-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JtVpUz5hk0jDm35JQiXIMp7Py1A+crNsbG6tIPqjykOBAaOpzYtp3VeAcXzgNRE9 TUtoDeoRHaeqRW0PEo/m5w== 0001045969-98-000419.txt : 19980514 0001045969-98-000419.hdr.sgml : 19980514 ACCESSION NUMBER: 0001045969-98-000419 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980513 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ASV INC /MN/ CENTRAL INDEX KEY: 0000926763 STANDARD INDUSTRIAL CLASSIFICATION: CONSTRUCTION MACHINERY & EQUIP [3531] IRS NUMBER: 411459569 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-25620 FILM NUMBER: 98617695 BUSINESS ADDRESS: STREET 1: P O BOX 5160 CITY: GRAND RAPIDS STATE: MN ZIP: 55744-5160 BUSINESS PHONE: 2183273434 MAIL ADDRESS: STREET 1: PO BOX 5160 CITY: GRAND RAPIDS STATE: MN ZIP: 55744-5160 10-Q 1 FORM 10-Q 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 MARCH 31, 1998 Commission file number: 0-25620 A.S.V., INC. (Exact name of registrant as specified in its charter) MINNESOTA 41-1459569 --------- ---------- State or other jurisdiction of I.R.S. Employer Identification No. incorporation of organization 840 LILY LANE P.O. BOX 5160 GRAND RAPIDS, MN 55744 (218) 327-3434 ---------------------- -------------- Address of principal executive offices Registrant's telephone number Check whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. : [X] Yes [ ] No As of May 4, 1998 5,026,043 shares of the registrant's Common Stock were issued and outstanding. 1 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS A.S.V., INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
MARCH 31, December 31, 1998 1997 ----------- ----------- ASSETS (Unaudited) CURRENT ASSETS Cash and cash equivalents ........................... $ 923,170 $ 316,599 Short-term investments .............................. 1,005,018 1,255,160 Accounts receivable, net ............................ 2,685,560 1,989,906 Inventories ......................................... 12,658,598 11,674,027 Prepaid expenses and other .......................... 355,060 342,896 ----------- ----------- Total current assets ..................... 17,627,406 15,578,588 Property and equipment, net ............................ 4,374,498 3,636,091 ----------- ----------- Total Assets $22,001,904 $19,214,679 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term liabilities ............ $ 217,515 $ -- Accounts payable .................................... 2,334,734 1,474,701 Accrued liabilities Compensation ...................................... 134,526 180,349 Interest .......................................... 92,351 81,250 Warranties ........................................ 250,000 200,000 Other ............................................. 168,024 98,998 Income taxes payable ................................ 447,924 201,674 ----------- ----------- Total current liabilities 3,645,074 2,236,972 ----------- ----------- LONG-TERM LIABILITIES, less current portion ............ 7,452,926 7,020,608 ----------- ----------- COMMITMENTS AND CONTINGENCIES .......................... -- -- SHAREHOLDERS' EQUITY Capital stock, $.01 par value: Preferred stock, 7,500,000 shares authorized; no shares outstanding ........................... -- -- Common stock, 22,500,000 shares authorized; 5,022,582 shares issued and outstanding in 1998; 5,012,207 shares issued and outstanding in 1997 . 50,226 50,122 Additional paid-in capital .......................... 6,700,295 6,545,432 Retained earnings ................................... 4,153,383 3,361,545 ----------- ----------- 10,903,904 9,957,099 ----------- ----------- Total Liabilities and Shareholders' Equity $22,001,904 $19,214,679 =========== ===========
See notes to consolidated financial statements. 2 A.S.V., INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF EARNINGS THREE MONTHS ENDED MARCH 31, 1998 AND 1997
1998 1997 ----------- ----------- Net sales ........................................... $ 9,028,838 $ 4,651,185 Cost of goods sold .................................. 6,770,995 3,582,043 ----------- ----------- Gross profit ............................... 2,257,843 1,069,142 ----------- ----------- Operating expenses: Selling, general and administrative .............. 808,195 488,057 Research and development ......................... 98,449 44,938 ----------- ----------- 906,644 532,995 ----------- ----------- Operating income ........................... 1,351,199 536,147 ----------- ----------- Other income (expense) Interest expense ................................. (128,946) (92,952) Other, net ....................................... 34,585 65,347 ----------- ----------- (94,361) (27,605) ----------- ----------- Income before income taxes ................. 1,256,838 508,542 Provision for income taxes .......................... 465,000 193,000 ----------- ----------- NET INCOME ................................. $ 791,838 $ 315,542 =========== =========== Net income per common share: Basic .......................................... $ .16 $ .07 =========== =========== Diluted * ...................................... $ .14 $ .06 =========== =========== Weighted average number of common shares outstanding: Basic .......................................... 5,019,156 4,826,398 =========== =========== Diluted * ...................................... 5,945,788 5,866,200 =========== ===========
