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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 2001
[ ] 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 0-13403
- --------------------------------------------------------------------------------
AMISTAR CORPORATION
(Exact name of registrant as specified in its Charter)
- --------------------------------------------------------------------------------
CALIFORNIA 95-2747332
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
237 VIA VERA CRUZ
SAN MARCOS, CA 92069-2698
(Address of principal executive offices) (Zip Code)
AREA CODE (760) 471-1700
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None Securities
registered pursuant to Section 12(g) of the Act:
Title of each class
--------------------------------
COMMON STOCK, PAR VALUE
$.01 PER SHARE
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 reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Aggregate market value of voting stock held by non-affiliates of the
registrant as of the close of business on March 4, 2002: $2,174,000.
The number of shares outstanding of registrant's Common Stock as of March
4, 2002: 3,139,750 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following document are incorporated by reference:
PART III Definitive Proxy Statement for Annual Meeting of Shareholders to
be held May 1, 2002 filed with the Securities and Exchange Commission.
1
AMISTAR CORPORATION
FORM 10-K
TABLE OF CONTENTS
PART I
1. Business................................................................3
2. Properties..............................................................6
3. Legal Proceedings.......................................................6
4. Submission of Matters to a Vote of Security Holders.....................6
PART II
5. Market for Registrant's Common Stock and Related Stockholder Matters....8
6. Selected Financial Data.................................................9
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations .................................................10
7a. Quantitative and Qualitative Disclosures About Market Risk ............18
8. Financial Statements and Supplementary Data............................19
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure...................................................33
PART III
10. Directors and Executive Officers of the Registrant.....................33
11. Executive Compensation.................................................33
12. Security Ownership of Certain Beneficial Owners and Management.........33
13. Certain Relationships and Related Transactions.........................33
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K........33
2
PART I
This Annual Report contains forward-looking statements within the meaning of the
Private Securities Reform Act of 1995, particularly statements regarding market
opportunities, success of research and development, customer acceptance of
products, gross profit and marketing expenses. These forward-looking statements
involve risks and uncertainties, and the cautionary statements set forth below
identify important factors that could cause actual results to differ materially
from those in any such forward-looking statements. Such factors include, but are
not limited to, adverse changes in general economic conditions, including
changes in the specific markets for the Company's products, product
availability, decreased or lack of growth in the electronics industry, adverse
changes in customer order patterns, increased competition, lack of acceptance of
new products, pricing pressures, lack of success in technological advancements,
and other factors.
ITEM 1. BUSINESS
Amistar Corporation (the Company) provides industrial automation solutions
primarily for electronic product manufacturers. The Company designs, develops,
manufactures, markets and services a variety of automatic equipment used to
assemble electronic components and product identification media to printed
circuit boards and other assemblies. In addition, the Company provides design
and manufacturing resources to create customized factory automation equipment
according to customer's specification in a broad range of industries. The
Company also provides contract-manufacturing services to companies who outsource
the manufacturing of their electronic products.
Financial Information Relating to Industry Segments
- ---------------------------------------------------
The Company's operations include two business segments: Industrial
Automaton (AIA), which encompasses the design, manufacture and distribution of
assembly machines and related accessories, and Amistar Manufacturing Services
(AMS) which provides contract manufacturing services. Prior to December 31,
2001, AIA was named the "machine products division" with "AIA" formerly the
title of the factory automation unit. The Company decided that "AIA" is a more
appropriate title for both the machine products area and customized factory
automation. Information concerning the Company's operations for the two segments
is found in note 10 to the financial statements.
Amistar Industrial Automation (AIA)
- -----------------------------------
Amistar Industrial Automation, a division of Amistar, provides factory
automation solutions by offering its own proprietary machine products and by
providing customized factory automation design and manufacturing.
Machine Products
- ----------------
The Company's label identification machines, the DataPlace(R) 100LP and
the DataPlace(R) 1M, are available in a standard configuration and can be
customized, through mechanical or software modifications, to meet the needs of a
specific application. In addition, the Company offers machine system integration
with the customer's ERP system.
The Company continues to sell a small number of axial component insertion
machines, and to provide service and spare parts to customers of its installed
base of through-hole insertion equipment and surface mount assembly machines.
During 2000, the Company's Japanese supplier of surface mount assembly
machines sold its operations to a competitor, leaving the Company without a
source of surface mount assembly (SMD) machines. During 2001, the Machine
Division completed its transition from a distributor of SMD machines to an
original manufacturer of automatic label application machines for the
electronics manufacturing industry.
Customized Factory Automation
- -----------------------------
During 2001, the Company launched a new business unit to utilize its core
strengths more effectively in the design, manufacture, and service of customized
factory automation equipment for other manufacturers. The unit's 2001 sales
included an order to provide final engineering design and manufacturing of
automation equipment for a major sports equipment manufacturer.
3
Amistar Manufacturing Services (AMS)
- ------------------------------------
Amistar Manufacturing Services, a division of Amistar, provides contract
manufacturing services to OEMs in various industries, such as medical, computer
peripherals, audio/video, industrial test and controls, data networking, and
telecommunications. The Company offers a broad range of solutions by providing
engineering services, materials procurement and management, surface mount and
through-hole board assembly, various levels of testing, final product assembly,
enclosure and systems build, distribution and warranty depot support.
Product Development
- -------------------
The Company's products are marketed to an industry that is subject to
rapid technological change and increasingly complex methods of manufacturing.
Amistar's ability to compete and operate successfully depends upon its ability
to react to such change. Accordingly, the Company has been committed to the
continuing enhancement of its current products to allow their use in a wider
variety of applications, and the development of new products to further reduce
customer labor costs and increase manufacturing efficiencies.
During 2001, 2000 and 1999, the Company's engineering, research and
development expenses were approximately $843,000, $1,161,000 and $1,197,000,
respectively. Development efforts were focused in 2000 on the DataPlace(R) 1M
automatic label placer and on custom applications for the DataPlace(R) 100LP.
During 2001, the engineering group focused on DataPlace(R) 1M machine cost
reduction, customization orders for both models of the DataPlace(R) machines and
provided support to the new customized factory automation unit. Management is
currently evaluating additional research and development projects for 2002.
Customers and Marketing
- -----------------------
The Company's machine products are sold primarily to contract and OEM
manufacturers of electronic products. The Company's marketing strategy is to
offer equipment that fulfills a variety of customer needs and to emphasize the
advanced features, ease of use, price, performance, and reliability.
Amistar markets its machine products in the United States through an
internal sales force that, in addition to direct selling efforts, also support
independent manufacturer's representatives. The AIA unit markets its services
through an internal sales force.
The Company's AMS division is marketed through a combination of Company
personnel, electronics component distributors and outside representatives.
Dependence on a Single Customer
- -------------------------------
During 2001, sales of $2,291,000 (or 17% of total sales) were made to
Merit Medical Systems, Inc., $1,634,000 (or 12% of total sales) to Systech
Corporation, $1,579,000 (or 12% of total sales) to Chad Therapeutics and
$1,532,000 (or 11% of total sales) to Signet Scientific. During 2000, sales of
$2,501,000 (or 14% of total sales) were made to Zevex International, Inc. and
$2,293,000 (or 12% of sales) were made to Merit Medical Systems, Inc. During
1999, sales of $1,855,000 (or 12% of total sales) were made to Merit Medical
Systems, Inc.
Foreign Sales
- -------------
A portion of the Company's machine sales has traditionally been to foreign
customers. Profitability and product mix of foreign machine sales are generally
comparable to domestic sales. During 2001, the Company's sales were primarily to
domestic customers. The Company is subject to international trade risks
including unfavorable economic conditions, foreign currency risk, restrictive
trade policies, controls on funds and political uncertainties. The following
table illustrates the Company's sales, expressed in dollars and as a percentage
of total sales, in major geographic markets over the last three years.
(Dollars in thousands) 2001 2000 1999
------------------------- ------------------------ ------------------------
United States $13,356 98% $18,040 97% $13,573 90%
Europe 211 2% 305 2% 187 1%
South America\Canada 56 - 73 - 523 4%
Asia 36 - 101 1% 788 5%
------------- -------- ------------ ------- ------------ -------
TOTALS $13,659 100% $18,519 100% $15,071 100%
============= ======== ============ ======= ============ =======
4
Foreign Sales, cont'd
- ---------------------
The Company's products can be freely exported to most countries under a
general destination (G-Dest) export classification with the U.S. Department of
Commerce. Additional information regarding foreign operations can be found in
notes 11 and 12 to the financial statements.
Service
- -------
The Company provides installation and service for all of its machines
other than those sold by certain distributors with qualified service personnel
who undertake the installation and service responsibility. The Company provides
service personnel for its customers out of the Company's San Marcos, California
and San Antonio, Texas offices. The Warrenville, Illinois and Melbourne, Florida
offices were closed during 2001 as part of a consolidation initiative. In
Europe, the Company's distributor, Assembly Service GmbH provides service
support.
Machine Manufacturing
- ---------------------
Amistar's machines are complex devices that combine a number of electronic
and electromechanical technologies, and must function in difficult production
environments with a high degree of precision and reliability. Product designs
typically call for a high percentage of specially designed machine parts, many
of which are fabricated in-house, as well as standard, commercially available
parts. The Company utilizes its machine shop located in San Marcos, California
for in-house fabrication.
Those parts of the Company's products that are not manufactured directly
by Amistar are purchased from outside vendors. Most parts are available from
more than one supplier. While certain parts are presently purchased from single
sources, the Company believes it would be able to locate additional sources for
such parts without a material adverse effect on its business. Amistar has never
experienced a major production delay due to a materials shortage or the loss of
a single-source for its material.
Contract Manufacturing
- ----------------------
The Company's ability to generate contract manufacturing service revenues
is dependent upon the availability of electronic components. Electronic
components are supplied by distributors (primary suppliers) and by brokers
(secondary suppliers). During portions of 2001, certain electronic components
were available from distributors on an allocated basis. Distributor allocations
can cause either interruption in supply to the Company or increased costs, or
both. In the event supply is only available through secondary suppliers, the
Company may also experience limitations on availability in addition to increased
costs.
