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, 1998
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 March 31, 1998.
<PAGE>
TOP AIR MANUFACTURING, INC. AND SUBSIDIARY
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed consolidated balance sheets, February 28, 1998
(unaudited) and May 31, 1997 1
Unaudited condensed consolidated statements of operations,
three months and nine months ended February 28, 1998 and
1997 2
Unaudited condensed consolidated statements of cash flows,
nine months ended February 28, 1998 and 1997 3
Notes to condensed financial statements (unaudited) 5
Item 2. Management's Discussion and Analysis or Plan of
Operation 6
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8
<PAGE>
TOP AIR MANUFACTURING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
FEBRUARY 28, MAY 31,
1998 1997*
------------ ----------
CURRENT ASSETS
Cash and cash equivalents $ 17,111 $ 263,518
Trade receivables, net of allowance
for doubtful accounts February 28, 1998
$131,500; May 31, 1997 $165,000 4,261,744 3,344,742
Inventories (Note 2) 5,503,816 3,885,154
Other current assets 279,755 352,584
---------- -----------
Total Current Assets 10,062,426 7,845,998
---------- -----------
LONG TERM RECEIVABLES AND OTHER ASSETS
Notes receivable, net of current portion 286,177 149,132
Goodwill 1,080,421 1,138,081
Other assets 174,621 193,127
--------- ---------
1,541,219 1,480,340
PROPERTY AND EQUIPMENT, at cost,
less accumulated depreciation
February 28, 1998 $1,140,374;
May 31, 1997 $782,912 2,661,082 2,059,140
--------- ---------
$14,264,727 $11,385,478
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt $ 4,021,312 $ 1,317,076
Other liabilities and accrued items 965,370 1,388,333
----------- -----------
Total Current Liabilities 4,986,682 2,705,409
LONG-TERM DEBT 2,433,087 2,108,381
----------- -----------
STOCKHOLDERS' EQUITY
Common stock 322,944 322,798
Additional paid-in capital 2,893,188 2,898,636
Retained earnings 3,753,339 3,369,945
----------- -----------
6,969,471 6,591,379
Less cost of treasury stock 124,513 19,691
----------- -----------
6,844,958 6,571,688
----------- -----------
$14,264,727 $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 Nine Months Ended
February 28, February 28,
1998 1997 1998 1997
---- ---- ---- ----
Net Sales $4,371,915 $4,449,473 $10,782,157 $7,657,221
--------- --------- ---------- ---------
Costs and Expenses:
Cost of goods sold 2,917,720 3,006,265 7,450,463 5,262,929
Selling and
administrative
expenses 746,138 717,423 2,135,153 1,796,043
Research and development
expenses 128,313 115,504 361,673 300,626
Interest expense 104,726 52,593 265,946 103,785
---------- ---------- ---------- ----------
3,896,897 3,891,785 10,213,235 7,463,383
---------- ---------- ----------- ----------
475,018 557,688 568,922 193,838
Other Income 14,649 69,052 30,284 141,774
---------- ---------- ----------- ----------
Income before
Income Taxes 489,667 626,740 599,206 335,612
Income Taxes 173,488 221,936 215,812 118,486
---------- ---------- ---------- ----------
Net Income $ 316,179 $ 404,804 $ 383,394 $ 217,126
========== ========== ========== ==========
Earnings per
Common Share $ .06 $ .09 $ .07 $ .05
========== ========== ========== ==========
Weighted Average
Number of Shares 5,262,628 4,670,431 5,268,619 4,282,510
========== ========== ========== ==========
See Notes to Condensed Financial Statements.
2
<PAGE>
TOP AIR MANUFACTURING, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended February 28, 1998 and 1997
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash (used in) operating activities $ (1,562,428) $ (1,352,861)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of equipment 1,600 909,971
Purchase of property and equipment (926,006) (945,448)
Payments received on long-term notes
receivable 25,422 7,513
Other -- (30,767)
--------- ----------
Net cash (used in) investing activities (898,984) (58,731)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings 6,517,400 1,761,000
Proceeds from long-term borrowings 725,000 2,897,445
Principal payments on short term borrowings (4,657,400) (795,000)
Principal payments on long term borrowings (259,871) (2,418,980)
Net proceeds from issuance of common
stock February 28, 1998 2,333 shares;
February 28, 1997 none 2,198 --
Purchase of common stock for the treasury (104,822) --
Stock registration fees (7,500) --
--------- ---------
Net cash provided by financing activities 2,215,005 1,444,465
--------- ---------
Increase (decrease) in Cash and
Cash Equivalents (246,407) 32,873
CASH AND CASH EQUIVALENTS
Beginning 263,518 517
-------- ---------
Ending $ 17,111 $ 33,390
========== ==========
See notes to Condensed Financial Statements.
3
<PAGE>
TOP AIR MANUFACTURING, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months Ended February 28, 1998 and 1997.
1998 1997
---- ----
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
==========
4
<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 February 28, 1998, May 31, 1997 and for the nine months ended February 28,
1998. The periods ended February 28, 1997 include financial information for
Ficklin Machine for the period January 15, 1997 (date of acquisition) through
February 28, 1997. All significant intercompany accounts and transactions have
been eliminated.
The condensed consolidated balance sheet as of February 28, 1998 and the
condensed consolidated statements of operations and cash flows for the nine
months ended February 28, 1998 and 1997 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 February 28, 1998 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 February 28, 1998 and 1997 are
not necessarily indicative of the operating results for the full year.
