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 August 31, 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.
(Name of small business issuer 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
(Registrant'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
4,978,757 Common Shares were outstanding as of September 30, 1998.
<PAGE>
TOP AIR MANUFACTURING, INC. AND SUBSIDIARY
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets,
August 31, 1998 (unaudited) and May 31, 1998 1
Unaudited Condensed Consolidated Statements of
Operations Three Months Ended August 31, 1998
and 1997 2
Unaudited Condensed Consolidated Statements of
Cash Flows, Three Months Ended August 31, 1998
and 1997 3
Notes to Condensed Consolidated 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>
TOP AIR MANUFACTURING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
AUGUST 31, MAY 31,
1998 1998*
---------- --------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,588 $ 5,146
Trade receivables, net of allowance for
doubtful accounts August 31, 1998
$122,167; May 31, 1998 $131,000 3,720,845 4,211,004
Inventories (Note 2) 5,885,096 5,167,744
Income tax benefits 168,726 --
Other current assets 175,073 169,852
--------- ---------
Total Current Assets 9,953,328 9,553,746
--------- ---------
LONG TERM RECEIVABLES AND OTHER ASSETS
Notes receivable, net of current portion 279,451 286,598
Goodwill 1,041,516 1,060,969
Other assets 51,231 63,682
------------ -------------
1,372,198 1,411,249
----------- -----------
PROPERTY AND EQUIPMENT, at cost,
less accumulated depreciation
August 31, 1998 $1,097,324;
May 31, 1998 $1,122,423 2,752,251 2,676,266
--------- ---------
$14,077,777 $13,641,261
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt $ 3,556,206 $ 2,624,707
Other Liabilities and accrued items 913,591 1,231,416
------- ---------
Total Current Liabilities 4,469,797 3,856,123
--------- ---------
LONG-TERM DEBT 2,379,637 2,323,567
--------- -----------
STOCKHOLDERS' EQUITY
Common stock 323,131 322,944
Additional paid-in capital 2,903,324 2,900,688
Retained earnings 4,144,131 4,369,952
--------- ---------
7,370,586 7,593,584
Less cost of treasury stock 142,243 132,013
---------- -----------
7,228,343 7,461,571
--------- ---------
$14,077,777 $13,641,261
=========== ===========
*Condensed from Audited Financial Statements.
See notes to Condensed Consolidated Financial Statements.
<PAGE>
TOP AIR MANUFACTURING, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months ended August 31, 1998 and 1997
1998 1997
---- ----
Net Sales $2,240,909 $2,597,927
--------- ---------
Costs and Expenses
Cost of goods sold 1,626,421 1,882,906
Selling and administrative expenses 725,285 691,038
Research and development expenses 133,898 109,306
Interest Expense 117,637 72,699
--------- ---------
2,603,241 2,755,949
--------- ---------
Operating Income (loss) (362,332) (158,022)
Other Income 4,580 11,803
--------- ---------
Income (loss) before Income Taxes (357,752) (146,219)
Income Taxes (credits) (131,931) (52,615)
---------- ---------
Net Income (loss) $(225,821) $(93,604)
========== =========
Earnings (loss) per Common Share $ ( .04) $ ( .02)
Weighted Average Number of Shares 5,083,664 5,101,560
========= =========
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
TOP AIR MANUFACTURING, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended August 31, 1998 and August 31, 1997
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash (used in) operating activities $ (1,108,091) $ (1,223,861)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (185,244) (76,950)
Payments received on long-term
notes receivable 8,202 3,097
----------- -----------
Net cash (used in) investing activities (177,042) (73,853)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings 1,895,000 2,130,000
Proceeds from long-term borrowings 162,414 --
Principal payments on short term borrowings (653,000) (904,000)
Principal payments on long-term borrowings (113,432) (84,600)
Net proceeds from issuance of common stock
August 31, 1998 3,001 shares; August 31, 1997
2,000 shares 2,823 1,771
Purchase of common stock for the treasury (10,230) (96,422)
Stock Registration Fees -- (7,500)
----------- ----------
Net cash provided by financing activities 1,283,575 1,039,249
----------- ----------
Increase (decrease) in Cash and
Cash Equivalents (1,558) (258,465)
CASH AND CASH EQUIVALENTS
Beginning 5,146 263,518
----------- ----------
Ending $ 3,588 $ 5,053
=========== ==========
See notes to Condensed Consolidated Financial Statements.
<PAGE>
TOP AIR MANUFACTURING, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Condensed Consolidated 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 August 31, 1998, May 31, 1998 and for the three months ended August 31, 1998
and 1997. All significant intercompany accounts and transactions have been
eliminated.
The condensed consolidated balance sheet as of August 31, 1998 and the condensed
consolidated statements of operations and cash flows for the three months ended
August 31, 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 August 31, 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, 1998 Annual Report to Shareholders.
The results of operations for the periods ended August 31, 1998 and 1997 are not
necessarily indicative of the operating results for the full year.