Competition
- -----------
The Company competes with a number of domestic and foreign manufacturers
of electronic component, label placement, or factory automation equipment, many
of whom have more diverse product lines and greater financial and marketing
resources than the Company. The Company's primary domestic label identification
machine competitors are Nortek Automation, Inc. and Computype, Inc.
The Company believes that the key factors affecting the choice of a label
placement machine are reliability, placement speed, responsive service, ability
to detect errors, range of labels placed, ease of programming and operation,
integration with ERP systems, and price.
There are numerous companies, of various sizes and geographic reach, which
provide contract assembly services to companies that sell electronic products,
none of which the Company considers to be a prime competitor.
Backlog
- -------
Customer machine order lead times are usually short. Current customer
practice is to wait to place the purchase order until just before the equipment
is required or after an evaluation period while on loan. Therefore, backlog may
not necessarily be indicative of future sales. Order lead times for contract
manufacturing vary. The backlog at December 31, 2001 was $3,458,000, all of
which is expected to ship during the next 12 months. The AIA and AMS divisions
had backlog at December 31, 2001 of $105,000 and $3,353,000 respectively. Total
Company backlog was $4,199,000 at December 31, 2000. The AIA and AMS divisions
had backlog at December 31, 2000 of $942,000 and $3,257,000, respectively. In
the event the Company is unable to ship on the purchase order due date, the
Company would not incur any contractual damages other than the potential damage
to a customer relationship.
5
Intellectual Property
- ---------------------
Amistar relies on U.S. and foreign patents, copyrights, trademarks and
trade secrets, to establish and maintain proprietary rights in its technology
and products. As of December 31, 2001, the Company has been issued nine United
States patents relating to mature products. Although the Company believes that
its patents have value, the Company also believes that responding to the
technological changes that characterize the electronics industry, maintaining a
strong marketing and service operation, and continuing to produce quality
products are of greater significance than patent protection. Moreover, there can
be no assurance that patents applied for will be granted or that any patents
presently held, or to be held, by the Company will afford it commercially
significant protection of its proprietary technology.
Employees
- ---------
During the week ended February 15, 2002, the Company had 117 full-time
employees and 5 temporary employees. Of the total employees, 97 were employed in
manufacturing, 8 in marketing and service, 7 in product development and 10 in
administration and finance.
ITEM 2. PROPERTIES
The Company owns the building and 5.6 acres of land on which the building
is located in San Marcos, California. The Company's headquarters, principal
administration, automation machine manufacturing, contract manufacturing
services, and research and development offices are located in this 80,000 square
foot building completed in April of 1987.
The Company leases, but no longer occupies, a 14,000 square foot facility
in Anaheim, California. On January 22, 2001 the Company entered into an
agreement extending the lease for an additional term of five years, expiring in
March 2006, at a current monthly rental rate of $8,400. In November 2001, the
Anaheim facility was subleased to a sub-tenant for a term beginning December
2001 and expiring March 2006, at an average monthly rental rate of $9,137 for 49
months in addition to a three-month free rent period.
ITEM 3. LEGAL PROCEEDINGS
The Company is not aware of any material pending legal proceedings
involving the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
6
EXECUTIVE OFFICERS AND DIRECTORS
Name Age Title
---- --- -----
Stuart C. Baker 70 Chairman of the Board and President
Dr. Sanford B. Ehrlich 50 Director
William W. Holl 71 Secretary, Treasurer and Director
Gordon S. Marshall 82 Director
Carl C. Roecks 68 Director
Howard C. White 61 Director
Daniel C. Finn 45 Vice President of Operations
Tod N. Kilgore 44 Vice President of Sales and
Marketing-AMS Division
Gregory D. Leiser 45 Vice President of Finance and Chief
Financial Officer
Harry A. Munn 50 Executive Vice President of
Marketing and Sales
Mr. Baker, a founder of the Company, has served the Company as a Director
and President since its inception in 1971 and as Chairman of the Board since
1993.
Dr. Ehrlich, appointed Director in 2000, is Associate Professor of
Management at the College of Business Administration at San Diego State
University, and serves as the Executive Director of the school's Entrepreneurial
Management Center.
Mr. Holl, a founder of the Company, has served the Company as a Director,
Secretary and Treasurer since its inception in 1971, and as Chief Financial
officer from 1978 until 2001. In 2001, Mr. Holl retired and serves the Company
on a part-time basis.
Mr. Marshall has served the Company as the Chairman of the Board from 1974
to 1993. Mr. Marshall was the founder and former Chairman of the Board of
Marshall Industries, an electronics distribution company that was acquired by
Avnet Electronics Marketing in 1999.
Mr. Roecks, a founder of the Company, has served the Company in various
engineering and management capacities since its inception in 1971. Since 1989,
Mr. Roecks has been retired and serves the Company on a part-time basis.
Mr. White, appointed Director in 2000, was formerly a partner in charge of
the Metropolitan Southern California Region Accounting and Audit Practice and
worldwide managing director of finance with Andersen Worldwide. Mr. White is
currently President of White & White LLC, a financial and business consulting
services company.
Mr. Finn has served the Company since 1979, and as Vice-President
Operations since 1999.
Mr. Kilgore has served the Company as Vice-President Sales and
Marketing-AMS Division since 1999.
Mr. Leiser has served the Company since 1995, as Vice-President Finance
since 1999 and as Chief Financial Officer since 2001.
Mr. Munn has served the Company since 1985, and as Vice-President
Marketing and Sales since 1997.
Mr. Saloka, not presently employed by the Company, served the Company as
Vice-President-AMS Division from 1999 through January 2002.
7
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
From May 1984, when Amistar had its initial public offering, until June
1985, the Company's stock was traded on the NASDAQ over the counter market under
the symbol AMTA. From June 18, 1985 until January 1999, the Company's stock was
traded on the NASDAQ/NMS (National Market System); since January 1999, the stock
has traded on the NASDAQ/SC (Small Cap market system). The following table
reflects the closing prices per share for the last two years:
Quarter ended High* Low*
----------------- ----- ----
Mar. 31, 2001 3.88 1.88
Jun. 30, 2001 2.13 1.49
Sep. 30, 2001 1.98 0.99
Dec. 31, 2001 1.35 0.99
Mar. 31, 2000 4.25 1.52
Jun. 30, 2000 4.00 2.19
Sep. 30, 2000 4.31 2.88
Dec. 31, 2000 3.00 2.25
* The prices indicated are as reported by the National
Association of Security Dealers.
The Company had approximately 90 shareholders of record on December 31,
2001; however, the Company believes there are over 1,000 beneficial owners based
on the number of requests for proxies.
The Company has not paid cash dividends on its common stock and does not
plan to pay cash dividends to its shareholders in the foreseeable future.
8
ITEM 6. SELECTED FINANCIAL DATA
Statements of Operations Data:
Year Ended December 31,
--------------------------------------------------------------------
(In thousands, except per share data)
2001 2000 1999 1998 1997
--------- --------- --------- --------- ---------
Net sales $ 13,659 $ 18,519 $ 15,071 $ 20,728 $ 22,840
Cost of sales 13,056 13,798 13,649 14,908 14,842
--------- --------- --------- --------- ---------
Gross profit 603 4,721 1,422 5,820 7,998
--------- --------- --------- --------- ---------
Operating expenses:
Selling 1,674 2,093 2,764 3,423 4,051
General & administrative 1,342 738 2,065 1,067 1,014
Engineering, research & development 843 1,161 1,197 1,202 1,462
--------- --------- --------- --------- ---------
3,859 3,992 6,026 5,692 6,527
--------- --------- --------- --------- ---------
Income (loss) from operations (3,256) 729 (4,604) 128 1,471
Other income (expense):
Interest, net 94 111 (43) (8) 86
Other 6 8 6 61 41
--------- --------- --------- --------- ---------
Earnings (loss) before income taxes (3,156) 848 (4,641) 181 1,598
Income tax expense (benefit) (66) 9 196 (50) 505
--------- --------- --------- --------- ---------
Net earnings (loss) $ (3,090) $ 839 $ (4,837) $ 231 $ 1,093
========= ========= ========= ========= =========
Earnings (loss) per common share:
Basic $ (0.99) $ 0.27 $ (1.54) $ 0.07 $ 0.34
========= ========= ========= ========= =========
Diluted $ (0.99) $ 0.26 $ (1.54) $ 0.07 $ 0.34
========= ========= ========= ========= =========
Weighted-average shares
outstanding:
Basic 3,127 3,137 3,137 3,206 3,236
========= ========= ========= ========= =========
Diluted 3,127 3,179 3,137 3,206 3,236
========= ========= ========= ========= =========
Selected Balance Sheet Data:
December 31,
--------------------------------------------------------------------
(In thousands)
2001 2000 1999 1998 1997
--------- --------- --------- --------- ---------
Working capital $ 2,371 $ 9,625 $ 8,236 $ 11,709 $ 12,632
Total assets 13,666 17,106 16,285 21,759 22,236
Long-term obligations 0 4,500 4,500 4,500 4,500
Retained earnings 3,715 6,805 5,967 10,803 10,573
Total shareholders' equity 8,283 11,426 10,587 15,424 15,448
9
ITEM 6. SELECTED FINANCIAL DATA
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarter Ended,
-----------------------------------------------------
3/31 6/30 9/30 12/31
------------- ------------ ------------ ------------
(In thousands, except per share data)
2001
- -------------------------------------------
Net sales $3,679 $3,399 $3,890 $2,691
Gross profit (loss) 381 (103) (147) 472
Net earnings (loss) (676) (956) (905) (553)
Earnings (loss) common per share:
Basic (0.22) (0.30) (0.29) (0.18)
Diluted (0.22) (0.30) (0.29) (0.18)
2000
- -------------------------------------------
Net sales $4,775 $5,471 $4,025 $4,248
Gross profit 1,208 1,530 817 1,166
Net earnings 62 378 47 352
Earnings common per share:
Basic 0.02 0.12 0.02 0.11
Diluted 0.02 0.12 0.01 0.11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Critical Accounting Principles and Estimates
- --------------------------------------------
In response to the SEC's Release Numbers 33-8040 "Cautionary Advice
Regarding Disclosure About Critical Accounting Policies" and 33-8056,
"Commission Statement about Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Company has identified the following
critical accounting policies that affect its more significant judgments and
estimates used in the preparation of its financial statements. The preparation
of the Company's financial statements in conformity with accounting principles
generally accepted in the United States of America requires management of the
Company to make estimates and judgments that affect the reported amounts of
assets and liabilities, revenues and expenses, and related disclosures of
contingent assets and liabilities. On an on-going basis, the Company makes
judgements regarding revenue recognition and evaluates its estimates, including
those related to allowance for doubtful accounts, inventories, asset impairment,
warranty obligations, contingencies and litigation. We describe these accounting
policies in the notes to the financial statements and at relevant sections in
this discussion and analysis. These estimates are based on the information that
is currently available and on various other assumptions that are believed to be
reasonable under the circumstances. Actual results could vary from those
estimates under different assumptions or conditions.