* Includes add back of after-tax effect of interest expense for convertible debentures. See notes to consolidated financial statements. 3 A.S.V., INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 1998 AND 1997
1998 1997 ----------- ----------- Cash flows from operating activities: Net income ......................................................... $ 791,838 $ 315,542 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation ................................................... 75,000 39,000 Interest accrued on capital lease obligation ................... 2,039 11,514 Deferred income taxes .......................................... (35,000) (26,000) Effect of warrant earned ....................................... 37,800 37,800 Changes in assets and liabilities: Accounts receivable .......................................... (695,654) 83,579 Inventories .................................................. (984,571) (1,010,812) Prepaid expenses and other ................................... 22,836 (31,583) Accounts payable ............................................. 860,033 1,148,948 Accrued expenses ............................................. 84,304 (72,905) Income taxes payable ......................................... 246,250 (111,000) ----------- ----------- Net cash provided by operating activities ............................. 404,875 384,083 ----------- ----------- Cash flows from investing activities: Purchase of property and equipment ................................. (165,613) (329,489) Purchase of short-term investments ................................. -- (1,001,240) Redemption of short-term investment ................................ 250,142 -- ----------- ----------- Net cash provided by (used in) investing activities ................... 84,529 (1,330,729) ----------- ----------- Cash flows provided by financing activities: Proceeds from exercise of stock options ............................ 57,167 31,459 Tax benefit related to exercise of stock options ................... 60,000 133,000 ----------- ----------- Net cash provided by financing activities ............................. 117,167 164,459 ----------- ----------- Net increase (decrease) in cash and cash equivalents .................. 606,571 (782,187) Cash and cash equivalents at beginning of period ...................... 316,599 3,042,494 ----------- ----------- Cash and cash equivalents at end of period ............................ $ 923,170 $ 2,260,307 =========== =========== Supplemental disclosure of cash flow information: Cash paid for interest ............................................. $ 117,845 $ 78,973 Cash paid for income taxes ......................................... 193,750 197,000 Supplemental disclosure of non-cash investing and financing activities: Assets acquired by incurring long-term liabilities ................. $ 647,794 $ --
See notes to consolidated financial statements. 4 A.S.V., INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1998 (UNAUDITED) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INTERIM FINANCIAL INFORMATION The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal, recurring adjustments) considered necessary for a fair presentation have been included. Results for the interim periods are not necessarily indicative of the results for an entire year. NOTE 2. SUBSEQUENT EVENT On April 21, 1998, the Company announced that its Board of Directors declared a 3-for-2 stock split in the form of a stock dividend. The stock split will be issued May 14, 1998 to shareholders of record as of May 4, 1998. All share and per share data in this report on Form 10-Q are presented prior to the split. NOTE 3. NEW ACCOUNTING PRONOUNCEMENT On January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." Comprehensive income includes certain changes in equity that are currently excluded from net income. The adoption of this statement did not impact the Company's consolidated financial statements; historically there have been no differences between net income and comprehensive income. 