UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended: June 30, 1998
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 - 12,061,991 shares outstanding as of
July 10, 1998
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
AG-BAG INTERNATIONAL LIMITED
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
June 30 December 31
(Unaudited)
1998 1997 1997
---------- ---------- ----------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 656 $ 656 $ 656
Accounts receivable 6,004,442 6,671,815 2,191,682
Inventories 5,871,385 7,219,711 5,528,239
Other current assets 349,166 580,025 2,168,123
---------- ---------- ----------
Total current assets 12,225,649 14,472,207 9,888,700
Deferred income tax 638,666 2,000 638,666
Intangible assets, less
accumulated amortization 92,199 1,605,427 104,547
Property, plant and equipment
less accumulated depreciation 4,117,460 4,957,330 4,378,444
Long-term inventories - 1,344,334 -
Other assets 286,951 221,077 179,973
---------- ----------- ----------
Total assets $17,360,925 $22,602,375 $15,190,330
========== ========== ==========
(Continued)
2
<PAGE>
AG-BAG INTERNATIONAL LIMITED
CONDENSED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30 December 31
(Unaudited)
1998 1997 1997
---------- ---------- ----------
<S> <C> <C> <C>
Current liabilities:
Notes payable to bank $ 2,059,391 $ 4,142,076 $ 1,717,263
Current portion of long term
debt and capital lease
obligations $ 368,681 434,058 444,985
Current portion of notes
payable to shareholders' 15,876 14,344 15,876
Accounts payable 1,739,126 2,118,732 949,373
Accrued expenses and other
current liabilities 1,215,088 992,034 1,040,471
Income tax payable 521,836 77,680 39,636
---------- ---------- ----------
Total current liabilities 5,919,998 7,778,924 4,207,604
Long term debt and capital
lease obligation, less
current portion 2,370,563 2,474,215 2,666,552
Notes payable to shareholders'
less current portion 16,347 32,743 23,884
---------- ---------- ----------
Total liabilities 8,306,908 10,285,882 6,898,040
---------- ---------- ----------
Commitments
Shareholders' equity:
Preferred stock, $4LV 8 1/2%
nonvoting 696,000 696,000 696,000
Common stock, $.01 par value 120,619 120,537 120,619
Additional paid-in capital 9,210,211 9,201,796 9,210,211
Retained earnings(deficit) (972,813) 2,304,042 (1,734,540)
Accumulated other comprehensive
income:
Foreign currency translation
adjustments (5,882)
---------- ---------- ----------
Total shareholders' equity 9,054,017 12,316,493 8,292,290
---------- ---------- ----------
Total liabilities and
shareholders' equity $17,360,925 $22,602,375 $15,190,330
========== ========== ==========
</TABLE>
See Notes to Condensed Financial Information
3
<PAGE>
AG-BAG INTERNATIONAL LIMITED
CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Accumulated
Other
Preferred Stock Common Stock Paid-In Retained Comprehensive
Shares Amount Shares Amount Capital Earnings Income Total
------ ------ ------ ------ ------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1997 174,000 $696,000 12,061,991 $120,619 $9,210,211 $(1,734,540) $ - $8,292,290
Preferred stock dividends (14,790) (14,790)
Net income 25,003 25,003
Other comprehensive income,
Net of tax - -
------- ------- ---------- ------- --------- --------- ---------- ----------
Balance March 31, 1998 174,000 696,000 12,061,991 120,619 9,210,211 (1,724,327) - 8,302,503
Preferred stock dividends (14,790) (14,790)
Net income 766,304 766,304
Other comprehensive income,
Net of tax - -
------- ------- ---------- ------- --------- --------- ---------- ----------
Balance June 30, 1998 174,000 $696,000 12,061,991 $120,619 $9,210,211 $(972,813) $ - $9,054,017
======= ======= ========== ======= ========= ========= ========== =========
</TABLE>
See Notes to Condensed Financial Information
4
<PAGE>
AG-BAG INTERNATIONAL LIMITED
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months
Ended June 30
(Unaudited)
----------------------
1998 1997
---- ----
<S> <C> <C>
Net sales $ 9,723,185 $ 8,079,262
Cost of sales 7,066,236 6,020,893
--------- ---------
Gross profit from operations 2,656,949 2,058,369
Selling expenses 792,305 669,947
Administrative expenses 621,888 585,617
Research and development expenses 19,941 8,594
--------- ---------
Income from operations 1,222,815 794,211
Other income (expense):
Interest income 24,408 1,863
Interest expense (134,674) (138,631)
Miscellaneous 123,955 115,530
--------- ---------
Income from continuing
operations before provision for
income taxes 1,236,504 772,973
Provision for income taxes 470,200 286,000
--------- ---------
Income from continuing
operations 766,304 486,973
Discontinued operations
Income from operations of discontinued
Ag-Bag Europe PLC - 85,387
--------- ---------
Net income $ 766,304 $ 572,360
Other comprehensive income, net of tax:
Foreign currency translation adjustments - 1,341
--------- ---------
Other comprehensive income - 1,341
--------- ---------
Total comprehensive income $ 766,304 $ 573,701
========= =========
Basic and diluted net income
per common share
Continuing operations $ .06 $ .04
Discontinued operations $ .00 $ .01
--------- ---------
$ .06 $ .05