Note 2. Inventories
Inventories consist of the following:
August 31, 1998 May 31, 1998
Finished Goods $ 5,173,693 $ 4,497,924
Work in Process 290,885 383,516
Raw Materials and Supplies 420,518 286,304
----------- -----------
$ 5,885,096 $ 5,167,744
=========== ===========
<PAGE>
TOP AIR MANUFACTURING, INC. AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
Net Sales:
Top Air Manufacturing Inc.'s net sales for the first quarter of fiscal 1999
decreased 14% to $2,240,909 compared to $2,597,927 for the same period last
year. The decrease is a result of an overall downturn in the agricultural
economy. Lower worldwide demand for grain and high domestic production has
resulted in depressed commodity prices effecting both grain and livestock
farming operations. The Company is assessing the potential impact this downturn
may have on the demand for agricultural equipment in order to make the necessary
adjustments to minimize negative effects on profitability for the rest of fiscal
1999.
Operating Costs & Expenses:
The Company's cost of goods sold for the quarter ended August 31, 1998 increased
to 73% of net sales compared to 72% for the first quarter of the previous year.
The increase, as a percentage of sales, was a result of fixed costs being spread
over a lower volume of sales.
Operating expenses increased 7% to $859,183 for the first quarter of fiscal 1999
compared to $800,344 for the previous year. The increase was primarily a result
of increased administrative expenses from the relocation of a Company officer,
the cost of a consultant to help develop improved production control procedures
and the addition of one employee to account for and implement these new
procedures.
Interest Expense:
Interest expense increased 62% to $117,637 compared to $72,699 for the first
quarter of last year. The increase was due to higher levels of short-term and
long-term debt outstanding during the period primarily as a result of the
purchase of new production machinery and increased levels of inventory.
Income Taxes:
The income tax credits of $131,931 and $52,615 for the quarters ended August 31,
1998 and 1997, represent the benefit that would be received if the loss of the
quarter was carried back to reclaim income tax paid in prior years.
<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 loss from operations of $225,821 was primarily responsible for the
decrease in working capital of approximately $214,000.
Liquidity and Capital Resources:
At August 31, 1998 the Company had working capital of $5,483,531 an increase of
$559,532 over a year ago and a decrease of $214,092 since May 31, 1998. The
increase from a year ago is primarily a result of approximately $785,000 of
income from operations which was offset by a reclassification of a current note
receivable of approximately $135,000, to long term and the purchase of nearly
$100,000 of property and equipment with short-term debt. The decrease since May
31, 1998 is described in the changes in financial position above. The current
ratio decreased to 2.23 from 2.48 at May 31, 1998.
On September 28, 1998 the Company repurchased 100,000 shares of its common stock
for the treasury from Wayne Dudley, a director of the Company. The purchase was
made in a private transaction at the closing market price on that date.
The Company is currently expanding its manufacturing facility in Cedar Falls,
Iowa by nearly 27,000 square feet. This expansion will improve the processing
flows and will enable the Company to produce grain wagons and carts and liquid
manure tanks simultaneously. The total cost of the project, which will include
the purchase of additional manufacturing equipment, will be approximately $1
million and will be substantially completed by January 1999. This project is
being financed with long-term bank debt. The Company believes it has access to
sufficient working capital to fund its operations for the foreseeable future.
<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) There were no reports on Form 8-K filed for the quarter ended August 31,
1998.
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 October 15, 1998 /s/ Steven R. Lind
--------------------------------------
Steven R. Lind
President and Chief Executive Officer;
Principal Executive Officer
Date October 15, 1998 /s/ Steven F. Bahlmann
--------------------------------------
Steven F. Bahlmann
Chief Accounting Officer;
Principal Accounting Officer
TOP AIR MANUFACTURING, INC.
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)
----------------------------------------
Three months ended:
August 31, 1998 5,083,664 $ (225,821) $ (.04)
August 31, 1997 5,101,560 $ (93,604) $ (.02)
Three Months Ended
August 31,
1998 1997
---- ----
*Computation of weighted average number of
common shares outstanding and
common equivalent shares:
Common shares outstanding at the
beginning of the period 5,083,456 5,135,548
Weighted average of common shares
issued (retired) during the period 208 (33,988)
Weighted average of the common
equivalent shares attributable to
stock options granted, computed
under the treasury stock method # -- --
---------- ---------
Weighted average number of common
and common equivalent shares 5,083,664 5,101,560
========= =========
# The stock options have not been included because they are antidilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> AUG-31-1998
<CASH> 3,588
<SECURITIES> 0
<RECEIVABLES> 3,843,012
<ALLOWANCES> 122,167
<INVENTORY> 5,885,096
<CURRENT-ASSETS> 9,953,328
<PP&E> 3,849,575
<DEPRECIATION> 1,097,324
<TOTAL-ASSETS> 14,077,777
<CURRENT-LIABILITIES> 4,469,797
<BONDS> 0
0
0
<COMMON> 323,131
<OTHER-SE> 6,905,212
<TOTAL-LIABILITY-AND-EQUITY> 14,077,777
<SALES> 2,240,909
<TOTAL-REVENUES> 2,245,489
<CGS> 1,626,421
<TOTAL-COSTS> 2,603,241
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 117,637
<INCOME-PRETAX> (357,752)
<INCOME-TAX> (131,931)
<INCOME-CONTINUING> (225,821)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (225,821)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