5 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table sets forth certain Statements of Earnings data as a percentage of net sales: Three Months Ended March 31, 1998 1997 ---- ---- Net sales...................................... 100.0% 100.0% Cost of goods sold............................. 75.0% 77.0 Gross profit................................... 25.0% 23.0 Selling, general and administrative expenses... 9.0% 10.5 Operating income............................... 15.0% 11.5 Interest expense............................... 1.4% 2.0 Net income..................................... 8.8% 6.8 NET SALES. For the three months ended March 31, 1998, net sales increased 94% to approximately $9,029,000 compared with $4,651,000 for the three months ended March 31, 1997. The increase was due to the increased sales of Posi-Track vehicles and related accessories. The majority of Posi-Track sales for the first quarter of 1998 were the HD series Posi-Track, which was put into production in fourth quarter 1997. The HD series Posi-Tracks feature a maintenance-free suspension which minimizes operator maintenance on the vehicle, as well as offering a more powerful engine and greater lifting capabilities than the Company's model MD-70 Posi-Track. The Company recently announced it will offer this same maintenance-free suspension under the MD-70 chassis as a new series of Posi-Tracks, the MD series. The MD series will be offered in 2 models, the 2800 and the 2810 (turbo), and is expected to be put into production in the second quarter of 1998. Sales of parts, used equipment and other items increased 39% for the three month period ended March 31, 1998 as compared with 1997. This increase was due in part to a 50% increase in the sale of parts as the number of vehicles in the field has increased and a 72% increase in the sale of used equipment due to more focused marketing efforts. In connection with the expansion of its manufacturing facility and increase in the models in its product lines, the Company is anticipating continued growth in its net sales in excess of 50% for the next twelve months. GROSS PROFIT. Gross profit for the three months ended March 31, 1998 increased to approximately $2,258,000, or 25.0% of net sales, compared with $1,069,000, or 23.0% of net sales, in 1997. The increased gross profit can be attributed to increased sales volume in 1998 while the increased gross profit percentage can be attributed to the shift in units sold from the model MD-70 Posi-Track to the HD series Posi-Track, which carries a higher gross profit. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses increased from approximately $488,000, or 10.5% of net sales in 1997, to approximately $808,000, or 9.0% of net sales in 1998. The increase is due primarily to increased marketing costs as well as higher compensation costs as sales and administrative personnel have been added to support expanded sales and customer service roles. The decreased percentage of selling, general and administrative expenses is due to the increased sales volume in 1998. RESEARCH AND DEVELOPMENT. Research and development expenses increased from approximately $45,000 in 1997 to approximately $98,000 in 1998. The increase is due to the Company devoting more resources to future product alternatives and one new product, the MD series Posi-Track, which will be placed into production in the second quarter of 1998. In order to maintain its competitive advantage over other manufacturers of similar products, the Company believes it will increase the level of spending on research and development activities. It is expected the main thrust of these activities will be directed towards extensions of the Company's current product lines and improvements of existing products. INTEREST EXPENSE. Interest expense increased from approximately $93,000 for the first quarter of 1997 to approximately $129,000 for the first quarter of 1998. The increase is due to the additional debt related to the 6 completion of the Company's facility expansion and the additional debt incurred in January 1998 for the acquisition of land and buildings for storage and to house research and development activities. 