The Company believes the following critical accounting policies affect its
more significant judgments and estimates used in the preparation of its
financial statements.
The Company generally recognizes revenue for machine sales upon shipment
and installation for the initial machine model sold to a customer. Revenue is
generally recognized for subsequent machine sales upon shipment, provided title
has transferred and the model, configuration, and application is substantially
similar to the original machine installed. In addition, the Company considers
many factors in the evaluation of revenue recognition, including customer
acceptance criteria, complexity of installation and integration into production
lines. Revenue for manufacturing services, factory automation services, machine
accessories, and spare parts are recognized upon shipment. Billable service
labor revenue is recognized upon completion. At the time of shipment, the
Company accrues for estimated non-billable installation, training and warranty
repair costs to be incurred.
10
Critical Accounting Principles and Estimates, Cont'd
- ----------------------------------------------------
The Company maintains an allowance for doubtful accounts for estimated
losses resulting from the inability of its customers to make required payments,
which results in bad debt expense. Management determines the adequacy of this
allowance by continually evaluating individual customer receivables considering
the customer's financial condition, security deposits, and current economic
conditions. If the financial condition of our customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional
allowances may be required.
The Company writes down its inventory for estimated obsolescence or
unmarketable inventory equal to the difference between the cost of inventory and
the estimated net realizable value based upon assumptions about future demand
and market conditions. If actual market conditions are less favorable than those
projected by management, additional inventory write-downs may be required.
Long-lived assets, consisting primarily of property and equipment, are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
the assets to future net cash flows (undiscounted and without interest) expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell.
The Company provides for the estimated cost of product warranties at the
time revenue is recognized. While the Company engages in extensive product
quality programs and processes, including actively monitoring and evaluating the
quality of its component suppliers, the Company 's warranty obligation is
affected by product failure rates and material usage and service delivery costs
incurred in correcting a product failure. Should actual product failure rates,
material usage or service delivery costs differ from the Company's estimates,
revisions to the estimated warranty liability would be required.
The Company is subject to various claims and legal actions in the ordinary
course of our business. Some of these matters include professional liability,
employee-related matters, and investigations by governmental agencies regarding
our employment practices. Although we are currently not aware of any such
pending or threatened litigation that we believe is reasonably likely to have a
material adverse effect on us, if we become aware of such assessments against
the Company, we will evaluate the probability of an adverse outcome and provide
accruals for such contingencies as necessary.
FACTORS THAT MAY AFFECT FINANCIAL CONDITION AND FUTURE RESULTS
The Company operates in an industry that is highly competitive. Industry
participants confront aggressive pricing practices by competitors, continually
changing customer demand patterns, and rapid technological developments. The
following are important factors that could cause actual results to differ
materially from the projected results contained in the forward-looking
statements in this report.
o Continued weak global economic conditions, or lack of electronics industry
manufacturing capacity expansion, could adversely impact the Company's
revenues and growth rate.
o The competitive environment in the electronics assembly machine and
contract manufacturing industry places pressure on revenue, gross margins
and market share.
o Erosion of the financial condition of customers could adversely affect the
Company's business.
o The availability of electronic components may be limited due to changes in
demand or supply and could adversely affect the Company's material costs
or ability to fulfill customers order requirements.
o The inability to invest in or acquire a new venture that can absorb excess
manufacturing capacity or contribute to the Company's return to
profitability, could adversely affect the Company's business.
11
o The inability of the Company to return to profitability could result in
default on the terms of the Union Bank of California Reimbursement
Agreement, which supports the stand-by letter of credit guaranteeing the
Company's performance on the industrial development bonds. In the event
the Company defaults, and is unable to present a viable turn-around plan
satisfactory to its Bank, such event, could cause the bank to require the
Company to seek a substitute guarantor, re-finance the building with
alternative financing or sell the San Marcos, California facility. The
inability of the Company to successfully substitute a guarantor or to
re-finance the building could have an adverse effect on the Company's
business.
o Other-see Item 7a. Qualitative and Quantitative Data About Market Risk
At December 31, 2001 and 2000, the Company did not have any relationships
with unconsolidated entities or financial partnerships, such entities often
referred to as structured finance or special purpose entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements
or other contractually narrow or limited purposes. In addition, the Company does
not engage in trading activities involving non-exchange traded contracts. As
such, the Company is not materially exposed to any financing, liquidity, market
or credit risk that could arise if the Company had engaged in such
relationships.
Results of Operations 2001 Compared to 2000
- -------------------------------------------
Company overall
- ---------------
Sales
- -----
Overall sales decreased to $13,659,000 from $18,519,000 in 2000, a
decrease of 26%. No portion of sales is attributable to inflation for 2001.
The Manufacturing Services division (AMS) sales increased $1,504,000 or
16% over 2000 and, as a result, contributed 78% of the overall sales for 2001.
AIA label identification machine shipments decreased from 29 units in 2000
to 4 units in 2001, an 86% decline expressed in sales dollars. Two of the
machines sold in 2001 represented initial sales of the new DataPlace 1M model.
The Company's through-hole machines operating in the field generated most of the
parts and service sales. However, as the population of the Company's
through-hole technology machines decline, demand for spare parts and
out-of-warranty field service will continue to follow a parallel trend.
The AIA customized factory automation unit generated $900,000 in
engineering design and manufactured product sales in its first year of
operation. The first year sales included $642,000 in shipments to a major
sporting equipment manufacturer.
Gross profit
- ------------
Gross profit decreased $4,118,000 or 87% in 2001, compared to 2000. This
decrease was due to the lower gross profit earned on a higher mix of contract
manufacturing services sales, lower factory utilization, decreased machine sales
and services, and an increase to the allowance for inventory obsolescence. The
2001 increase in the allowance for inventory obsolescence primarily consisted of
$279,000 related to older technology machines, and $219,000 related to private
label products
Selling expenses
- ----------------
Selling expenses decreased $419,000 in the current year due to AIA machine
products sales and service staff reductions, consolidation of sales and service
offices, lower commission expense, and reduced division marketing expenses.
General and administrative expenses
- -----------------------------------
General and administrative expense increased $604,000 in 2001 over 2000.
The increase was primarily due to a $121,000 restructuring charge related to the
closure of the Anaheim, California contract assembly facility, a $60,000
increase in the allowance for doubtful accounts, a $32,000 increase in insurance
premiums, a $79,000 increase in professional fees and a $350,000 recovery in
2000 of a bad debt previously written off in 1999.
12
Results of Operations 2001 Compared to 2000, cont'd
- ---------------------------------------------------
General and administrative expenses,cont'd
- ------------------------------------------
During the current year, the Company undertook several initiatives aimed
at reducing operating expenses as well as improving operational efficiencies.
During the third quarter of 2001, the Company closed its Anaheim AMS facility
and consolidated production into the San Marcos facility. In connection with the
Anaheim plant closing, restructuring charges of $121,000 were recorded in
general and administrative expenses in the third quarter. The charges were
comprised of the following:
Amount
---------
Separation costs $ 29,000
Lease abandonment 69,000
Facility repairs 12,000
Other 10,000
---------
Total $121,000
=========
Of the total charge of $121,000, $99,000 has been paid as of December 31,
2001 and the balance of $22,000, which is included in accrued liabilities, is
expected to be paid by March 31, 2002.
Engineering, research and development expenses
- ----------------------------------------------
Engineering, research and development efforts in 2001 were focused on a
DataPlace 1M cost reduction project and in support of AIA operations. Expenses
declined 2001 over 2000 due to fewer development projects and due to staff
reductions.
Other Income (expense)
- ----------------------
Interest income decreased $75,000 in 2001, compared to 2000, due to lower
average cash balances during 2001 and decreases in interest rates earned on
money market funds. Interest expense decreased $58,000 in 2001, compared to
2000, due to decreases in interest rates on the bonds.
Income taxes
- ------------
The income tax benefit for 2001 represents an adjustment to the income tax
accrual to match the expected minimum tax liability to various states.
No federal income tax carryforward benefit has been recorded in 2001 due
to the net loss and the uncertainty concerning the Company's ability to utilize
the net operating loss in the future. A 100% valuation allowance has been
recorded against the net deferred income tax asset as of December 31, 2001.
On March 9, 2002, the "Job Creation and Worker Assistance Act of 2002"
(the Act) was signed into law. The Act extends the period in which a net
operating loss may be carried back. As a result, the Company will be able to
recognize a $400,000 carryback refund receivable in the first quarter of 2002.
Amistar Industrial Automation segment
- -------------------------------------
During 2001, the Company sold two initial customized DataPlace 1M
machines. Compared to the DataPlace 100LP machine, the 1M is suitable for
applications requiring less functionality and sells at a lower price.
In 2001, the Company was severely affected by the overall recession and
especially the contraction in manufacturing capacity among the Company's machine
customer base. Many of the Company's machine customers froze capital spending
during 2001. In the event that the Company's base of customers and potential
customers move production offshore to take advantage of the lower cost of labor,
the Company's labor saving automation equipment may become less attractive.
