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, 1996
Commission File Number: 0-18259
AG-BAG INTERNATIONAL LIMITED
(Exact name of registrant as specified in its charter.)
Delaware 93-1143627
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2320 SE Ag-Bag Lane, Warrenton OR 97146
(Address of principal executive offices) (Zip Code)
(503)861-1644
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 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 / /
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Common Stock, $.01 par value per share - 12,053,751 shares
outstanding as of March 31, 1996.
<PAGE>
Part 1 - Financial Information
Item 1 - Financial Statements
AG-BAG INTERNATIONAL LIMITED
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
March 31 December 31,
(Unaudited) 1995
(Audited)
1996 1995
__________ __________ __________
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 656 $ 656 $ 656
Accounts receivable 4,129,312 4,454,659 2,140,992
Inventories 7,487,889 5,919,312 6,748,272
Other current assets 950,431 671,709 488,875
__________ __________ __________
Total current assets 12,568,288 11,046,336 9,378,795
Deferred income tax 12,301 12,301
Intangible assets, less
accumulated amortization 1,897,458 2,153,531 1,960,997
Property, plant and equipment
less accumulated depreciation 3,368,724 3,878,922 3,520,252
Long-term inventories 1,280,834 885,303 1,280,834
Other assets 146,186 91,554 144,272
__________ __________ __________
Total assets $19,273,791 $18,055,646 $16,297,451
========== ========== ==========
(Continued)
2
<PAGE>
AG-BAG INTERNATIONAL LIMITED
CONSOLIDATED BALANCE SHEETS
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31 December 31,
(Unaudited) 1995
(Audited)
1996 1995
__________ __________ __________
<S> <C> <C> <C>
Current liabilities:
Notes payable to bank $ 3,537,469 $ 2,350,804 $ 1,478,886
Current portion of long term
debt and capital lease
obligations 468,265 513,299 421,462
Current portion of notes
payable to shareholders' 12,635 284,813 12,635
Accounts payable 1,756,727 1,165,931 474,128
Accrued expenses and other
current liabilities 679,591 710,370 766,711
Income tax payable 71,998 199,000 146,998
__________ __________ __________
Total current liabilities 6,526,685 5,224,217 3,300,820
Deferred income taxes 32,699
Long term debt and capital
lease obligation, less
current portion 1,084,398 1,037,249 1,183,114
Notes payable to shareholders'
less current portion 51,302 54,420
__________ __________ __________
Total liabilities 7,662,385 6,294,165 4,538,354
__________ __________ __________
Commitments
Shareholders' equity:
Preferred stock, $4LV 8 1/2%
nonvoting 696,000 696,000 696,000
Common stock, $.01 par value 120,537 120,435 120,537
Additional paid-in capital 9,201,796 9,185,612 9,201,796
Retained earnings 1,708,163 1,852,259 1,835,441
Foreign currency translation (115,090) ( 92,825) (94,677)
__________ __________ __________
Total shareholders' equity 11,611,406 11,761,481 11,759,097
__________ __________ __________
Total liabilities and
shareholders' equity $19,273,791 $18,055,646 $16,297,451
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Information
3
<PAGE>
AG-BAG INTERNATIONAL LIMITED
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Foreign
Preferred Stock Common Stock Paid-In Retained Currency
Shares Amount Shares Amount Capital Earnings Translation Total
______ ______ ______ ______ _______ ________ ___________ _____
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1995 174,000 $696,000 12,053,751 $120,537 $9,201,796 $1,835,441 ($94,677) $11,759,097
Foreign currency translation ( 20,413) (20,413)
Preferred stock dividends (14,790) (14,790)
Net loss (112,488) (112,488)
_______ _______ __________ _______ _________ _________ _______ __________
Balance March 31, 1996 174,000 696,000 12,053,751 120,537 9,201,796 1,708,163 (115,090) 11,611,406
======= ======= ========== ======= ========= ========= ======== ==========
</TABLE>
See Notes to Consolidated Financial Information
4
<PAGE>
AG-BAG INTERNATIONAL LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months
Ended March 31
(Unaudited)
____________________
1996 1995
____ ____
<S> <C> <C>
Net sales $ 3,974,245 $ 4,527,093
Cost of sales 3,025,949 3,195,288
__________ __________
Gross profit from operations 948,296 1,331,805
Selling expenses 543,182 626,359
Administrative expenses 552,758 517,050
Research and development expenses 16,683 25,562
__________ __________
Income(loss) from operations (164,327) 162,834
Other income (expense):
Interest income 12,818 13,330
Interest expense ( 68,020) ( 46,192)
Miscellaneous 32,041 (8,331)
__________ __________
Income(loss) before provision for
income taxes (187,488) 121,641
Provision for income taxes 75,000 ( 42,000)
__________ __________
Net income(loss) $ (112,488) $ 79,641
========== ==========
Earnings(loss) per share $ (.01) $ .01
========== ==========
Weighted average number of common
shares outstanding 12,086,034 12,041,462
========== ==========
</TABLE>
See Notes to Consolidated Financial Information
5
<PAGE>
AG-BAG INTERNATIONAL LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended March 31