7 NET INCOME. Net income for the first quarter of 1998 was approximately $792,000, as compared with approximately $316,000 for the first quarter of 1997. The increase in 1998 resulted primarily from added gross profit on increased sales offset in part by increased operating costs and interest expense. LIQUIDITY AND CAPITAL RESOURCES At March 31, 1998, the Company had working capital of approximately $13,982,000 compared with working capital of approximately $10,748,000 at March 31, 1997, an increase of approximately $3,234,000. The major components of this increase are as follows: Inventories increased approximately $6,487,000 due to the introduction of two new Posi-Track models in 1997 and also increased sales; Accounts receivable increased approximately $1,508,000 due to increased sales; Cash and short-term investments decreased approximately $3,603,000 as the Company built inventory levels and equipped its expanded manufacturing facility; Current liabilities increased approximately $1,254,000 due to the overall increase in the Company's volume and profitability. The Company's working capital position at March 31, 1998 remained relatively constant when compared with December 31, 1997, increasing approximately $641,000. However, the Company's inventories increased approximately $985,000 and accounts payable increased approximately $860,000 due to the timing of certain inventory purchases and their related payment. Also, cash and short-term investments increased approximately $356,000 and accounts receivable increased approximately $696,000 due to increased sales. Other current liabilities, such as income taxes payable and accrued liabilities, increased approximately $331,00 due to increased sales volume and profitability. In addition, the current portion of long-term liabilities increased approximately $218,000 due to the additional debt incurred for the Company's facility expansion and the acquisition of land and buildings for storage and to house the Company's research and development activities. In connection with the expansion of its manufacturing facility, the Company's lease for this facility has been amended. On April 1, 1998, the Company began paying $12,300 per month for the expanded facility, in addition to the amount it was currently paying. The additional payment will continue through January 1, 2018, with payments subject to revision every five years based upon interest rate negotiation between the lessor and the involved bank related to the lessor's underlying debt. The Company has recorded the lease, as amended, as a capital lease. The Company believes its existing cash and marketable securities, together with cash expected to be provided by operations and available, unused credit lines, will satisfy the Company's projected working capital needs and other cash requirements for the next twelve months. Beyond that period, it may be necessary to obtain additional capital resources. The Company has not determined whether the composition of these additional resources would be in the form of additional debt, convertible securities, equity securities or a combination. The Company has increased its number of employees by approximately 50% in the last 12 months. In order to meet its anticipated sales levels for the remainder of 1998, the Company expects it will increase its number of employees by approximately 10-30% over the next twelve months. It is anticipated the majority of the additional employees will be in the production area. The Company believes the local work force is sufficient to hire the additional employees. The statements set forth above under "Liquidity and Capital Resources" and elsewhere in this Form 10-Q which are not historical facts are forward-looking statements and involve risks and uncertainties, many of which are outside the Company's control and, accordingly, actual results may differ materially. Factors that might cause such a difference include, but are not limited to, lack of market acceptance of new or existing products, inability to attract new dealers for the Company's products, unexpected delays in obtaining raw materials, unexpected additional expenses or operating losses or the activities of competitors. Any forward-looking statements provided from time-to-time by the Company represents only management's then-best current estimate of future results or trends. