UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
{X} Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934.
For the quarterly Period ended February 28, 1997
or
{ } Transition report under Section 13 or 15(d) of the Exchange
Act.
For the transition period from to
Commission File Number: 0-10571
TOP AIR MANUFACTURING, INC.
(Exact name of small business issuer as specified in its charter)
Iowa 42-1155462
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
317 Savannah Park Road, Cedar Falls, Iowa 50613
(Address of principal executive offices) (Zip Code)
(319) 268-0473
(Issuer's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal
year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
5,164,765 Common Shares were outstanding as of March 31, 1997.
<PAGE>
TOP AIR MANUFACTURING, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed consolidated balance sheets,
February 28, 1997 (unaudited)
and May 31, 1996 1
Unaudited condensed consolidated statements of
operations three months and nine months ended
February 28, 1997 and February 29, 1996 2
Unaudited condensed consolidated statements of
cash flows, nine months ended February 28, 1997
and February 29, 1996 3 & 4
Notes to condensed consolidated financial statements
(unaudited) 5 & 6
Unaudited condensed pro forma statement of income
three months ended February 28, 1997 7
Notes to condensed pro forma statements (unaudited) 7
Item 2. Management's Discussion and Analysis or
Plan of Operation 8 & 9
PART II. OTHER INFORMATION
Item 2. Changes in Securities 10
Item 6. Exhibits and Reports of Form 8-K 10 & 11
<PAGE>
<TABLE>
TOP AIR MANUFACTURING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
ASSETS
FEBRUARY 28, MAY 31,
1997 1996*
------------ ----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 33,390 $ 517
Trade receivables, net of
allowance for doubtful
accounts February 28, 1997
$211,500; May 31, 1996 $167,000 3,480,190 1,564,968
Inventories (Note 2) 4,437,731 2,635,802
Equipment held for sale -- 755,546
Other current assets 325,564 309,110
--------- ---------
Total Current Assets 8,276,875 5,265,943
--------- ---------
LONG TERM RECEIVABLES AND OTHER ASSETS
Notes receivable, net of current
portion 152,328 160,216
Other assets 96,687 65,920
--------- ---------
249,015 226,136
--------- ---------
PROPERTY AND EQUIPMENT, at cost,
less accumulated depreciation
February 28, 1997 $1,117,707;
May 31, 1996 $967,939 2,327,404 1,007,653
--------- ---------
INTANGIBLES, primarily goodwill 1,202,334 --
--------- ---------
$12,055,628 $6,499,732
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt $ 1,610,895 $ 81,497
Other Liabilities and accrued items 2,322,054 1,455,656
----------- ----------
Total Current Liabilities 3,932,949 1,537,153
----------- ----------
LONG-TERM DEBT 2,191,835 830,111
----------- ----------
STOCKHOLDERS' EQUITY
Common stock 322,735 250,860
Additional paid-in capital 2,898,105 1,388,730
Retained earnings 2,729,695 2,512,569
---------- -----------
5,950,535 4,152,159
Less cost of treasury stock 19,691 19,691
---------- -----------
5,930,844 4,132,468
---------- -----------
$12,055,628 $6,499,732
=========== ===========
*Condensed from Audited Financial Statements.
See notes to Condensed Financial Statements.
</TABLE>
-1-
<PAGE>
TOP AIR MANUFACTURING, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
February 28, February 29, February 28, February 29,
1997 1996 1997 1996
----------- ----------- ----------- -----------
Net Sales $4,449,473 $3,409,863 $7,657,221 $7,376,928
---------- ---------- ---------- ----------
Costs and Expenses
Cost of goods
sold 3,006,265 2,312,944 5,262,929 5,271,284
Selling and
administrative
expenses 717,423 590,152 1,796,043 1,577,507
Research and
development
expenses 115,504 97,805 300,626 269,280
Interest
expense 52,593 57,641 103,785 143,878
------ ------ ------- -------
3,891,785 3,058,542 7,463,383 7,261,949
--------- --------- --------- ---------
557,688 351,321 193,838 114,979
Other Income 69,052 20,918 141,774 66,627
------ ------ ------- ------
Income before
Income Taxes 626,740 372,239 335,612 181,606
Income Taxes 221,936 145,100 118,486 70,800
------- ------- ------- ------
Net Income $ 404,804 $ 227,139 $ 217,126 $ 110,806
========== ========== ========== ==========
Earnings
per Common Share $ .09 $ .06 $ .05 $ .03
========== ========== ========== ==========
Weighted Average
Number of Shares 4,670,431 4,071,349 4,282,510 3,993,154
========= ========= ========= =========
See Notes to Condensed Financial Statements.