(Unaudited)
___________________________
1996 1995
____ ____
<S> <C> <C>
Cash flows from operating activities:
Net income(loss) $ (112,488) $ 79,641
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 270,701 181,767
Loss on disposition of fixed assets 801
Changes in assets and liabilities:
Accounts receivable (1,988,320) (2,028,624)
Inventories ( 739,617) (1,093,334)
Other current assets (461,556) (355,182)
Accounts payable 1,282,599 526,542
Accrued expenses and other current
liabilities ( 87,120) 30,196
Income tax payable ( 75,000) (111,000)
Other assets 1,914
__________ __________
Net cash used in operating activities (1,908,086) (2,769,994)
__________ __________
Cash flows from investing activities:
Capital expenditures ( 56,052) (124,712)
Proceeds from disposition of fixed assets 2,500
Intangible assets (6,711)
__________ __________
Net cash used in investing activities ( 60,263) (124,712)
__________ __________
Cash flows from financing activities:
Proceeds from line of credit 2,058,583 2,220,048
Principal payments on debt ( 51,913) (109,206)
Payment of shareholders' notes ( 3,118) ( 90,187)
Proceeds on long term note receivable 31,595
Payment of preferred dividends (14,790) (14,790)
__________ __________
Net cash provided by financing activities 1,988,762 2,037,460
__________ __________
Effect of foreign currency translation (20,413) (18,141)
__________ __________
Net decrease in cash - 0 - (875,387)
Cash and cash equivalents at beginning
of period 656 876,043
__________ __________
Cash and cash equivalents at end of period $ 656 $ 656
========== ==========
</TABLE>
See Notes to Consolidated Financial Information
6
<PAGE>
AG-BAG INTERNATIONAL LIMITED
Notes to Consolidated Financial Information
(Unaudited)
Note 1 - Description of Business and Summary of Significant
Accounting Policies
___________________________________________________________
The Company's consolidated financial statements includes accounts of the
parent and its subsidiaries and reflects all adjustments which, in the
opinion of management, are necessary for a fair statement of the results of
operations for the periods presented. Due to the seasonal nature of the
business, the operating results of the Company's quarterly financial
information should not be taken as indicative of the results of its
operations for a full year. The financial statements presented for the
three month period should be read in conjunction with the consolidated
financial statements and notes thereto for the year ended December 31, 1995
included in the Company's annual report on Form 10-K, as amended by a Form
10-K/A-1 filed with the Securities and Exchange Commission on April 11,
1996.
Reclassifications
_________________
Certain reclassifications have been made to the financial statements for
the periods presented from amounts previously reported to conform with
classifications currently adopted. Such reclassifications had no effect on
previously reported shareholders' equity or results of operations.
7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
_____________________________________________
Reference is made to Item 7 of "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in the Company's
annual report on Form 10-K, as amended by a Form 10-K/A-1, for the year
ended December 31, 1995, on file with the Securities and Exchange
Commission. The following discussion and analysis pertains to the
Company's results of operations for the three-month period ended March 31,
1996, compared to the results of operations for the three-month period
ended March 31, 1995, and to changes in the Company's financial condition
from December 31, 1995 to March 31, 1996.
Consolidated net sales for the three-month period ended March 31, 1996, were
$3,974,245, down 12.21% from $4,527,093 for the same period in 1995. The
decrease for the quarter was the result of the fact that the Company was
unable to ship some bag orders due to late winter weather in certain areas
of the US, coupled with lower preseason sales of inoculant by the Company's
UK operation. In addition, the Company did not have a sale of a
mid-sized composting system during the first quarter of 1996 as it did in
1995. Machines shipped during the first quarter of 1996 increased 19.05%
over the first quarter of 1995.
Gross profit from sales for the three-month period ended March 31, 1996, was
$948,296, a decrease of 28.80% from $1,331,805 for the same period in 1995.
The decrease for the quarter was primarily the result of lower sales volumes
coupled with increased transportation costs and lower margins on used
equipment sold during the quarter. Bag margins were also slightly lower as
a result of intense competition in certain areas of the North American market.
Selling expenses for the three-month period ended March 31, 1996, were
$543,182, a decrease of 13.28% from $626,359 for the same period in 1995.
The decrease was the result of reduced commissions due to lower sales for
the quarter coupled with lower travel expenses resulting from the move of
the annual first quarter sales meeting to December.
