UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 27, 1998
Commission File No. 0-23204
VISTA 2000, INC.
(Exact name of registrant as specified in its charter)
Delaware 58-1972066
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
221 West First Street
Kewanee, Illinois 61443
(Address of principal executive offices)
(309) 856-8068
(Issuer's telephone number)
Check 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 at least
the past 90 days. Yes X No
----- -----
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Class Outstanding at July 30, 1998
- ----- -----------------------------
Common Stock, $.01 par value 47,991,432
PART I.- FINANCIAL INFORMATION
Item 1. Financial Statements
2
VISTA 2000, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share data)
(Unaudited)
ASSETS
June 27, December 27,
1998 1997
---------- --------------
Current Assets
Cash and cash equivalents $ 1,431 $ 2,122
Accounts receivable, net 4,640 7,729
Inventories 13,238 12,493
Prepaid expenses & other 650 650
--------------- ---------------
Total current assets 19,959 22,994
--------------- ---------------
Property and Equipment, net 4,285 4,270
Note Receivable, net 1,038 1,042
Other Assets 34 256
--------------- ---------------
$ 25,316 $ 28,562
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--------------- ---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 775 $ 1,390
Current portion of long-term obligations 908 137
Accrued payroll and related expenses 478 548
Accrued liabilities & other 2,274 3,481
--------------- ---------------
Total current liabilities 4,435 5,556
--------------- ---------------
Long-term obligations, net of current portion 1,770 3,883
Commitments and Contingencies -- --
Stockholders' Equity
Common Stock 483 448
Additional paid-in capital 67,439 67,370
Accumulated deficit (46,977) (46,875)
Currency translation (84) (70)
--------------- ---------------
20,861 20,873
Less: treasury shares and warrants - at cost 1,750 1,750
--------------- ---------------
Total Stockholders' equity 19,111 19,123
--------------- ---------------
$ 25,316 $ 28,562
--------------- ---------------
--------------- ---------------
The accompanying notes are an integral part of these statements.
3
VISTA 2000, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share data)
(Unaudited)
Six Months Six Months
Quarter ended Quarter ended ended ended
June 27, 1998 June 28, 1997 June 27, 1998 June 28, 1997
------------- ------------- ------------- -------------
Net Sales $ 8,280 $ 23,712 $ 18,531 $ 47,291
Cost of Sales 5,987 16,231 13,231 32,748
------------- ---------------- -------------- --------------
Gross profit 2,293 7,481 5,300 14,543
Operating expenses 2,509 7,192 5,297 13,879
------------- ---------------- -------------- --------------
(216) 289 3 664
Gain (loss) on sale of operating assets 0 (1,355) 0 (1,355)
------------- ---------------- -------------- --------------
Operating profit (loss) (216) (1,066) 3 (691)
Other income and (expense)
Interest (63) (569) (100) (1,111)
Other 0 (4) 16 (20)
------------- ---------------- -------------- --------------
Income (loss) before income tax (279) (1,639) (81) (1,822)
Income tax (expense) benefit (11) (3) (21) (27)
------------- ---------------- -------------- --------------
Net income (loss) $ (290) $ (1,642) $ (102) $ (1,849)
------------- ---------------- -------------- --------------
------------- ---------------- -------------- --------------
Weighted average shares outstanding 47,512,586 26,997,878 47,183,396 22,365,329
Basic earnings (loss) per common share $ (0.01) $ (0.06) $ (0.00) $ (0.08)
------------- ---------------- -------------- --------------
------------- ---------------- -------------- --------------
The accompanying notes are an integral part of these statements.
4
VISTA 2000, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six Months ended Six Months ended
June 27, 1998 June 28, 1997
------------- -------------
Cash flows provided (used) by operating activities:
Net loss $ (102) $ (1,849)
Adjustments to reconcile net loss to net cash used
by operations:
Depreciation and amortization 158 1,224
(Gain) Loss on disposal of property and equipment 0 1,355
(Increase) decrease in operating assets:
Accounts receivable 3,089 2,643
Inventories (745) (1,563)
Prepaid expenses and other current assets 0 385
Deferred charges and other assets 226 4
Increase (decrease) in operating liabilities:
Accounts Payable (615) (912)
Accrued liabilities (1,277) (1,541)
----------- ----------
Net cash provided (used) by operating activities 734 (254)
----------- ----------
Cash flows used by investing activities:
Purchases of property and equipment (173) (2,923)
Proceeds from sale of property and equipment 0 505
----------- ----------
Net cash used by investing activities (173) (2,418)
----------- ----------
Cash flows provided (used) by financing activities:
Proceeds from long-term obligations 20,545 39,211
Payments on long-term obligations (21,887) (38,086)
Proceeds from issuance of common stock 104 889
Proceeds from exercise of stock options and warrants 0 80
----------- ----------
Net cash provided (used) by financing activities (1,238) 2,094
----------- ----------
Effect of exchange rates on cash and cash equivalents (14) (9)
----------- ----------
Net decrease in cash during period (691) (587)
Cash and cash equivalents at the beginning of the period 2,122 1,165
----------- ----------
Cash and cash equivalents at the end of the period $ 1,431 $ 578
----------- ----------
----------- ----------
The accompanying notes are an integral part of these statements.