-2-
<PAGE>
TOP AIR MANUFACTURING, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended February 28, 1997 and February 29, 1996
1997 1996
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash (used in) operating
activities $(1,352,861) $ (803,598)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of equipment 909,971 63,950
Purchase of property and equipment (945,448) (224,534)
Payments received on long-term
notes receivable 7,513 15,009
Other (30,767) --
--------- ---------
Net cash (used in) investing
activities (58,731) (145,575)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings 1,761,000 3,673,100
Proceeds from long-term borrowings 2,897,445 1,900,000
Principal payments on short term
borrowings (795,000) (2,620,100)
Net proceeds from issuance of common
stock February 28, 1997 none;
February 29, 1996 1,666 shares -- 1,291
Principal payments on long-term
borrowings (2,418,980) (2,399,794)
Purchase of common stock for the
treasury -- (19,691)
--------- ---------
Net cash provided by financing
activities 1,444,465 534,806
--------- ---------
Increase (decrease) in Cash and
Cash Equivalents 32,873 (414,367)
CASH AND CASH EQUIVALENTS
Beginning 517 414,748
--------- ---------
Ending $ 33,390 $ 381
=========== ===========
See notes to Condensed Financial Statements.
-3-
<PAGE>
TOP AIR MANUFACTURING, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine months
Ended February 28, 1997 and February 29, 1996.
1997 1996
---------- -----------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Acquisition of Ficklin Machine:
Working capital acquired $1,155,069
Fair value of other assets acquired,
principally goodwill and property
and equipment 1,822,838
Long-term debt assumed (1,396,657)
----------
$1,581,250
==========
Issuance of common stock,
1,150,000 shares $1,581,250
==========
Acquisition of Clay Equipment:
Working capital acquired $1,329,160
Fair value of other assets acquired,
principally property and equipment 1,127,825
Long-term debt assumed (1,828,735)
----------
$ 628,250
==========
Issuance of common stock,
837,666 shares $ (628,250)
==========
-4-
<PAGE>
TOP AIR MANUFACTURING, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Condensed Financial Statements
As a result of the acquisition of Ficklin Machine Co. (Note 3) which
was accounted for under the purchase method, the condensed financial statements
as of February 28, 1997, and for the three months and nine months ended February
28, 1997 have been presented on a consolidated basis. All prior period condensed
financial statements include only financial information of Top Air
Manufacturing, Inc. All significant intercompany accounts and transactions have
been eliminated.
The condensed consolidated balance sheet as of February 28, 1997 and
the condensed consolidated statements of operations for the three months and
nine months ended February 28, 1997 and February 29, 1996 and the condensed
consolidated statements of cash flows for the nine months ended February 28,
1997 and February 29, 1996, have been prepared by the Company without audit. In
the opinion of management, all adjustments (which include normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows at February 28, 1997 and for all periods presented
have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principals have been condensed or omitted. It is suggested that these condensed
financial statements be read in conjunction with the financial statements and
notes thereto included in the Company's May 31, 1996 Annual Report to
Shareholders. The results of operations for the periods ended February 28, 1997
and February 29, 1996 are not necessarily indicative of the operating results
for the full year.
Note 2. Inventories
Inventories consist of the following:
February 28, May 31,
1997 1996
----------- ----------
Finished Goods $3,792,171 $2,453,691
Work in Process 385,236 38,303
Raw Materials and Supplies 260,324 143,808
---------- ----------
$4,437,731 $2,635,802
========== ==========
-5-
<PAGE>
TOP AIR MANUFACTURING, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 3. Acquisition
On January 15, 1997 the Company acquired all of the assets of Ficklin
Machine Co., Inc. of Onarga, Illinois, indirectly by acquiring all of the issued
and outstanding stock of Ficklin in exchange for 1,150,000 shares of the
Company's common stock. As a result, Ficklin became a wholly-owned subsidiary of
the Company.