Note 2. Inventories
Inventories consist of the following:
February 28, 1998 May 31, 1997
----------------- ------------
Finished Goods $5,115,032 $3,421,222
Work in Process 203,231 257,099
Raw Materials and Supplies 185,553 206,833
---------- ----------
$5,503,816 $3,885,154
========== ==========
5
<PAGE>
TOP AIR MANUFACTURING, INC. AND SUBSIDIARY
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, 1998 were
$4,371,915 and $10,782,157. This represents a 2% decrease and a 41% increase,
respectively, from the same periods last year. The decrease for the third
quarter was primarily a result of abnormally high shipments made in the prior
year to reduce the backlog created during the second quarter of 1997 which had
accumulated while the company moved. While shipments were lower in the current
quarter, gross margin has improved as a result of reduced production overtime in
the current year. Substantial overtime was necessary in the third quarter of
1997 to reduce the unusually high backlog. The increase for the nine month
period was a result of higher shipments of spraying equipment and incremental
sales from the acquisition of Ficklin Machine. The backlog on March 31, 1998
remains strong at $3.5 million compared to $3.0 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, 1998 decreased to 67% from 68% and remained constant at 69%
for the nine months ended February 28, 1998. The decrease is a result of reduced
production overtime described above.
Operating expenses increased to $874,451 and $2,496,826 for the third quarter
and nine months ended February 28, 1998, compared to $832,927 and $2,096,669 for
the same periods last year. The increases for both periods resulted primarily
from incremental expenses as a result of the acquisition of Ficklin Machine on
January 15, 1997.
Interest Expense:
Interest expense increased 99% to $104,726 from $52,593 for the third quarter
and 156% to $265,946 from $103,785 for the nine months ended February 28, 1998.
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.
Income Tax Expense:
The company's income tax expense for the third quarter and nine months ended
February 28, 1998 is an estimate based on an annualized effective tax rate of
36%.
6
<PAGE>
TOP AIR MANUFACTURING, INC. AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
Material Changes in Financial Position:
The company's working capital decreased approximately $65,000 for the nine
months ended February 28, 1998. Income from operations of $383,394 was offset by
three factors to create this decrease. First, $105,000 was used to reacquire
shares of the company's common stock. Second, approximately $175,000 of
short-term debt was incurred for the acquisition of new machinery. Finally, a
current note receivable for the sale of the company's old plant was renegotiated
for a period of two years resulting in a reclassification to long-term notes
receivable of $155,000.
Liquidity and Capital Resources:
At February 28, 1998, the company had working capital of $5,075,744, an increase
of $731,818 over a year ago and a decrease of $64,845 since May 31, 1997. The
increase from a year ago is a result of approximately $640,000 of income from
operations and $200,000 in proceeds from the sale of fixed assets offset by the
$65,000 decrease in working capital since May 31, 1997 described in the changes
in financial position above. The current ratio decreased to 2.02 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.
7
<PAGE>
TOP AIR MANUFACTURING, INC. AND SUBSIDIARY
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) Reports on Form 8-K
Form 8-K dated December 8, 1997 and filed December 10, 1997 reported that the
company was approved for listing on the American Stock Exchange under the ticker
symbol TPC.
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, 1998 /s/ Steven R. Lind
--------------------------------
Steven R. Lind
President and Chief Executive Officer;
Principal Executive Officer
Date April 14, 1998 /s/ Steven F. Bahlmann
--------------------------------
Steven F. Bahlmann
Controller; Chief Accounting
Officer
8
EXHIBIT 11 - COMPUTATION OF EARNINGS PER COMMON SHARE
Column A Column B Column C
Weighted
Average Income Per
Number of Common
Shares Net Share
Outstanding* Income (B/A)
----------- --------- ---------
Nine months ended:
February 28, 1998 5,268,619 $383,394 $ .07
February 28, 1997 4,282,510 217,126 .05
Three months ended:
February 28,1998 5,262,628 $316,179 $ .06
February 28,1997 4,670,431 404,804 .09
Nine Months Ended Three Months Ended
February 28, February 28,
1998 1997 1998 1997
---- ---- ---- ----
*Computation of weighted
average number of common
shares outstanding and
common equivalent shares:
Common shares outstanding
at the beginning of the
period 5,135,548 4,013,765 5,086,456 4,013,765
Weighted average of common
shares issued during the
period 1,520 189,560 -- 575,000
Weighted average of common
shares repurchased for the
treasury during the period (47,472) -- (2,866) --
Weighted average of the common
equivalent shares attributable
to stock options granted,
computed under the treasury
stock method 179,023 79,185 179,038 81,666
--------- --------- --------- ---------
Weighted average number of
common and common
equivalent shares 5,268,619 4,282,510 5,262,628 4,670,431
========= ========= ========= =========
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> FEB-28-1998
<CASH> 17,111
<SECURITIES> 0
<RECEIVABLES> 4,393,244
<ALLOWANCES> 131,500
<INVENTORY> 5,503,816
<CURRENT-ASSETS> 10,062,426
<PP&E> 3,801,456
<DEPRECIATION> 1,140,374
<TOTAL-ASSETS> 14,264,727
<CURRENT-LIABILITIES> 4,986,682
<BONDS> 0
0
0
<COMMON> 322,944
<OTHER-SE> 6,522,014
<TOTAL-LIABILITY-AND-EQUITY> 14,264,727
<SALES> 10,782,157
<TOTAL-REVENUES> 10,812,441
<CGS> 7,450,463
<TOTAL-COSTS> 9,947,289
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 265,946
<INCOME-PRETAX> 599,206
<INCOME-TAX> 215,812
<INCOME-CONTINUING> 383,394
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 383,394
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
