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 November 30, 1997
or
{ }Transition report under Section 13 or 15(d) of the Exchange Act.
For the transition period from to
Commission file number: 1-13679
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
5,083,456 Common Shares were outstanding as of December 31, 1997.
<PAGE>
TOP AIR MANUFACTURING, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed consolidated balance sheets, November 30, 1997
(unaudited) and May 31, 1997 1
Unaudited condensed consolidated statements of operations
three months and six months ended November 30, 1996 and 1997 2
Unaudited condensed consolidated statements of cash
flows, six months ended November 30, 1996 and 1997 3
Notes to condensed financial statements (unaudited) 4
Item 2. Management's Discussion and Analysis or Plan of
Operation 5
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports of Form 8-K 7
<PAGE>
FINANCIAL INFORMATION
Item 1. Financial Statements
TOP AIR MANUFACTURING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
NOVEMBER 30, MAY 31,
1997 1997*
----- ------
CURRENT ASSETS
Cash and cash equivalents $ 12,998 $ 263,518
Trade receivables, net of allowance
for doubtful accounts November 30, 1997
$171,000; May 31, 1997 $165,000 2,737,170 3,344,742
Inventories (Note 2) 5,010,752 3,885,154
Income tax benefits 204,300 --
Other current assets 344,541 352,584
---------- ----------
Total Current Assets 8,309,761 7,845,998
---------- ----------
LONG TERM RECEIVABLES AND OTHER ASSETS
Notes receivable, net of current portion 142,639 149,132
Goodwill 1,099,874 1,138,081
Other assets 180,443 193,127
---------- -----------
1,422,956 1,480,340
PROPERTY AND EQUIPMENT, at cost,
less accumulated depreciation
November 30, 1997 $966,722;
May 31, 1997 $782,912 2,667,516 2,059,140
----------- -----------
$12,400,233 $11,385,478
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt $ 2,337,204 $ 1,317,076
Other liabilities and accrued items 986,620 1,388,333
--------- ---------
Total Current Liabilities 3,323,824 2,705,409
LONG-TERM DEBT 2,539,230 2,108,381
----------- -----------
STOCKHOLDERS' EQUITY
Common stock 322,944 322,798
Additional paid-in capital 2,893,188 2,898,636
Retained earnings 3,437,160 3,369,945
--------- ---------
6,653,292 6,591,379
Less cost of treasury stock 116,113 19,691
--------- ----------
6,537,179 6,571,688
--------- ---------
$12,400,233 $11,385,478
========== ==========
*Condensed from Audited Financial Statements.
See notes to Condensed Financial Statements.
1
<PAGE>
TOP AIR MANUFACTURING, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
November 30, November 30,
1997 1996 1997 1996
---- ---- ---- ----
Net Sales $3,812,315 $1,317,629 $6,410,242 $3,207,748
---------- ---------- ---------- ----------
Costs and Expenses
Cost of goods
sold 2,649,837 936,939 4,532,743 2,256,664
Selling and
administrative
expenses 697,977 532,010 1,389,015 1,078,620
Research and
development
expenses 124,054 88,117 233,360 185,122
Interest
expense 88,521 27,607 161,220 51,192
----------- ---------- --------- -----------
3,560,389 1,584,673 6,316,338 3,571,598
---------- ---------- -------- -----------
251,926 (267,044) 93,904 (363,850)
Other Income 3,832 33,095 15,635 72,722
------ ------ ---------- ---------
Income (loss)
before
Income Taxes 255,758 (233,949) 109,539 (291,128)
Income Taxes
(credits) 94,939 (84,350) 42,324 (103,450)
------------ ----------- ---------- ----------
Net Income
(loss) $ 160,819 $ (149,599) $ 67,215 $ (187,678)
========== ========== ========= ===========
Earnings (loss)
per Common Share $ .03 $ (.04) $ .01 $ ( .05)
============ =========== ========= ===========
Weighted Average
Number of Share 5,237,612 4,013,765 5,243,875 4,013,765
========== ========== ========= =========
See Notes to Condensed Financial Statements.