Administrative expenses for the three-month period ended March 31, 1996,
were $552,758, an increase of 6.90% from $517,050 for the same period in
1995. The increase for the quarter was the result of increased
professional fees coupled with increases in retirement plan expense and
general operating overhead required to support the international expansion
and grain and compost divisions.
8
<PAGE>
Interest expense for the three-month period ended March 31, 1996, was
$68,020, an increase of 47.25% from $46,192 for the same period in 1995.
The increase was the result of the Company using a larger portion of its
credit facility during the quarter resulting from an inventory build-up in
late 1995.
Net income (loss) for the three-month period ended March 31, 1996, was
($112,488) compared to $79,641 for the same period in 1995. The decrease
for the quarter was the result of lower sales volumes and margins and higher
transportation costs coupled with increases in administrative and interest
costs which were offset by lower selling expenses.
Liquidity and Capital Resources
_______________________________
The seasonal nature of the northern hemisphere farming industry, the
production time for equipment and the time required to prepare bags for use
requires the Company to manufacture and carry high inventories to meet
rapid delivery requirements. In particular, the Company must maintain a
significant level of bags during the spring and early summer to meet the
sales demands during the harvest season. The Company uses working capital
and trade credit to increase its inventory so that it has sufficient
inventory available to meet its sales demands through the spring and summer
months.
The Company relies on its suppliers to provide trade credit to enable the
Company to build its inventory. The Company's suppliers have provided
sufficient trade credit to meet the demand to date and management believes
this will continue. No assurance can be given that suppliers will continue
to provide sufficient trade credit in the future.
Accounts receivable decreased 7.30% as of March 31, 1996, to $4,129,312 from
the March 31, 1995, level of $4,454,659. The decrease in accounts
receivable was the result of decreased sales which occurred during the
first quarter of 1996 compared to 1995.
Inventory at March 31, 1996, was $8,768,723 which was 28.86% higher than
inventory at March 31, 1995, of $6,804,615. The increase in inventory was
the result of reduced sales for the quarter and management's earlier
decision to carry higher inventory levels to meet rapid delivery
requirements and avoid backlog during harvest and its planned plant
expansion during 1996.
9
<PAGE>
The Company has a domestic operating line of credit with a limit of
$5,000,000, secured by accounts receivable and inventory. In addition, the
Company has a $200,000 equipment acquisition line. As of March 31, 1996,
$3,263,497 had been taken under the credit line and no borrowings had been
taken under the equipment acquisition line. The Company also has a
revolving credit facility denominated in pounds sterling for its UK
operation with a limit of 400,000 pounds sterling. As of March 31, 1996,
borrowings under the foreign operation line aggregated $273,972 US dollars
out of an available $611,080 US dollars. Management believes that, along
with funds generated from operations and its credit facilities, it will be
able to meet the Company's cash requirements through 1996.
The Company plans to consolidate the operations at its Blair, Nebraska
facility into one building. At present, the Company utilizes different
buildings for its bag, proprietary inoculant and machine operations. The
Company will sell the existing buildings and will build a new facility on
land the Company already owns which is near the existing facilities. The
new facility will be financed with the sale proceeds of the existing
buildings and a loan secured by the new facility. The sale of the existing
facilities and construction of the new facility will not have a material
effect on the Company's liquidity.
10
<PAGE>
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27, Financial Data Schedule (Edgar Only)
(b) No reports on Form 8-K were filed by the Company during the
quarter ended March 31, 1996.
11
<PAGE>
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.
AG-BAG INTERNATIONAL LIMITED,
a Delaware corporation
(Registrant)
By: /s/ Michael R. Wallis
_____________________________________
Date: May 14, 1996 Michael R. Wallis
Chief Financial Officer and
Vice President*
* Signing on behalf of the Registrant
and as Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S REPORT ON FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1996, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 656
<RECEIVABLES> 4,364,949
<ALLOWANCES> (235,637)
<INVENTORY> 8,768,723
<CURRENT-ASSETS> 12,568,288
<PP&E> 7,261,350
<DEPRECIATION> (3,892,626)
<TOTAL-ASSETS> 19,273,791
<CURRENT-LIABILITIES> 6,526,685
<BONDS> 0
0
696,000
<COMMON> 120,537
<OTHER-SE> 10,794,869
<TOTAL-LIABILITY-AND-EQUITY> 19,273,791
<SALES> 3,974,245
<TOTAL-REVENUES> 4,019,104
<CGS> 3,025,949
<TOTAL-COSTS> 4,138,572
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68,020
<INCOME-PRETAX> (187,488)
<INCOME-TAX> 75,000
<INCOME-CONTINUING> (112,488)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (112,488)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