The transaction was accounted for using the purchase method of
accounting. The Company currently intends to continue the business of Ficklin in
substantially the manner as conducted before the transaction.
-6-
<PAGE>
TOP AIR MANUFACTURING, INC.
PRO FORMA CONDENSED STATEMENT OF INCOME (UNAUDITED)
3 MONTHS ENDED FEBRUARY 28, 1997
PRO FORMA PRO FORMA
TOP AIR FICKLIN ADJUSTMENTS COMBINED
REVENUE $2,571,365 $598,711 $ -- $3,170,076
---------- -------- ---------- ----------
INCOME FROM CONTINUING
OPERATIONS 421,974 (74,623) 3,867 (2)
---------- -------- 7,114 (3)
(18,762)(4) 339,570
----------- ----------
NET INCOME $ 421,974 $(74,623) $(7,781) $ 339,570
========== ======== =========== ==========
EARNINGS PER SHARE $ .08 $ (.01) $ .00 $ .07
========== ======== =========== ==========
See notes to unaudited pro forma statements of income below.
NOTES TO UNAUDITED PRO FORMA STATEMENTS OF INCOME
(1) Information for the three month period ended February 29, 1996 is not
presented because the date of inception for Ficklin Machine Co. was not
until March 6, 1996.
(2) To eliminate interest expense on note payable converted to additional paid-
in capital.
(3) To eliminate amortization of Ficklin Machine goodwill.
(4) To amortize goodwill acquired over a 15 year period using the straight-line
method.
-7-
<PAGE>
TOP AIR MANUFACTURING, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
Net Sales:
Net sales for the third quarter and nine months ended February 28,
1997 were $4,449,473 and $7,657,221, which were increases of 30% and 4%
respectively, compared to sales for the same periods last year. The increase for
the third quarter was a result of two factors. First, there were increased
shipments of whole goods which reduced the backlog created in the second quarter
during the time the Company moved into the new facility as discussed in the
November 30, 1996 10-QSB. Secondly, incremental sales of $396,584 of Ficklin
Machine were included since the date of acquisition. The increase for the nine
month period was a result of the increases for the first and third quarters,
offset by the decrease resulting from the production shutdown during the
Company's move into the new facility during the second quarter. The majority of
the backlog difference reported in the November 30, 1996 10-QSB has been
recouped. However, orders continue to be strong as the Company enters the fourth
quarter. Backlog on March 31, 1997 was $1.5 million compared to $1.0 million on
the same date last year.
Operating Costs & Expenses:
The Company's ratio of cost of goods sold to net sales for the third
quarter ended February 28, 1997 remained constant at 68% and decreased to 69%
from 71% for the nine months ended February 28, 1997 compared to the same
periods of the previous year. The decrease is a result of fixed overhead
expenses being reduced during the production shutdown during the Company's move
to the new facility, local and federal agencies absorbing the majority of the
expenses associated with the move to the new facility, and the elimination of
the inefficiences in operating two facilities.
Operating expenses increased to $832,927 and $2,096,669 for the third
quarter and nine months ended February 28, 1997, compared to $687,957 and
$1,846,787 for the same periods last year. The increases for both periods
resulted primarily from incremental expenses from the acquisition of Ficklin
Machine and the nine month period was also increased as a result of incremental
expenses incurred from the timing of the acquisition of Clay Equipment as
previously mentioned.
-8-
<PAGE>
TOP AIR MANUFACTURING, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
Interest Expense:
Interest expense decreased 9% to $52,593 from $57,641 for the third
quarter and 28% to $103,785 from $143,878 for the nine months ended February 28,
1997. The decreases were due to lower levels of short-term and long-term debt
outstanding during the period.
Material Changes in Financial Position:
The Company's working capital was positively impacted by income from
operations of $217,126 combined with an approximate increase of $1,200,000 in
working capital resulting from the Ficklin Machine acquisition. These increases
were offset by equipment held for sale of $755,546, that was sold and the
proceeds used to purchase replacement fixed assets. These changes resulted in an
increase in working capital of $615,136 for the nine months ended February 28,
1997.