5
Vista 2000, Inc. And Subsidiaries
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 27, 1998
Note 1. Basis of Presentation
The consolidated financial statements included in this report have
been prepared by Vista 2000, Inc. (the "Company") pursuant to the rules and
regulations of the Securities and Exchange Commission for interim reporting
and include all normal and recurring adjustments which are, in the opinion of
management, necessary for a fair presentation. These financial statements
have not been audited by an independent accountant. The consolidated
financial statements include the accounts of the Company and its subsidiaries.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations for interim reporting. These financial statements should be
read in conjunction with the financial statements and notes thereto included
in the Company's Annual Report on Form 10-K, for the year ended December 28,
1997. The financial data for the interim periods presented may not
necessarily reflect the results to be anticipated for the complete year.
Certain amounts in prior year's financial statements have been
reclassified to conform to the 1998 presentation.
Note 2. Net Earnings (Loss) Per Common Share
Basic earnings (loss) per common share has been calculated using the
weighted average number of shares of common stock outstanding during each
period. Diluted net income per common share is not disclosed because the
effect of the exchange or exercise of common stock equivalents would be
antidilutive.
Note 3. Inventories
Inventories consist of the following (in thousands):
June 27, Dec 27,
1998 1997
--------------- ---------------
Raw materials $ 1,862 $ 1,752
Work-in-process 419 330
Finished goods 10,957 10,411
--------------- ---------------
$ 13,238 $ 12,493
--------------- ---------------
--------------- ---------------
6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
All statements, other than statements of historical fact, included
in this Quarterly Report including, without limitation, the statements under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" are, or may be deemed to be, forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934. Important
factors that could cause actual results to differ materially from those
discussed in such forward-looking statements ("Cautionary Statements")
include: the general strength or weakness of the consumer products industry
and the pricing policies of competitors. All subsequent written and oral
forward-looking statements attributable to Vista or persons acting on the
behalf of Vista are expressly qualified in their entirety by such Cautionary
Statements.
Sales
Total revenues for the three months ended June 27, 1998 were
$8,280,000 down from $23,712,000 for the comparable quarter in 1997. The
decrease in sales is primarily attributable to the sale of the ACPI
subsidiary's key, key manufacturing, letters, numbers and signs
manufacturing, real estate and related businesses on August 25, 1997 and the
resulting absence of this activity in 1998. In addition, sales at the
Company's Boss Manufacturing operations declined approximately 5% from 1997
during the quarter as the Company experienced a reduction in demand for its
products. As expected, sales were down from the first quarter of 1998 because
of the Company's increased emphasis on glove operations which historically
experience a seasonal slowdown during the warm weather months.
On a year-to-date basis, revenues are also down substantially at
$18,531,000 for the six months ended June 27, 1998 compared to $47,291,000
for the first half of 1997. Again, this decrease is primarily the result of
lost revenues associated with the ACPI assets sold in August 1997. Boss
Manufacturing sales were down roughly 5% during the first half of 1998 in
comparison to 1997 which the Company attributes to an unusually warm winter
in the mid-west and a soft manufacturing and industrial environment during
the second quarter.
Cost of Sales
Cost of sales for the three months ended June 27, 1998 were
$5,987,000 compared to a cost of sales in the corresponding 1997 period of
$16,231,000. The drop in cost of sales expense is due to the significant
sales decrease previously discussed. On a percentage of sales basis, the
gross margin for the second quarter of 1998 was approximately 27.7% compared
to 31.5% in 1997 due to the change in product mix resulting from the ACPI
operations sold in 1997. The Company's glove operations generate a lower
margin than certain of the operations sold in 1997. However, the sales and
administrative expenses associated with the glove operations are also
generally lower.