The Company took steps during 2001 to minimize costs in response to the
recession driven decline in demand for its label identification automation
equipment. The Company reduced its sales and field service support staff during
the year. At December 31, 2001, the Company had, based on forecasts, an
approximate 18 to 24 month supply of DataPlace machine inventory. The Company
has considered the current and projected state of the machines technology, its
expected future competitive position and demand upon economic recovery in its
analysis of inventory valuation. A protracted period of insufficient demand for
the DataPlace machines could require additional charges for reserves for partial
or total obsolescence in the future.
13
Results of Operations 2001 Compared to 2000, cont'd
- ---------------------------------------------------
To more effectively utilize the Company's existing engineering and machine
manufacturing capacity in 2001, the Company formed the new AIA business unit to
pursue automation applications in new markets. The new AIA unit has allowed the
Company to penetrate new market segments including the sports equipment
automation market.
Contract Manufacturing Services segment
- ---------------------------------------
During 2001, despite difficult economic conditions, much of the AMS sales
growth came from the Company's base of medical product customers who increased
orders over 2000. In addition, a portion of the AMS sales growth came from
increased quick-turn prototype services to a major test equipment customer.
Considering the inefficiencies of maintaining two plants operating at less
than full capacity, the Company consolidated its Anaheim operations with the San
Marcos facility to increase factory utilization.
During the fourth quarter of 2001, the Company experienced a fall-off in
AMS sales from previous quarters due to customer order push-outs and a reduction
in orders from a major customer that was adversely affected by the recession and
events of September 11, 2001.
Results of Operations 2000 Compared to 1999
- -------------------------------------------
Company overall
- ---------------
Sales
- -----
Sales increased to $18,519,000, from $15,071,000 in 1999, an increase of
23%. The Manufacturing Services division sales increased 51% over 1999 and as a
result contributed most of the overall sales growth. The increase in label
identification machine sales in 2000 was offset by the decline in the
discontinued distributed surface mount machines compared to 1999. No portion of
2000 sales was due to inflation.
Gross profit
- ------------
Gross profit dollars and gross profit percent increased $3,300,000 and
16.1% in 2000, compared to 1999. This increase was due to the higher gross
margins earned on the DataPlace label identification machine, improved factory
utilization and improved gross margins on contract manufacturing services. The
year 1999 was burdened with a $1,437,000 addition to the allowance for inventory
obsolescence related to PlaceMaster(R) machines, a $210,000 addition to the
allowance for inventory related to private label products, and excess plant
capacity in the machine division, which depressed margins.
Selling expenses
- ----------------
Selling expenses decreased $857,000 in 2000 due to staff reductions, lower
machine commission expense, and reduced machine division marketing expenses.
Substantially all the DataPlace machines were sold on a direct basis and
therefore did not require a commission payment to an outside representative. In
1999, the machine sales were primarily comprised of sales of the SMD machines,
which required a commission payment as the machines were sold through outside
representatives.
General and administrative expenses
- -----------------------------------
General and administrative expense decreased $1,327,000 over 1999. The
decreased expense was due partially to a $350,000 recovery in 2000 related to
one of several bad debts totaling $996,000 that had been reserved for in 1999.
Engineering, research and development
- -------------------------------------
Development efforts in 2000 were focused on the second DataPlace(R) label
identification machine and on customization orders received related to the
DataPlace(R) 100LP model.
Other income (expense)
- ----------------------
Interest income increased $184,000 in 2000, compared to 1999, due to
higher average cash balances during 2000.
14
Results of Operations 2000 Compared to 1999, cont'd
- ---------------------------------------------------
Income taxes
- ------------
No federal income tax expense was recorded in 2000 due to the change in
the valuation allowance. Uncertainties at December 31, 2000 concerning the
Company's ability to utilize the benefits of the deferred tax assets in the
future precluded it from recording an asset at full value. Therefore a 100%
valuation allowance was recorded against the net deferred income tax asset.
Amistar Industrial Automation segment
- -------------------------------------
In 2000, the machine production unit made the transition from offering
distributed surface mount assembly machines to offering label identification
machines. The Company's label identification machines were designed and
manufactured in-house. The Company shipped twenty-nine label identification
machines to predominantly Fortune 500 contract manufacturers and OEM's.
On January 19, 2000, the Company was notified of the establishment of a
cooperative relationship between Tenryu Technics, the manufacturer of the
private label machines, and Yamaha Motor Co., Ltd. IM Operations. This
cooperative relationship led to the formation of a new company named I-Pulse
Company Ltd. during 2000. During January 2000, the Company, following its
strategy to reposition itself from SMD assembly to label identification
machines, chose to no longer carry the distributed machine line. Accordingly,
the agreement between the Company and I-Pulse terminated effective June 30,
2000. The Company was able to successfully sell off its remaining distributed
machine inventory during the first two quarters of 2000, including ten machines
repossessed from PricePoint Micro Technologies in January 2000.
The Company's primary sales and gross margin contributions in 1999 came
from the distributed private label machine line, whereas in 2000, the label
identification machine was the primary contributor.
Contract Manufacturing Services Segment
- ---------------------------------------
Sales generated from the AMS division increased 51% in 2000 over 1999.
During 1999, the Company made investments in staff, equipment and ISO 9002
certification. These enhanced capabilities resulted in the addition of several
major new customers and growth with existing customers during 2000. In addition,
the Company concluded business with several small high risk and unprofitable
customers. Gross margins improved as a result of increased labor efficiencies on
the increased volume. Credit risk decreased during 2000 as the division upgraded
its class of customers to larger and more financially stable companies.
Liquidity and Capital Resources
- -------------------------------
The Company's cash flow from operations decreased during 2001, compared to
increases in 2000 and 1999. Working capital decreased $7,254,000 in 2001,
increased $1,389,000 in 2000 and decreased $3,473,000 in 1999. Operating
activities generated (consumed) ($.5 million), $2.3 million, and $1.2 million in
cash flow during the years ended 2001, 2000, and 1999, respectively.
The current year decrease in cash flow and working capital, excluding the
effect of the $4,500,000 Industrial Development bonds reclassification discussed
below, was primarily due to lower sales and the collection of contracts
receivable and reduction of inventory providing a partial offset. The Company
generated cash during 2000, primarily through earnings and the collection of
contracts receivable. The Company generated cash in 1999 by collecting accounts
receivable, collecting a contract receivable for $400,000 in advance of its
scheduled maturity date, and by reducing inventory. Contracts receivable also
decreased $296,000 in 1999 due to a write-down of a contract receivable to the
net realizable value of the collateral (equipment) repossessed during 2000.
In 2001, 2000 and 1999, investing activities consisted primarily of
capital expenditures to support the current and expected growth of the Amistar
Manufacturing Services division. During 1999, the AMS division added an
additional SMD assembly line at its San Marcos, California facility.
During 2001, the Company repurchased $57,000 of its own stock on the open
market as part of a strategy to buy back stock that the Company considers
undervalued and to support the minimum NASDAQ Small Cap listing stock price
requirement.
The Company financed its 80,000 square foot manufacturing and office
facility located in San Marcos, California through $4,500,000 of bonds issued by
the Industrial Development Authority of the City of San Marcos in 1995. The
bonds carry a variable interest rate and mature in December 2005. Payments of
principal and interest are unconditionally guaranteed by a $4,617,000
irrevocable letter of credit issued by the Company's bank.
15
The terms of the present irrevocable letter of credit required the Company
in 1995 to establish a $1,329,000 interest-bearing cash collateral account
(restricted cash) in order to meet a required loan to value ratio. In 2001, the
amount of restricted cash was revised to $1,452,000. On February 1, 2002, the
Company paid $1,500,000 to redeem a portion of the industrial development bonds
utilizing the restricted cash balance of $1,452,000 plus an additional $48,000
of unrestricted cash. The Company's obligation under the irrevocable letter of
credit was reduced accordingly by $1,500,000 effective on February 1, 2002.
Effective March 1, 2002, the Company will be required to make monthly payments
of $10,000 per month into a sinking fund for redemption of the bonds. Redemption
will occur in increments of $100,000 as the funds accrete to the minimum
redemption level.
The Company's stand-by letter of credit reimbursement agreement with its
bank maintains certain affirmative financial covenants. At December 31, 2001,
the Company was not in compliance with a tangible net worth covenant. The
Company received waivers relating to this covenant through May 31, 2002. The
Company has made all required debt service payments on the bonds. However, based
on the uncertainity concerning the Company's ability to meet the covenant after
the waiver expires, and considering that a covenant violation would constitute
an event of default which would allow the bank to call the debt prior to
maturity, the entire Industrial Development bonds balance of $4,500,000 has been
classified as a current liability in the accompanying balance sheet.
The inability of the Company to return to profitability could result in
default on the terms of the Union Bank of California Reimbursement Agreement,
which supports the stand-by letter of credit guaranteeing the Company's
performance on the industrial development bonds. In the event the Company
defaults, and is unable to present a viable turn-around plan satisfactory to its
Bank, such event, could cause the bank to require the Company to seek a
substitute guarantor, re-finance the building with alternative financing or sell
the San Marcos, California facility. The inability of the Company to
successfully substitute a guarantor or to re-finance the building could have an
adverse effect on the Company's business.
The following summarizes the Company's contractual obligations and other
commitments at December 31, 2001, and the effect such obligations could have on
its liquidity and cash flow in future periods (in thousands):
Total Amount
Committed Amount of Commitment Expiring by Period
--------- ---------------------------------------
2002 2003 2004 2005 2006
---- ---- ---- ---- ----
Operating lease payable $ 460,000 $ 103,000 $ 106,000 $ 109,000 $ 114,000 $ 28,000
Industrial Bonds payable 4,500,000 1,500,000 100,000 120,000 2,780,000 -
The operating lease payable has not been reduced by the following minimum
sublease rental income, which has a remaining term concurrent with the Company's
term.
Total Amount 2002 2003 2004 2005 2006
------------ ---- ---- ---- ---- ----
Sublease income $ 439,000 $ 78,000 $ 107,000 $ 111,000 $ 114,000 $ 29,000
The Company's primary sources of liquidity consist of cash and cash
equivalents and working capital. The Company maintained a revolving line of
credit with its bank during 1998 until expiration on March 31, 1999. The Company
does not intend to pursue another line of credit at this time. The Company
believes that cash and cash equivalents provided from operations and cash
balances at December 31, 2001 will be adequate to support its operating and
investing requirements through 2002.