2
<PAGE>
TOP AIR MANUFACTURING, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended November 30, 1997 and 1996
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash (used in) operating
activities $ (363,442) $ (225,199)
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of equipment -- 520,945
Purchase of property and equipment (825,576) (1,024,326)
Payments received on long-term notes
receivable 4,726 5,979
----------- ------------
Net cash (used in) investing activities (820,850) (497,402)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings 3,915,000 79,000
Proceeds from long-term borrowings 725,000 2,587,000
Principal payments on short term borrowings (3,429,000) --
Principal payments on long term borrowings (175,504) (1,936,457)
Net proceeds from issuance of common
stock November 30, 1997 2,333 shares;
November 30, 1996 none 2,198 --
Purchase of common stock for the treasury (96,422) --
Stock Registration Fees (7,500) --
--------- ----------
Net cash provided by financing activities 933,772 729,543
----------- -----------
Increase (decrease) in Cash and
Cash Equivalents (250,520) 6,942
CASH AND CASH EQUIVALENTS
Beginning 263,518 517
-------- --------
Ending $ 12,998 $ 7,459
=========== ===========
See notes to Condensed Financial Statements.
3
<PAGE>
TOP AIR MANUFACTURING, INC. AND SUBSIDIARY
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Condensed Financial Statements
The financial statements of Top Air Manufacturing, Inc. and its wholly owned
subsidiary (Ficklin Machine Co.) have been presented on a consolidated basis as
of November 30, 1997, May 31, 1997 and for the six months ended November 30,
1997. The period ended November 30, 1996 only includes financial information of
Top Air as a result of the acquisition of Ficklin Machine on January 15, 1997.
All significant intercompany accounts and transactions have been eliminated.
The condensed consolidated balance sheet as of November 30, 1997 and the
condensed consolidated statements of operations and cash flows for the six
months ended November 30, 1997 and 1996 have been prepared by the Company
without audit. In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows at November 30, 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, 1997 Annual Report to Shareholders.
The results of operations for the periods ended November 30, 1997 and 1996 are
not necessarily indicative of the operating results for the full year.
Note 2. Inventories
Inventories consist of the following:
November 30, 1997 May 31, 1997
Finished Goods $4,260,994 $3,421,222
Work in Process 218,976 257,099
Raw Materials and Supplies 530,782 206,833
------------ -----------
$5,010,752 $3,885,154
============ ===========
4
<PAGE>
TOP AIR MANUFACTURING, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
This report contains certain forward-looking statements within the meaning of
the Federal Securities Laws which, while reflective of management's beliefs or
expectations, involve certain risks and uncertainties, many of which are beyond
the control of the Company. Accordingly, the Company's actual results and the
timing of certain events could differ materially from those discussed herein.
Factors that cause or contribute to such differences include, but are not
limited to, those factors discussed in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
those factors discussed in Exhibit 99 to the Company's Annual Report on Form
10-KSB for the fiscal year ended May 31, 1997.
OVERVIEW:
On January 15, 1997, Top Air acquired all of the issued and outstanding stock of
Ficklin Machine Co., Inc. ("Ficklin Machine"), which acquisition was accounted
for under the purchase method of accounting. Accordingly, the results of
operations of Ficklin Machine have been included in the Company's financial
statements commencing with the date of the acquisition.
RESULTS OF OPERATIONS
Net Sales:
The Company's net sales in the second quarter increased 189% to $3,812,315 from
$1,317,629 for the comparable period last year. Net sales for the six months
ended November 30, 1997 increased 100% to $6,410,242.00 from $3,207,748 for the
comparable period last year. The second quarter increase was a result of
substantially higher levels of production and shipping of Top Air products and
incremental sales of Ficklin Machine products totalling $1,359,230. In addition,
the Company sales during the second quarter of 1996 were adversely impacted by
the Company's relocation of its operations. The increase in sales for the six
month period is also primarily attributable to the reasons mentioned above.
The Company's cost of goods sold in the second quarter decreased to 70% of net
sales, compared to 71% for the comparable period last year. The decrease was the
result of improved plant utilization in the current year, offset in part by the
margins of the Ficklin Machine product line which are generally lower than those
historically achieved by the Top Air product line. Costs of goods sold for the
six month period increased to 71% of net sales, compared to 70% for the same
period of the previous year. This decrease was a result of the lower margin
Ficklin Machine sales being a higher percentage of the Company's net sales
during the period.
Operating Expenses:
Operating expenses in the second quarter increased 33% to $822,031 from $620,127
for the comparable period last year. Operating expenses for the six months ended
November 30, 1997 increased 28% to $1,622,375 from $1,263,742 for the comparable
period last year. The increases are primarily attributable to the incremental
expenses of Ficklin Machine operations.