7
For the first half of the year, cost of sales declined to
$13,231,000 in 1998 from $32,748,000 in 1997 for the same reasons discussed
above. Gross margin, on a percentage of sales basis, totaled 28.6% for the
first six months of 1998, down about 2% from the prior year. As discussed
above, the significant change in product mix between the periods was the
major cause of this margin erosion.
Operating expenses
Operating expenses (selling, general and administrative expenses)
totaled $2,509,000 for the three months ended June 27, 1998, as compared to
$7,192,000 for the corresponding period of 1997. The decrease is
substantially attributable to reductions of staff, legal and auditing
expenses at the Company's corporate headquarters and the sale of ACPI
operations during August 1997. In addition, the Company benefited from an
unplanned insurance premium refund of $260,000 during the quarter.
For the six month period, operating expenses were $5,297,000 in 1998
versus $13,879,000 in 1997 as the second quarter followed the trend
established during the first three months of the year. The Company plans to
continue its efforts to restructure and consolidate certain of its
administrative and warehouse functions. These efforts are intended to further
reduce future operating expenses, though the anticipated benefits may not be
realized until a later period.
Liquidity and Capital Resources
For the six months ended June 27, 1998, the Company's operating
activities generated cash of $734,000 compared to a $(254,000) use of cash
for the comparable period in 1997. This improvement is attributable to the
substantial reduction in the Company's net loss and generation of cash from
working capital in 1998 versus consumption of cash by working capital in
1997. The primary source of cash generated by working capital is the seasonal
reduction in accounts receivable attributable to the overall lower level of
sales in 1998. The accounts receivable reduction is partially offset by an
increase in inventory as the Company begins to stock goods for increased
fourth quarter sales and decreases in accounts payable and accrued
liabilities. Accrued liabilities are down from year end due to the payment in
1998 of certain legal and professional, employee benefit and settlement
expenses accrued in 1997.
Cash used by investing activities declined to $(173,000) for the six
months ended June 27, 1998, down from $(2,418,000) in 1997 because of the
Company's restructuring to concentrate on glove operations which are less
capital intensive than the lines of business sold in 1997. Financing
activities used $(1,238,000) during the first half of 1998 as the Company
used the funds generated by operating activities as well a portion of the
cash on hand at year end to pay down its revolving line of credit.
Under the terms of its $10,000,000 revolving line of credit, the
Company had drawn approximately $1,325,000 as of June 27, 1998 plus had an
additional $2,000,000 of availability temporarily restricted to secure
letters of credit issued in connection with the sale of ACPI assets. This
left approximately $6,675,000 available under the current credit facility
which management believes should provide adequate liquidity for the Company's
expected working capital and operating needs.
8
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
Not applicable.
PART II. --OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various lawsuits in the ordinary course
of business. These lawsuits primarily involve claims for damages arising out
of commercial disputes. In the opinion of management, the ultimate
disposition of these matters should not have a material adverse effect on the
Company's consolidated financial position or liquidity.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security holders
None.
Item 5. Other Information
The Company has been notified that the Creditor's Committee in the
Alabaster bankruptcy has filed papers alleging a fraudulent conveyance in the
sale of Alabaster by the Company. The Company will vigorously defend itself
in this matter and believes it will ultimately prevail. However, the outcome
of litigation is uncertain. Should the outcome of this litigation prove to be
unfavorable, the Company may be required to return all proceeds from the
Alabaster sale to the bankruptcy estate, which totaled $2 million.
In August 1997, certain assets of the Company's ACPI subsidiary were
sold to Axxess Technologies, Inc. (Axxess). The sale agreement provided for
certain post closing adjustments to account for changes in assets and
liabilities between the date of the agreement and the closing of the sale.
Subsequent to the closing, the Company and Axxess were involved in a dispute
concerning the post closing adjustment as well as certain other alleged
breaches with regard to the sales agreement.
9
During the third quarter of 1998, the Company and Axxess agreed to
settle all claims associated with the ACPI asset sale transaction. As a
result of this settlement, the Company expects to reduce the loss recorded on
disposition of the ACPI assets from $(1.8 million) to approximately $(.9
million) during the third quarter of 1998. In addition, the Company should
receive a release on standby letters of credit totaling $2 million issued in
connection with the sale to Axxess.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule (filed electronically with the SEC
only)
(b) Reports on Form 8-K
For the current quarter, no reports on Form 8-K were filed.
10
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
VISTA 2000, INC.
Dated: August 11, 1998 By: /s/ J. Bruce Lancaster
-----------------------
J. Bruce Lancaster
Chief Financial Officer
(principal financial officer)
11