16
The following table sets forth the statements of operations as a percentage of
net sales:
Percentage of Net Sales
-----------------------
2001 2000 1999
-------------- --------------- ------------
Net sales 100.0 100.0 100.0
Cost of sales 95.6 74.5 90.6
-------------- --------------- ------------
Gross profit 4.4 25.5 9.4
-------------- --------------- ------------
Operating expenses:
Selling 12.2 11.3 18.3
General and administrative 9.8 4.0 13.7
Engineering, research and development 6.2 6.3 7.9
-------------- --------------- ------------
28.2 21.6 39.9
-------------- --------------- ------------
Income (loss) from operations (23.8) 3.9 (30.5)
Other income (expense):
Interest, net .7 .7 (.3)
Other - - -
-------------- --------------- ------------
Earnings (loss) before income taxes (23.1) 4.6 (30.8)
Income tax expense (benefit) (.5) 0.1 1.3
-------------- --------------- ------------
Net earnings (loss) (22.6) 4.5 (32.1)
============== =============== ============
The following table sets forth sales (in thousands) by product classification:
2001 2000 1999
---------------------- ---------------------- ----------------------
Amistar machines,
parts and service $ 1,783 13% $ 6,279 34% $ 2,989 20%
Private label machines 294 2% 3,062 16% 6,001 40%
Factory automation 900 7% - -
Manufacturing services 10,682 78% 9,178 50% 6,081 40%
-------- -------- -------- -------- -------- --------
$13,659 100% $18,519 100% $15,071 100%
======== ======== ======== ======== ======== ========
17
New Accounting Pronouncements
- -----------------------------
In August 2001, the FASB issued Statement of Financial Accounting
Standards No. 143 (SFAS No. 143), "Accounting for Asset Retirement Obligations,"
which addresses financial accounting and reporting for obligations associated
with the retirement of tangible long-lived assets and for the associated asset
retirement costs. The standard applies to tangible long-lived assets that have a
legal obligation associated with their retirement and that result from the
acquisition, construction or development or normal use of the assets. SFAS No.
143 requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred if a reasonable
estimate of fair value can be made. The fair value of the liability is added to
the carrying amount of the associated asset and this additional carrying amount
is depreciated over the remaining life of the asset. The liability is accreted
at the end of each period through charges to operating expense. The provisions
of SFAS No. 143 are required to be applied during the quarter ending March 31,
2003. To implement the provisions, the Company must identify all legal
obligations for asset retirement obligations, if any, and determine the fair
value of these obligations on the date of adoption. The determination of fair
value is complex and will require the Company to gather market information and
develop cash flow models. Additionally, the Company will be required to develop
processes to track and monitor these obligations. Because of the effort
necessary to comply with the adoption of SFAS No. 143, it is not practicable for
the Company to estimate the impact of adopting this statement at the date of
this annual report.
In October 2001, the FASB issued Statement of Financial Accounting
Standards No. 144 (SFAS No. 144), "Accounting for the Impairment or Disposal of
Long-Lived Assets," which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets. While SFAS No. 144 supersedes SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," it retains many of the fundamental provisions of SFAS
No. 121, including the recognition and measurement of the impairment of
long-lived assets to be held and used, and the measurement of long-lived assets
to be disposed of by sale. SFAS No. 144 also supersedes the accounting and
reporting provisions of Accounting Principles Board Opinion No. 30 (APB No. 30),
"Reporting the Results of Operations--Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions," for the disposal of a segment of a business. However,
it retains the requirement in APB No. 30 to report separately discontinued
operations and extends that reporting to a component of an entity that either
has been disposed of (by sale, abandonment, or in a distribution to owners) or
is classified as held for sale. SFAS No. 144 is effective for fiscal years
beginning after December 15, 2001. At this time, the Company does not anticipate
that the adoption of SFAS No. 144 will have a material effect on the Company's
financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DATA ABOUT MARKET RISK
The Company is exposed to a variety of risks, including changes in
interest rates affecting the cost of its debt. The Company does not have any
derivative financial instruments.
The Company's only term debt at December 31, 2001 is comprised of
industrial development bonds. The Company financed the construction of a
manufacturing and office facility in San Marcos, California through $4,500,000
of bonds issued by the Industrial Development Authority of City of San Marcos on
December 19, 1985. The bonds mature in December 2005, and interest is accrued at
a variable monthly rate. Interest was paid at a weighted-average variable rate
of 3.0% during 2001. A hypothetical 10% increase in the weighted-average
interest rate for 2001 would have increased the net loss by approximately
$12,000.
18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Shareholders
Amistar Corporation:
We have audited the accompanying balance sheets of Amistar Corporation as of
December 31, 2001 and 2000, and the related statements of operations,
shareholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Amistar Corporation as of
December 31, 2001 and 2000 and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States of
America.
San Diego, California /s/ KPMG LLP
February 1, 2002 KPMG LLP
19
AMISTAR CORPORATION
Balance Sheets
December 31, 2001 2000
- -------------------------------------------------------------------------------------------------
ASSETS (Note 4)
Current assets:
Cash and cash equivalents $ 3,626,396 $ 4,519,494
Trade accounts receivable, less allowance for doubtful
accounts of $187,497 in 2001 and $138,922 in 2000 1,064,471 2,843,486
Contracts receivable (note 3) - 55,871
Inventories (note 2) 2,723,661 3,078,850
Demonstration equipment 152,659 112,536
Prepaid expenses 187,385 194,598
------------- -------------
Total current assets 7,754,572 10,804,835
------------- -------------
Property and equipment:
Land 981,875 981,875
Building and building improvements 4,090,832 4,078,205
Machinery and equipment 6,948,149 7,002,893
Computer software and equipment 492,152 463,447
Leasehold improvements 2,478 11,767
------------- -------------
12,515,486 12,538,187
Less accumulated depreciation and amortization (8,129,206) (7,669,315)
------------- -------------
Net property and equipment 4,386,280 4,868,872
------------- -------------
Restricted cash (notes 4 and 12) 1,452,000 1,329,000
Other assets 73,559 103,154
------------- -------------
$ 13,666,411 $ 17,105,861
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 284,993 $ 588,542
Accrued payroll and related costs 291,634 152,822
Accrued liabilities 202,543 239,773
Accrued product installation and warranty costs 88,251 105,000
Accrued commissions 16,418 93,888
Industrial development bonds (notes 4 and 12) 4,500,000 -
------------- -------------
Total current liabilities 5,383,839 1,180,025
------------- -------------
Industrial development bonds (notes 4 and 12) - 4,500,000
------------- -------------
Shareholders' equity :
Preferred stock, $.01 par value. Authorized 2,000,000
shares; none outstanding - -
Common stock, $.01 par value. Authorized 20,000,000
shares 3,139,750 and 3,136,500 shares issued and
outstanding in 2001 and 2000, respectively 31,398 31,365
Additional paid-in capital 4,593,073 4,589,043
Retained earnings 3,715,387 6,805,428
Treasury stock, 53,378 common shares, at cost (57,286) -
------------- -------------
Total shareholders' equity 8,282,572 11,425,836
------------- -------------
Commitments (note 7)
$ 13,666,411 $ 17,105,861
============= =============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20
AMISTAR CORPORATION
Statements of Operations
Years ended December 31, 2001 2000 1999
- --------------------------------------------------------------------------------------------------
Net sales $ 13,658,922 $ 18,519,075 $ 15,070,500
Cost of sales 13,055,896 13,798,276 13,649,455
------------- ------------- -------------
Gross profit 603,026 4,720,799 1,421,045
------------- ------------- -------------
Operating expenses:
Selling 1,673,403 2,092,922 2,763,264
General and administrative 1,342,361 737,977 2,065,480
Engineering, research and development 842,892 1,161,039 1,196,724
------------- ------------- -------------
3,858,656 3,991,938 6,025,468
------------- ------------- -------------
Income (loss) from operations (3,255,630) 728,861 (4,604,423)
Other income (expense):
Interest expense (124,804) (182,624) (152,640)
Interest income 218,706 293,905 110,175
Other 5,500 7,643 6,214
------------- ------------- -------------
Earnings (loss) before income taxes (3,156,228) 847,785 (4,640,674)
Income tax expense (benefit) (note 5) (66,187) 9,000 195,897
------------- ------------- -------------
Net earnings (loss) $ (3,090,041) $ 838,785 $ (4,836,571)
============= ============= =============
Earnings (loss) per common share :
Basic $ (0.99) $ 0.27 $ (1.54)
============= ============= =============
Diluted $ (0.99) $ 0.26 $ (1.54)
============= ============= =============
Weighted-average shares outstanding:
Basic 3,127,196 3,136,500 3,136,500
============= ============= =============
Diluted 3,127,196 3,179,000 3,136,500
============= ============= =============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21
AMISTAR CORPORATION
Statements of Shareholders' Equity
Years Ended December 31, 2001, 2000, and 1999
- --------------------------------------------------------------------------------------------------------------------------------
Common Stock
----------------------------- Additional Total
Shares Paid-in Retained Treasury Shareholders'
(in 000's) Par value capital Earnings Stock Equity
------------- ------------- ------------- ------------- ------------- -------------
Balances at December 31, 1998 3,137 $ 31,365 $ 4,589,043 $ 10,803,214 - $ 15,423,622
Net loss - - - (4,836,571) - (4,836,571)
------------- ------------- ------------- ------------- ------------- -------------
Balances at December 31, 1999 3,137 31,365 4,589,043 5,966,643 - 10,587,051
Net income - - - 838,785 - 838,785
------------- ------------- ------------- ------------- ------------- -------------
Balances at December 31, 2000 3,137 31,365 4,589,043 6,805,428 - 11,425,836
Stock option exercise 3 33 4,030 - - 4,063
Repurchase of common shares - - - - (57,286) (57,286)
Net loss - - - (3,090,041) - (3,090,041)
------------- ------------- ------------- ------------- ------------- -------------
Balances at December 31, 2001 3,140 $ 31,398 $ 4,593,073 $ 3,715,387 $ (57,286) $ 8,282,572
============= ============= ============= ============= ============= =============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22
AMISTAR CORPORATION
Statements of Cash Flows
Years ended December 31, 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------
Cash flows provided by (used in) operating activities:
Net earnings (loss) $(3,090,041) $ 838,785 $(4,836,571)
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 696,611 760,872 736,189
Gain on sale of equipment (5,500) - (3,784)
Provision for deferred income tax expense - - 461,000
Changes in assets and liabilities:
Trade accounts receivable, net 1,779,015 (170,357) 2,179,633
Income taxes receivable - 207,518 81,686
Inventories 355,189 (31,851) 1,637,864
Demonstration equipment (40,123) 5,041 156,053
Prepaid expenses 7,213 (122,514) 144,619
Contracts receivable 55,871 809,904 1,260,996
Other assets 29,595 11,558 15,375
Accounts payable (303,549) 73,688 (137,307)
Accrued payroll and related costs 138,812 32,668 (60,009)
Accrued liabilities (37,230) 27,537 (247,969)
Accrued product installation and warranty costs (16,749) - (10,000)
Accrued commissions (77,470) (151,513) (182,365)
------------ ------------ ------------
Net cash provided by (used in) operating activities (508,356) 2,291,336 1,195,410
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from sale of equipment 5,500 - 5,647
Capital expenditures (214,019) (247,547) (201,963)
------------ ------------ ------------
Net cash used in investing activities (208,519) (247,547) (196,316)
------------ ------------ ------------
Cash flows from financing activities
Restricted cash (123,000) - -
Exercise of stock options 4,063 - -
Repurchase of common stock (57,286) - -
------------ ------------ ------------
Net cash used in financing activities (176,223) - -
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents (893,098) 2,043,789 999,094
Cash and cash equivalents at the beginning of the year 4,519,494 2,475,705 1,476,611
------------ ------------ ------------
Cash and cash equivalents at the end of the year $ 3,626,396 $ 4,519,494 $ 2,475,705
============ ============ ============
Supplemental disclosure of cash flow information
Cash paid during the year for:
Interest $ 137,517 $ 179,971 $ 152,887
============ ============ ============
Income taxes $ 9,153 $ 3,267 $ 4,749
============ ============ ============
Supplemental disclosure of non-cash investing activities:
Transfer of inventory to property and equipment $ - $ - $ 150,000
============ ============ ============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23
AMISTAR CORPORATION
Notes to Financial Statements
Three years ended December 31, 2001
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
- -----------------------
Amistar Corporation (the Company) operates two divisions, Amistar Industrial
Automation (AIA) and Amistar Manufacturing Services (AMS). The AIA division
manufactures and markets assembly machinery primarily for the electronics
industry and provides engineering design and manufacturing services to customers
seeking enhanced factory automation. AMS is a contract assembler of electronic
products, including printed circuit board assemblies. The Company's customers
are located predominately in the United States. The Company's headquarters and
primary manufacturing facility is located in San Marcos, California. The
Company's raw materials are readily available subject to certain market
conditions that may affect the allocation of electronic components.