Liquidity and Capital Resources:
At February 28, 1997, the Company had working capital of $4,343,926,
an increase of $1,230,013 from a year ago and an increase of $615,136 since May
31, 1996. The increase from a year ago is primarily a result of approximately
$1,200,000 of working capital picked up with the acquisition of Ficklin Machine
on January 15, 1997. The increase since May 31, 1996 is described in the changes
in financial position, above. The current ratio decreased to 2.10 from 3.43 at
May 31, 1996. The Company currently intends to continue the business of Ficklin
Machine in substantially the manner as conducted prior to the acquisition and
the Company anticipates no other significant outlays for property and equipment
in the foreseeable future. The Company believes it has access to sufficient
working capital for its present and foreseeable future.
-9-
<PAGE>
TOP AIR MANUFACTURING, INC.
PART II. OTHER INFORMATION
Item 2. Sales of unregistered securities
(a) On January 15, 1997 the Company issued 1,150,000 unregistered
shares of no par common stock in connection with the acquisition
of Ficklin Machine Co. The sale of these shares was exempt from
registration under the Securities Act of 1933, as amended
pursuant to Section 4(2) thereof and Regulation D thereunder.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number
--------------
(11) Statement re computation of earnings per common share
(b) Reports on Form 8-K
Form 8-K dated January 15, 1997 and filed January 24, 1997
reported that the Company has acquired all of the issued and
outstanding stock of Ficklin Machine Company in exchange for
1,150,000 shares of Company's no par common stock.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TOP AIR MANUFACTURING, INC.
(Registrant)
Date April 14, 1997 /s/ Steven R. Lind
--------------------------------
Steven R. Lind
President and Chief Executive Officer;
Principal Executive Officer
Date April 14, 1997 /s/ Steven F. Bahlmann
--------------------------------
Steven F. Bahlmann
Controller; Chief Accounting
Officer
-10-
TOP AIR MANUFACTURING, INC.
EXHIBIT 11 - COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
Column A Column B Column C
Weighted Income
Average Per
Number of Common
Shares Net Share
Outstanding* Income (B/A)
------------ -------- ---------
Nine months ended:
February 28, 1997 4,282,510 $217,126 $ .05
February 29, 1996 3,993,154 110,806 .03
Three months ended:
February 28, 1997 4,670,431 $404,804 $ .09
February 29, 1996 4,071,349 227,139 .06
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
February 28, February 29, February 28, February 29,
1997 1996 1997 1996
------------ ------------ ------------ ------------
*Computation of weighted
average number of
common shares
outstanding and
common equivalent
shares:
<S> <C> <C> <C> <C>
Common shares out-
standing at the
beginning of the
period 4,013,765 3,174,433 4,013,765 4,013,765
Weighted average of
common shares
issued during
the period 189,560 762,103 575,000 --
Weighted average of
the common
equivalent shares
attributable to
stock options granted,
computed under the
treasury stock
method 79,185 56,618 81,666 57,584
--------- --------- --------- ---------
Weighted average number
of common and common
equivalent shares 4,282,510 3,993,154 4,670,431 4,071,349
========= ========= ========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> FEB-28-1997
<CASH> 33,390
<SECURITIES> 0
<RECEIVABLES> 3,480,190
<ALLOWANCES> 211,500
<INVENTORY> 4,437,731
<CURRENT-ASSETS> 8,276,875
<PP&E> 2,327,404
<DEPRECIATION> 1,117,707
<TOTAL-ASSETS> 12,055,628
<CURRENT-LIABILITIES> 3,932,949
<BONDS> 0
0
0
<COMMON> 322,735
<OTHER-SE> 5,608,109
<TOTAL-LIABILITY-AND-EQUITY> 12,055,628
<SALES> 7,657,221
<TOTAL-REVENUES> 7,798,995
<CGS> 5,262,929
<TOTAL-COSTS> 7,359,598
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 103,785
<INCOME-PRETAX> 335,612
<INCOME-TAX> 118,486
<INCOME-CONTINUING> 217,126
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 217,126
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