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK None 8 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS Exhibit Number Description ------ ----------- 3.1 Second Restated Articles of Incorporation of the Company (a) 3.1a Amendment to Second Restated Articles of Incorporation of the Company (e) 3.2 Bylaws of the Company (a) 4.1 Specimen form of the Company's Common Stock Certificate (a) 4.2 * 1987 Stock Option Plan (a) 4.3 * 1994 Long-Term Incentive and Stock Option Plan (a) 4.4 Form of Warrant issued to Summit Investment Corporation (b) 4.5 Form of Debenture issued October 1996 (d) 4.6 Warrant issued to Leo Partners, Inc. on December 1, 1996 (e) 4.7 * 1996 Incentive and Stock Option Plan (f) 10.1 Development Agreement dated July 14, 1994 among the Iron Range Resources and Rehabilitation Board ("IRRRB"), the Grand Rapids Economic Development Agency ("EDA") and the Company (b) 10.2 Lease and Option Agreement dated July 14, 1994 between the Grand Rapids Economic Development Agency and the Company (b) 10.3 Option Agreement dated July 14, 1994 between the EDA and the Company (b) 9 10.4 Grant Contract dated July 1, 1994 between the Company and the IRRRB (b) 10.5 Letter Credit Agreement dated June 15, 1994 between the Security State Bank of Hibbing and the Company (a) 10.6 Supplemental Lease Agreement dated April 18, 1997 between the EDA and the Company (f) 10.7 Supplemental Development Agreement dated April 18, 1997 between the EDA and the Company (f) 10.8 Line of Credit dated May 22, 1997 between Norwest Bank Minnesota North, N.A. and the Company (f) 10.9 * Employment Agreement dated October 17, 1994 between the Company and Thomas R. Karges (c) 10.10 Consulting Agreement between the Company and Leo Partners, Inc. dated December 1, 1996 (e) 11 Statement re: Computation of Per Share Earnings 22 List of Subsidiaries (a) 27 Financial Data Schedule for the three months ended March 31, 1998 (a) Incorporated by reference to the Company's Registration Statement on Form SB-2 (File No. 33-61284C) filed July 7, 1994. (b) Incorporated by reference to the Company's Post-Effective Amendment No. 1 to Registration Statement on Form SB-2 (File No. 33-61284C) filed August 3, 1994. (c) Incorporated by reference to the Company's Quarterly Report on Form 10-QSB for the quarter ended September 30, 1994 (File No. 33-61284C) filed November 11, 1994. (d) Incorporated by reference to the Company's Quarterly Report on Form 10-QSB for the quarter ended September 30, 1996 (File No. 0-25620) filed electronically November 13, 1996. (e) Incorporated by reference to the Company's Annual Report on Form 10-KSB for the year ended December 31, 1996 (File No. 0-25620) filed electronically March 28, 1997. (f) Incorporated by reference to the Company's Quarterly Report on Form 10-QSB for the quarter ended June 30, 1997 (File No. 0-25620) filed electronically August 13, 1997. * Indicates management contract or compensation plan or arrangement. (b) REPORTS ON FORM 8-K No reports on Form 8-K were filed during the quarter ended March 31, 1998. 10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. A.S.V., INC. Dated: May 13, 1998 By /s/ Gary Lemke ----------------- Gary Lemke President Dated: May 13, 1998 By /s/ Thomas R. Karges ----------------------- Thomas R. Karges Chief Financial Officer (principal financial and accounting officer) 11 EXHIBIT INDEX
EXHIBIT METHOD OF FILING - ------- ---------------- 11 Statement re: Computation of Per Share Earnings Filed herewith electronically 27 Financial Data Schedule Filed herewith electronically
12 EX-11 2 COMPUTATION OF EARNINGS PER SHARE A.S.V., INC. AND SUBSIDIARY EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE THREE MONTHS ENDED MARCH 31, 1998 AND 1997 1998 1997 ---------- ---------- BASIC Earnings Net income $ 791,838 $ 315,542 ========== ========== Shares Weighted average number of common shares outstanding 5,019,156 4,826,398 ========== ========== Earnings per common share $ .16 $ .07 ========== ========== DILUTED Earnings Net income $ 791,838 $ 315,542 Add after tax interest expense applicable to 6.5% convertible debentures 51,187 50,374 ---------- ---------- Net income applicable to common stock $ 843,025 $ 365,916 ========== ========== Shares Weighted average number of common shares outstanding 5,019,156 4,826,398 Assuming exercise of options and warrants reduced by the number of shares which could have been purchased with the proceeds from the exercise of such options and warrants 472,087 585,257 Assuming conversion of 6.5% convertible debentures 454,545 454,545 ---------- ---------- Weighted average number of common and common equivalent shares outstanding 5,945,788 5,866,200 ========== ========== Earnings per common share $ .14 $ .06 ========== ========== EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF EARNINGS FOUND ON PAGES 2 AND 3 OF THE COMPANY'S FORM 10-Q FOR THE YEAR TO DATE, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 923,170 1,005,018 2,715,560 30,000 12,658,598 17,627,406 5,177,866 803,368 22,001,904 3,645,074 7,452,926 0 0 50,226 10,853,678 22,001,904 9,028,838 9,028,838 6,770,995 906,644 0 10,000 128,946 1,256,838 465,000 791,838 0 0 0 791,838 .16 .14 INCLUDES ADDBACK OF AFTER-TAX EFFECT OF INTEREST EXPENSE FOR CONVERTIBLE DEBENTURES
-----END PRIVACY-ENHANCED MESSAGE-----