Revenue Recognition
- -------------------
In the fourth quarter of 2000, the Company implemented Securities and Exchange
Commission's Staff Accounting Bulletin No.101, "Revenue Recognition in Financial
Statements" ("SAB 101"). Effective as of January 1, 2000, SAB 101 summarizes
certain of the SEC's staff's views in applying generally accepted accounting
principles to revenue recognition in financial statements. Implementation of
this bulletin did not have an impact on the Company's results of operations.
The Company generally recognizes revenue for machine sales upon shipment and
installation for the initial machine model sold to a customer. Revenue is
generally recognized for subsequent machine sales upon shipment, provided title
has transferred and the model, configuration, and application is substantially
similar to the first machine installed. In addition, the Company considers many
factors in the evaluation of revenue recognition, including customer acceptance
criteria, complexity of installation and integration into production lines.
Revenue for manufacturing services, machine accessories, and spare parts are
recognized upon shipment. Billable service labor revenue is recognized upon
completion. At the time of shipment, the Company accrues for estimated
non-billable installation, training and warranty repair costs to be incurred.
Cash and cash equivalents
- -------------------------
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. As of December 31, 2001
and 2000, cash equivalents amounted to $3,064,000 and $4,394,000, respectively.
Inventories
- -----------
Inventories are valued at the lower of cost (first-in, first-out) or market (net
realizable value) and are reviewed regularly for obsolescence.
Demonstration Equipment
- -----------------------
Demonstration equipment represents short-term transfers of inventory for
purposes of participating in trade shows and demonstrations with customers. This
equipment is typically sold or returned to inventory within six months.
Property and Equipment
- ----------------------
Property and equipment are stated at cost. Depreciation is recorded using the
straight-line method over the estimated useful lives of the assets as follows:
Building 40 years
Building improvements 10 years
Machinery and equipment 4-7 years
Computer software and equipment 3-5 years
Leasehold improvements Shorter of lease term or useful life
Reclassifications
- -----------------
Certain prior year amounts have been reclassified to conform to the current year
presentation.
24
AMISTAR CORPORATION
Notes to Financial Statements, Continued
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Deferred Bond Refinancing Costs
- -------------------------------
Costs incurred in connection with refinancing the Industrial Development Bonds
are amortized using the effective interest method over the life of the bonds.
Deferred costs are included in other assets.
Research and Development Costs
- ------------------------------
Research and development costs are expensed in the period incurred.
Income Taxes
- ------------
Income taxes are accounted for under the asset and liability method.
Accordingly, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Stock-Based Compensation
- ------------------------
The Company adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"). Accordingly, the Company continues to account for stock-based
compensation under APB Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations. As such, compensation expense for
employee stock option grants is recorded on the date of grant only if the
current market price of the Company's stock exceeds the exercise price.
Earnings per Common Share
- -------------------------
The Company calculates net earnings per share in accordance with SFAS No. 128,
Earnings Per Share. Under SFAS No. 128, basic net earnings per common share is
calculated by dividing net earnings (loss) by the weighted-average number of
common shares outstanding during the reporting period. Diluted net earnings
(loss) per common share reflects the effects of potentially dilutive securities.
Weighted average shares used to compute net earnings (loss) per share are
presented below (in thousands):
Years ended December 31,
---------------------------------------
2001 2000 1999
----------- ------------ -----------
Weighted-average shares basic 3,127 3,137 3,137
Dilutive effect of stock options - 42 -
----------- ------------ -----------
Weighted-average shares, diluted 3,127 3,179 3,137
=========== ============ ===========
Options to purchase 100,000, 21,000 and 121,000 shares of common stock were not
included in the calculation of diluted net earnings per share for the years
ended December 31, 2001, 2000 and 1999, respectively, because the effects of
these instruments was anti-dilutive.
Use of Estimates
- ----------------
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets, liabilities and revenues and expenses, and
the disclosure of contingent assets and liabilities to prepare these financial
statements in conformity with accounting principles generally accepted in the
United States of America. Actual results could differ from those estimates.
25
AMISTAR CORPORATION
Notes to Financial Statements, Continued
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair Value of Financial Instruments
- -----------------------------------
The carrying amount of cash and cash equivalents, trade receivables, accounts
payable and accrued expenses approximate fair value because of the short
maturity of those instruments. The carrying amounts of contracts receivable
approximate fair value because the contract interest rates and terms reflect
market rates and terms on similar instruments. The carrying amount of the
Company's Industrial Development Bonds approximates fair value due to the
variable interest rate provision, which effectively re-prices the instruments to
market values on a monthly basis.
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
- -----------------------------------------------------------------------
Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of the
assets to future net cash flows (undiscounted and without interest) expected to
be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell.
(2) INVENTORIES
Inventories at December 31, 2001 and 2000, consist of the following:
2001 2000
----------- -----------
Raw Material $ 813,540 $1,418,463
Work In Process 1,022,840 811,547
Finished Goods 887,281 848,840
----------- -----------
$2,723,661 $3,078,850
=========== ===========
(3) CONTRACTS RECEIVABLE
The Company in 1999 sold machines to certain customers with payment terms
extending beyond one year. The Company charged interest on these sales
contracts, at rates ranging from 9% to 10.5%. The Company regularly evaluates
the collectability associated with these balances and provides allowances as
deemed necessary.
(4) INDUSTRIAL DEVELOPMENT BONDS
The Company financed the construction of a manufacturing and office facility in
San Marcos, California through $4,500,000 of bonds issued by the Industrial
Development Authority of City of San Marcos on December 19, 1985. The bonds
originally matured in December 1995. In October 1995, the Company secured an
extension of the maturity date to December 2005. The bonds bear interest at a
variable rate (1.35% at December 31, 2001), with interest payable monthly. The
bonds are guaranteed by a $4,616,791 irrevocable letter of credit, which is
secured by substantially all assets of the Company. The terms of the irrevocable
letter of credit required the Company to establish a $1,452,000 interest-bearing
cash collateral account in order to meet a loan-to-value ratio covenant. Costs
incurred in connection with the bond refinancing primarily consists of loan
origination fees, broker's commission, legal and other fees, which have been
capitalized and included in other assets. The bond costs are amortized over the
term of the bonds. Deferred bond-refinancing costs were $53,000 and $67,000 at
December 31, 2001 and 2000, respectively. Ongoing fees related to the bonds and
the irrevocable letter of credit will approximate 2% of the bond principal
annually. On February 1, 2002, the Company paid $1,500,000 to redeem a portion
of the industrial development bonds utilizing the restricted cash balance of
$1,452,000 plus an additional $48,000 of unrestricted cash. Effective March 1,
2002, the Company will be required to make monthly payments of $10,000 per month
into a sinking fund for redemption of the bonds. Redemption will occur in
minimum increments of $100,000 as the funds accrete to the minimum redemption
level.
26
AMISTAR CORPORATION
Notes to Financial Statements, Continued
The Company's stand-by letter of credit reimbursement agreement with its bank
maintains certain affirmative financial covenants. At December 31, 2001, the
Company was not in compliance with a tangible net worth covenant. The Company
received waivers relating to this covenant through May 31, 2002. The Company has
made all required debt service payments on the bonds. However, based on the
uncertainity concerning the Company's ability to meet the covenant after the
waiver expires, and considering that a covenant violation would constitute an
event of default which would allow the bank to call the debt prior to maturity,
the entire Industrial Development bonds balance of $4,500,000 has been
classified as a current liability in the accompanying balance sheet.