Interest Expense:
The Company's interest expense for the second quarter increased 221% to $88,521
from $27,607 for the comparable period last year. Interest expense for the six
months ended November 30, 1997 increased 215% to $161,220 from $51,192 for the
comparable period last year. The increases were due to higher levels of
short-term and long-term debt outstanding during the periods resulting from the
acquisition of Ficklin Machine and the purchase of new machinery.
5
<PAGE>
Income Tax Expense:
The Company's Income Tax expense for the second quarter and the six months ended
November 30, 1997 is an estimate based on an annualized effective tax rate of
37%. The income tax credits of $84,350 for the second quarter and $103,450 for
the six months ended November 30, 1996 represent the benefit that would be
received if the loss for the periods were carried back to reclaim income tax
paid in prior years.
Material Changes in Financial Position:
The Company's income from operations of $67,215 was offset by approximately
$97,000 resulting from the reacquisition of shares of common stock previously
held in escrow in connection with the Company's acquisition of Clay Equipment
Corporation to secure certain indemnification obligations of Clay Equipment and
approximately $122,000 of indebtedness incurred in connection with the
acquisition of new machinery, resulting in a decrease in working capital of
approximately $155,000 for the six months ended November 30, 1997.
Liquidity and Capital Resources:
At November 30, 1997 the Company had working capital of $4,985,937, an increase
of $1,794,097 over a year ago and a decrease of $154,652 since May 31, 1997. The
increase from a year ago is primarily a result of approximately $1,200,000 of
working capital acquired in the Ficklin Machine acquisition and approximately
$1,050,000 of income from operations, offset by $250,000 of equipment held for
sale that was sold and the proceeds used to purchase replacement fixed assets
and the $155,000 decrease in working capital since May 31, 1997 described in the
changes in financial position above. The current ratio decreased to 2.50 from
2.90 at May 31, 1997. The Company anticipates no significant outlays for
property and equipment in the foreseeable future. The Company believes it has
access to sufficient working capital to support its current needs for the
foreseeable future.
6
<PAGE>
TOP AIR MANUFACTURING, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number
(11) Statement re computation of earnings per common share
(27) Financial Data Schedule
(b) There were no reports on Form 8-K filed for the quarter ended November 30,
1997.
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 January 14, 1997 /s/ Steven R. Lind
--------------------------------
Steven R. Lind
President and Chief Executive Officer;
Principal Executive Officer
Date January 14, 1997 /s/ Steven F. Bahlmann
--------------------------------
Steven F. Bahlmann
Controller; Chief Accounting Officer
7
EXHIBIT 11 - COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
Column A Column B Column C
Weighted Income
Average (loss) Per
Number of Net Common
Shares Income Share
Outstanding* (Loss) (B/A)
-------------------------------------------
Six months ended:
November 30, 1997 5,243,875 67,215 .01
November 30, 1996 4,013,765 (187,678) (.05)
Three months ended:
November 30, 1997 5,237,612 160,819 .03
November 30, 1996 4,013,765 (149,599) (.04)
Six Months Ended Three Months Ended
November 30, November 30,
1997 1996 1997 1996
----------------- -----------------
*Computation of weighted
average number of common share
outstanding and common
equivalent shares:
Common shares outstanding
at the beginning of the
period 5,135,548 4,013,765 5,086,123 4,013,765
Weighted average of common
shares issued during the
period 1,120 -- 164 --
Weighted average of common
shares repurchased for the
treasury during the per (44,118) -- -- --
Weighted average of the common
equivalent shares attributable
to stock options granted,
computed under the treasury
stock method 151,325 -- 151,325 --
--------- --------- --------- ----------
Weighted average number of
common and common
equivalent shares 5,243,875 4,013,765 5,237,612 4,013,765
========= ========= ========= =========
8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> NOV-30-1997
<CASH> 12,998
<SECURITIES> 0
<RECEIVABLES> 2,908,170
<ALLOWANCES> 171,000
<INVENTORY> 5,010,752
<CURRENT-ASSETS> 8,309,761
<PP&E> 3,634,238
<DEPRECIATION> 966,722
<TOTAL-ASSETS> 12,400,233
<CURRENT-LIABILITIES> 3,323,824
<BONDS> 0
0
0
<COMMON> 322,944
<OTHER-SE> 6,214,235
<TOTAL-LIABILITY-AND-EQUITY> 12,400,233
<SALES> 6,410,242
<TOTAL-REVENUES> 6,425,877
<CGS> 4,532,743
<TOTAL-COSTS> 6,155,118
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 161,220
<INCOME-PRETAX> 109,539
<INCOME-TAX> 42,324
<INCOME-CONTINUING> 67,215
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 67,215
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
