 for the three months ended March 31, 2000
is derived from income of $62,623 from the core business offset by an
operational loss of $42,600 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 $496,073 for the three months ended March
31, 1999 to a loss of ($79,239) for the three months ended March 31, 2000. The
decrease is a consequence of the sale of property in 1999 owned by a subsidiary
of the Company at a profit of $ 532,058.
Net Income and Income Tax
-------------------------
Income tax retention decreased from $34,357 for the three months ended March 31,
1999 to none for the three months ended March 31, 2000, as a consequence of the
Net Loss before Income Taxes.
Net Income decreased from $101,108 for the three months ended March 31, 1999 to
a loss of ($136,211) for the three months ended March 31, 2000, as a result of
the decrease in revenues in the core business and the losses from Consonni/ECESA
operations.
Liquidity and Capital Resources
-------------------------------
The Company has financed its operations and other working capital
requirements principally
4
<PAGE>
from operating cash flow.
Current Assets
--------------
Accounts receivable decreased from $4,243,673 at December 31, 1999 to $3,739,468
at March 31, 2000 as a consequence of a decrease in the activity of Consonni
during the last quarter of 1999, which affects the invoicing of the first
quarter of 2000.
Property, plant and equipment increased from $3,362,741 at December 31, 1999 to
$3,473,111 at March 31, 2000, an increase of $110,370 or 3.3%. This increase is
a result of an increase in the Company's expenditures in the vineyard.
Other assets increased from $4,890,084 at December 31, 1999 to $4,942,149 at
March 31, 2000. This increase is a consequence of the Company's increased
investment in Consonni/ECESA.
Liabilities
-----------
Current liabilities increased from $4,965,542 at December 31, 1999, to
$5,190,598 at March 31, 2000, as a result of the increase of Consonni's debt to
suppliers.
Long-term liabilities increased from $3,037,940 at December 31, 1999 to
$3,280,314 at March 31, 2000. This increase is due to the consolidation of the
debt of Consonni (consolidated in the Company's subsidiary, Conusa USA, Inc.)
with 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 March 31, 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
At the 1998 Annual Meeting of Shareholders, held on March 24, 2000,
Pedro P. Errazuriz, Jose Luis Yrarrazaval, Alberto Coddou, Sergio Jimenez, and
Claude Mermier were elected as directors of the Company, each receiving
1,462,220 or 64.1% of the vote with no votes against and 600 votes abstaining.
The shareholders of the Company ratified the appointment of
PricewaterhouseCoopers, as the Company's independent certified public
accountants for the fiscal year ending December 31, 1999, with 1,462,820 or
64.2% voting in favor, none against or abstaining.
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 March 13, 2000.
On March 7, 2000, the Company engaged PricewaterhouseCoopers to act as the
Company's independent certified public accountant. PricewaterhouseCoopers
replaced Spear, Safer, Harmon & Co. There have been no disagreements with Spear,
Safer, Harmon & Co. 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 DESCRIPTION
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27 Financial Data Schedule
8