(5) INCOME TAXES
Income tax expense (benefit) consists of the following:
Federal State Total
---------- ---------- ----------
2001 Current $ (73,187) $ 7,000 $ (66,187)
Deferred - - -
---------- ---------- ----------
$ (73,187) $ 7,000 $ (66,187)
========== ========== ==========
2000 Current $ - $ 9,000 $ 9,000
Deferred - - -
---------- ---------- ----------
$ - $ 9,000 $ 9,000
========== ========== ==========
1999 Current $(268,103) $ 3,000 $(265,103)
Deferred 411,000 50,000 461,000
---------- ---------- ----------
$ 142,897 $ 53,000 $ 195,897
========== ========== ==========
Actual income taxes for 2001, 2000 and 1999 differ from "expected" income taxes
for those years computed by applying the U.S. federal statutory rate of 34% to
earnings (loss) before taxes as follows:
2001 2000 1999
------------ ------------ ------------
Income tax expense (benefit) $(1,073,000) $ 288,000 $(1,578,000)
State and foreign income taxes, net of federal
income tax benefit 5,000 6,000 3,000
Change in valuation allowance 1,210,000 217,000 1,668,897
Permanent differences - - 102,000
Income tax carryforwards and credits (38,000) (502,000) -
Other, net (170,187) - -
------------ ------------ ------------
$ (66,187) $ 9,000 $ 195,897
============ ============ ============
27
AMISTAR CORPORATION
Notes to Financial Statements, Continued
The tax effects of significant temporary differences, which comprise deferred
tax assets and liabilities consist of the following:
2001 2000
------------ ------------
Deferred tax assets:
Allowance for doubtful accounts $ 79,000 $ 60,000
Warranty accrual 35,000 42,000
Inventory allowance 1,023,000 842,000
Accrued vacation 13,000 23,000
State income tax credits and loss carryforwards 283,000 181,000
Foreign tax credits and loss carryforwards 1,588,000 833,000
Other 187,000 63,000
------------ ------------
Gross deferred tax assets 3,208,000 2,044,000
Valuation allowance (3,096,000) (1,886,000)
------------ ------------
Total deferred tax assets 112,000 158,000
------------ ------------
Deferred tax liabilities-depreciation and
amortization (112,000) (158,000)
------------ ------------
Net deferred tax assets $ - $ -
============ ============
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
amount and timing of scheduled reversal of deferred tax liabilities, projected
future taxable income and projections for future taxable income over the
periods, which the deferred tax assets are deductible. Management believes it is
more likely than not that the Company will not realize the benefits of these
deductible differences.
The Company has tax credits totaling $371,000, of which $145,000 in foreign tax
credits are expected to begin expiring in 2002. In addition, the Company has
Federal and State net operating loss carry forwards in the amount of $1,499,000
at December 31, 2001, which are expected to begin expiring in 2014.
(6) STOCK OPTION PLAN
In 1994, the Company adopted an incentive stock option plan (the "Plan") for
employees. The Plan allows for grants of options to purchase up to 310,000
shares of authorized but un-issued common stock. Stock options are granted with
an exercise price equal to the stock's fair market value at the date of grant,
generally vest over four years from the date of grant, and expire five years
after the date of grant.
The Company applies APB Opinion No. 25, and related interpretations, in
accounting for the Plan and, accordingly, no compensation cost has been
recognized for stock option grants to employees and directors in the financial
statements. Had the Company determined compensation cost based on the fair value
at the grant date for its stock options under SFAS 123, the Company's net
earnings (loss) per share would have been (reduced) increased to the pro forma
amounts as follows ($ in thousands, except per share amounts):
28
AMISTAR CORPORATION
Notes to Financial Statements, Continued
(6) STOCK OPTION PLAN (CONTINUED)
2001 2000 1999
------------ ------------ ------------
Net earnings (loss) - as reported $ (3,090) $ 839 $ (4,837)
Net earnings (loss) - pro forma (3,148) 747 (4,903)
Earnings (loss) per share::
Basic, as reported (.99) ..27 (1.54)
Diluted, as reported (.99) ..26 (1.54)
Basic, pro forma (1.01) ..24 (1.56)
Diluted, pro forma (1.01) ..23 (1.56)
The per share weighted-average fair value of stock options granted during 2001,
2000 and 1999 was $1.10, $1.33 and $1.25, respectively, on the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions: expected life of 5 years, expected volatility of 65%, 55% and 61%
in 2001, 2000 and 1999, respectively, no dividends, and risk-free interest rate
of 3.7%, 6.1% and 5.6% for 2001, 2000 and 1999, respectively.
Stock option activity during the periods indicated is as follows:
Year Ended December 31,
------------------------------------------------------------------------------------------
2001 2000 1999
--------------------------- --------------------------- ------------------------------
Weighted- Weighted- Weighted-
Average Average Average
No. of Exercise No. of Exercise No. of Exercise
Shares Price Shares Price Shares Price
------------- ------------- ------------ ------------ ------------- ---------------
Beginning balance 213,000 $ 1.8539 206,750 $ 1.8194 29,750 $ 3.1980
Options granted 5,000 1.1000 14,000 2.4732 182,000 1.6400
Options exercised (3,250) 2.6000 - - - -
Options expired/cancelled (12,250) 1.6100 (7,750) 2.0503 (5,000) 3.5000
------------- ------------- ------------ ------------ ------------- ---------------
Ending balance 202,500 $ 1.8380 213,000 $ 1.8539 206,750 $ 1.8194
============= ============= ============ ============ ============= ===============
Balance exercisable 102,250 60,000 11,500
============= ============ =============
The range of exercise prices on options outstanding at December 31, 2001, are as
follows:
Exercise
Options Price
------- -----
11,000 $3.50
7,500 $3.00
6,000 $2.6875
8,000 $2.3125
67,000 $2.125
20,000 $1.563
78,000 $1.25
5,000 $1.10
--------------
202,500
==============
At December 31, 2001, the weighted-average remaining contractual life of
outstanding options was 2.5 years.
29
AMISTAR CORPORATION
Notes to Financial Statements, Continued
(7) COMMITMENTS
The Company leases a 14,000 square foot facility in Anaheim, California that it
sublet in December 2001. Rental expense for operating leases on the Anaheim, CA
facility and Warrenville, IL office approximated $94,000, $120,000, and $117,000
for the years ended December 31, 2001, 2000 and 1999, respectively. The Company
has the following future minimum lease payments under a non-cancelable operating
lease:
Total 2002 2003 2004 2005 2006
----- ---- ---- ---- ---- ----
Operating lease $460,000 $103,000 $106,000 $109,000 $114,000 $28,000
The future minimum lease payments under a non-cancelable operating lease have
not been reduced by the following future minimum sublease rental income, which
has a remaining term concurrent with the Company's term.
Total 2002 2003 2004 2005 2006
----- ---- ---- ---- ---- ----
Sublease income $439,000 $78,000 $107,000 $111,000 $114,000 $29,000
(8) RELATED PARTY TRANSACTIONS
The Company purchased certain electronic components from Marshall Industries
(Marshall) during the year ended December 31, 1999. Gordon Marshall, a director
of the Company, was Chairman of the Board of Marshall Industries until 1999,
when Marshall was acquired by Avnet Electronics Marketing. During 1999, such
purchases totaled $751,000. The Company also acted as a subcontractor to
Marshall through its Amistar Manufacturing Services division until October 1999.
Sales to Marshall were $285,000 in 1999.
The Company sells its products to Automation, Ltd., the Company's exclusive
distributor for Great Britain and Ireland. Richard A. Butcher, a Director of the
Company until December 2000, formerly held the position of Managing Director of
Automation, Ltd. Sales to Automation, Ltd. were $109,000 and $42,000 for 2000
and 1999, respectively. Accounts receivable from Automation, Ltd. were $8,000 at
December 31, 2000.
(9) 401(K) PLAN
The Company has established a 401(k) savings plan for the benefit of its
employees. The plan permits eligible employees to contribute to the plan up the
limits set by the Internal Revenue Code. The Company makes a matching
contribution to the plan equal to 50% of the first 6% of compensation
contributed by each participant. Amounts contributed by the Company in 2001,
2000, and 1999 were $88,000, $89,000, and $80,000, respectively.
30
AMISTAR CORPORATION
Notes to Financial Statements, Continued
(10) INDUSTRY SEGMENTS AND GEOGRAPHIC INFORMATION
The following table summarizes the Company's two operating segments: Amistar
Industrial Automation, which encompass the manufacture and distribution of
assembly machines and related accessories, and Amistar Manufacturing Services.
The Company identifies reportable segments based on the unique: nature of
operating activities, customer base and marketing channels. Information is also
provided by major geographical area (in 000's). Occupancy costs related to the
Company's San Marcos, CA facility totaling $113,000 was allocated to the AMS
division during each of the three years ended December 31, 2001. This occupancy
allocation is based on square feet utilized.
MFG.
INDUSTRIAL AUTOMATION SERVICES
----------------------------------------------- -----------
UNITED REST OF UNITED
STATES EUROPE WORLD TOTAL STATES CORPORATE TOTAL
----------- ---------- ---------- ------------ ----------- ----------- -----------
Year Ended December 31, 2001
Net sales $ 2,674 $ 211 $ 92 $ 2,977 $ 10,682 $ - $ 13,659
=========== ========== ========== ============ =========== =========== ===========
Loss from operations (1,819) (143) (63) (2,025) (1,231) - (3,256)
=========== ========== ========== ============ =========== =========== ===========
Depreciation and amortization 230 - - 230 438 29 697
=========== ========== ========== ============ =========== =========== ===========
Total assets 5,859 57 5,916 2,411 5,339 13,666
=========== ========== ========== ============ =========== =========== ===========
Additions to long-lived assets 29 - - 29 185 214
=========== ========== ========== ============ =========== =========== ===========
YEAR ENDED DECEMBER 31, 2000
Net sales $ 8,862 $ 305 $ 174 $ 9,341 $ 9,178 $ - $ 18,519
=========== ========== ========== ============ =========== =========== ===========
Income from operations 581 20 12 613 116 - 729
=========== ========== ========== ============ =========== =========== ===========
Depreciation and amortization 62 - - 62 454 245 761
=========== ========== ========== ============ =========== =========== ===========
Total assets 5,790 202 116 6,108 5,650 5,348 17,106
=========== ========== ========== ============ =========== =========== ===========
Additions to long-lived assets 33 - - 33 96 119 248
=========== ========== ========== ============ =========== =========== ===========
YEAR ENDED DECEMBER 31, 1999
Net sales $ 7,492 $ 187 $ 1,311 $ 8,990 $ 6,081 $ - $ 15,071
=========== ========== ========== ============ =========== =========== ===========
Loss from operations (2,413) (59) (443) (2,915) (1,653) (36) (4,604)
=========== ========== ========== ============ =========== =========== ===========
Depreciation and amortization 76 - - 76 466 194 736
=========== ========== ========== ============ =========== =========== ===========
Total assets 4,726 167 552 5,445 2,562 8,278 16,285
=========== ========== ========== ============ =========== =========== ===========
Additions to long-lived assets 28 - - 28 247 77 352
=========== ========== ========== ============ =========== =========== ===========
Occupancy costs related to the Company's San Marcos, CA facility totaling
$113,000 was allocated to the AMS division during each of the three years ended
December 31, 2001. This occupancy allocation is based on square feet utilized.
The basis for attributing revenue to the geographical areas is based on where
products and services are sold. The basis for attributing revenue to the
segments is based on the nature of the products delivered or services to be
performed. In addition, total assets include accounts receivables due from
foreign customers aggregating $57,000 at December 31, 2001, $64,000 at December
31, 2000, and $685,000 at December 31, 1999.
31
AMISTAR CORPORATION
Notes to Financial Statements, Continued
(11) BUSINESS CONCENTRATIONS
Most of the Company's customers are located in the United States. During 2001,
sales of $2,291,000 (or 17% of total sales) were made to Merit Medical Systems,
Inc., $1,634,000 (or 12% of total sales) to Systech Corporation, $1,579,000 (or
12% of total sales) to Chad Therapeutics and $1,532,000 (or 11% of total sales)
to Signet Scientific. During 2000, sales of $2,501,000 (or 14% of total sales)
were made to Zevex International, Inc. During 1999, sales of $1,855,000 (or 12%
of total sales) were made to Merit Medical Systems, Inc.
The Company distributed private label accessories and spare parts under an
exclusive OEM supply agreement with I-Pulse Company Ltd. (formerly Tenryu
Technics) until June 30, 2001. On January 19, 2000, the Company was notified of
the establishment of a cooperative relationship between Tenryu Technics, the
manufacturer of the private label machines, and Yamaha Motor Co., Ltd. IM
Operations. This cooperative relationship led to the formation of a new company
named I-Pulse Company Ltd. during 2000. During January 2001, the Company,
following its strategy to reposition itself from SMD assembly to label
identification machines, choose to no longer carry the distributed line.
Accordingly, the agreement between the Company and I-Pulse terminated effective
June 30. 2001. The Company was able to successfully sell off its remaining
distributed machine inventory during the first two quarters of 2000, including
the ten machines repossessed from PricePoint Micro Technologies in January 2000.
Private label sales comprised 2%, 17% and 40% of total sales in 2001, 2000 and
1999, respectively, and as a result, the Company only had significant dependence
on this supplier during 1999.
(12) SUBSEQUENT EVENT
On February 1, 2002, the Company paid $1,500,000 to redeem a portion of the
industrial development bonds utilizing the restricted cash balance of $1,452,000
plus an additional $48,000 of unrestricted cash.
32
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There is incorporated herein by reference the information from the section
entitled "Election of Directors" on pages 2 and 3 of the Company's definitive
Proxy Statement, dated March 25, 2002, filed with the Securities and Exchange
Commission. Reference is also made to the list of Executive Officers, which is
provided in Part I of this report under the caption "Executive Officers and
Directors."
ITEM 11. EXECUTIVE COMPENSATION
There is incorporated herein by reference the information from the section
entitled "Compensation of Directors and Executive Officers" on pages 5, 7 and 11
of the Company's definitive Proxy Statement, dated March 25, 2002, filed with
the Securities and Exchange Commission.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is incorporated herein by reference the information from the section
entitled "Security Ownership of Certain Beneficial Owners and Management" on
page 4 of the Company's definitive Proxy Statement, dated March 25, 2002, filed
with the Securities and Exchange Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following financial statements of Amistar Corporation are set forth in
item 8 of this Annual Report on Form 10-K:
1. Independent Auditors' Report
Financial Statements:
Balance Sheets - December 31, 2001 and 2000
Statements of Operations - Years ended December 31, 2001,
2000, and 1999.
Statements of Shareholders'- Equity-Years ended December 31,
2001, 2000 and 1999
Statements of Cash Flows - Years ended December 31, 2001, 2000
and 1999
Notes to Financial Statements - Years ended December 31, 2001,
2000 and 1999
2. The following Financial Statement Schedule as of and for the
years ended December 31, 2001, 2000 and 1999 is submitted
herewith:
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not
applicable or not required.
3. Exhibits:
3.1 Restated Articles of Incorporation of Registrant, as amended.*
3.2 Bylaws of Registrant, as amended.*
33
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K,
(CONTINUED)
10.1 Lease dated July 30, 1982, between Registrant (Lessee) and
Skyway Business Park, 1978, a Limited Partnership (Lessor)
with respect to premises located at 3130 Skyway Business Park,
Building 2, Santa Maria, California 93454*
10.2 Export Distributorship Agreement dated August 17, 1981 between
the Registrant and Automation, Ltd. (England, Scotland, Wales
and Ireland).*
10.3 Form of Export Distributorship Agreement used in France, West
Germany, Switzerland, Liechtenstein and Australia.*
10.4 Form of Contract for Sales Representatives used in the United
States.*
10.5 Letter Agreement dated December 6, 1984, between Registrant
and First Interstate Bank of California.***
10.6 1984 Employee Stock Option Plan and related forms of Incentive
Stock Option Agreement and Non-Qualified Stock Option
Agreement.**
10.7 Deed of Trust with assignment of rents and promissory note
dated September 21,1984, with respect to the purchase of land
in San Marcos, California.***
10.8 Financing documents relative to $4,500,000 of bonds issued by
the Industrial Development Authority of the City of Sam Marcos
on December 19, 1985.***
10.9 Bank agreement dated November 19, 1984.*****
10.10 Amendments to the stock option plan.****
10.11 Form of Indemnity Agreement*****
10.12 1994 Employee Stock Option Plan******
22.1 List of Subsidiaries*
23.1 Independent Auditors' Consent and Report on Schedule
- ------------------------
*These exhibits are incorporated by reference from the exhibits of the
same number in the Company's Registration Statement on form S-1 (No. 2-897782).
**This exhibit is incorporated by reference from the exhibits numbered
28.1, 28.2 and 28.3 of the Company's Registration Statement on Form S-8 (No.
2-94696).
***This exhibit is incorporated by reference from the exhibits of the
same number in the Company's Annual Report on form 10-K for Year ended December
31, 1985.
****This exhibit is incorporated by reference from the exhibits of the
same number in the Company's Annual Report on form 10-K for Year ended December
31, 1986.
*****This exhibit is incorporated by reference from the exhibits of the
same number in the Company's Annual Report on form 10-K for Year ended December
31, 1987.
******This exhibit is incorporated by reference of the Company's
Registration Statement of Form-S-8 filed February 15, 1995.
34
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
AMISTAR CORPORATION
/s/ Stuart C. Baker
-------------------
Stuart C. Baker
President
Date: March 13, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and the dates indicated.
/s/ Stuart C. Baker President and Chairman of the Board March 13, 2002
----------------------------- (Principal Executive Officer)
Stuart C. Baker
/s/ Gregory D. Leiser Vice President Finance and Chief March 13, 2002
----------------------------- Financial Officer
Gregory D. Leiser (Principal Financial and Accounting Officer)
/s/ Sanford B. Ehrlich Director March 13, 2002
-----------------------------
Dr. Sanford B. Ehrlich
/s/ William W. Holl Secretary, Treasurer and March 13, 2002
----------------------------- Director
William W. Holl
/s/ Gordon S. Marshall Director March 13, 2002
-----------------------------
Gordon S. Marshall
/s/ Carl C. Roecks Director March 13, 2002
-----------------------------
Carl C. Roecks
/s/ Howard C. White Director March 13, 2002
-----------------------------
Howard C. White
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AMISTAR CORPORATION
Schedule II
Valuation and Qualifying Accounts
Three years ended December 31, 2001
Column A Column B Column C Column D Column E
- -------------------------- -------------- ---------------------------- ------------ --------------
Additions
----------------------------
Balance at Charged to Charged Balance
beginning costs and to other at end
Description of period expenses accounts Deductions of period
- -------------------------- -------------- -------------- ------------ ------------ --------------
Allowance for doubtful
accounts
2001 $ 138,922 $ 60,000 $ 8,197 $ 19,622 $ 187,497
============== ============== ============ ============ ==============
2000 $ 853,995 $ (350,457) $ 57,098 $ 421,714 $ 138,922
============== ============== ============ ============ ==============
1999 $ 164,839 $ 996,000 $ 57,510 $ 364,354 $ 853,995
============== ============== ============ ============ ==============
Allowance for inventory
obsolescence:
2001 $ 1,532,350 $ 463,367 $ - $ - $ 1,995,717
============== ============== ============ ============ ==============
2000 $ 1,651,454 $ - $ - $ 119,104 $ 1,532,350
============== ============== ============ ============ ==============
1999 $ 631,200 $1,647,000 $ - $ 626,746 $ 1,651,454
============== ============== ============ ============ ==============
SEE ACCOMPANYING INDEPENDENT AUDITORS' REPORT ON SCHEDULE.
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