========= =========
Basic and diluted weighted average
number of common shares outstanding 12,061,991 12,053,751
========== ==========
</TABLE>
See Notes to Condensed Financial Information
5
<PAGE>
AG-BAG INTERNATIONAL LIMITED
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months
Ended June 30
(Unaudited)
----------------------
1998 1997
---- ----
<S> <C> <C>
Net sales $14,493,481 $10,854,888
Cost of sales 10,665,908 8,220,079
---------- ----------
Gross profit from operations 3,827,573 2,634,809
Selling expenses 1,450,021 1,224,782
Administrative expenses 1,039,790 1,088,310
Research and development expenses 46,934 36,657
---------- ----------
Income from operations 1,290,828 285,060
Other income (expense):
Interest income 46,869 8,931
Interest expense (233,918) (187,222)
Miscellaneous 169,728 162,028
---------- ----------
Income from continuing
operations before provision for
income taxes 1,273,507 268,797
Provision for income taxes 482,200 77,680
---------- ----------
Income from continuing
operations 791,307 191,117
Discontinued operations
Income from operations of discontinued
Ag-Bag Europe PLC - 2,766
---------- ----------
Net income $ 791,307 $ 193,883
Other Comprehensive Income, net of tax:
Foreign currency translation adjustments - (34,207)
---------- ----------
Other Comprehensive Income - (34,207)
---------- ----------
Total Comprehensive Income $ 791,307 $ 159,676
========== ==========
Basic and diluted net income
per common share
Continuing operations $ .06 $ .02
Discontinued operations $ .00 $ .00
---------- ----------
$ .06 $ .02
========== ==========
Basic and diluted weighted average
number of common shares outstanding 12,061,991 12,053,751
========== ==========
</TABLE>
See Notes to Condensed Financial Information
6
<PAGE>
AG-BAG INTERNATIONAL LIMITED
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended June 30
(Unaudited)
--------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 791,307 $ 193,883
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 299,428 535,528
Inventory obsolescence reserves 15,000 120,000
Loss on disposition of fixed assets 769 1,443
Changes in assets and liabilities:
Accounts receivable (3,812,760) (3,709,215)
Inventories (163,405) (1,831,485)
Other current assets 1,818,957 (33,458)
Accounts payable 789,757 1,419,541
Accrued expenses and other current
liabilities 174,617 (24,106)
Income tax payable 482,200 77,680
Other assets (106,978) ( 17,423)
---------- ----------
Net cash provided(used) in operating
activities 288,892 (3,267,612)
---------- ----------
Cash flows from investing activities:
Capital expenditures (231,610) (656,034)
Proceeds from disposition of fixed assets 10,000 -
---------- ----------
Net cash used in investing activities (221,610) (656,034)
---------- ----------
Cash flows from financing activities:
Net proceeds from line of credit 342,128 3,762,870
Principal payments on debt (372,293) (99,567)
Proceeds from issuance of debt - 331,120
Payment of shareholders' notes (7,537) (6,990)
Payment of preferred dividends (29,580) (29,580)
---------- ----------
Net cash provided(used) in financing
activities (67,282) 3,957,853
---------- ----------
Effect of foreign currency translation - (34,207)
---------- ----------
Net decrease in cash - 0 - - 0 -
Cash and cash equivalents at beginning
of period 656 656
---------- ----------
Cash and cash equivalents at end of period $ 656 $ 656
========== ==========
</TABLE>
See Notes to Condensed Financial Information
7
<PAGE>
AG-BAG INTERNATIONAL LIMITED
Notes to Condensed Financial Information
(Unaudited)
Note 1 - Description of Business and Summary of Significant Accounting Policies
- -------------------------------------------------------------------------------
The Company's financial statements 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 six-month period should be read
in conjunction with the financial statements and notes thereto for the year
ended December 31, 1997 included in the Company's annual report on Form 10-K
filed with the Securities and Exchange Commission on March 31, 1998.
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.
Recent Accounting Pronouncements
- --------------------------------
In June 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income", which establishes standards for reporting and display of comprehensive
income and its components (revenue, expenses, gains and losses) in a full set of
general-purpose financial statements. The Company has adopted SFAS No. 130 for
its current fiscal year, and has restated 1997 amounts (net of tax) to comply
with SFAS No. 130 on a comparative basis.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information", which changes the way public companies
report information about operating segments. SFAS No. 131, which is based on the
management approach to segment reporting, establishes requirements to report
selected segment information quarterly and to report entity-wide disclosures
about products and services, major customers and the material countries in which
the entity holds assets and reports revenue. The Company has adopted SFAS No.
131 for its current fiscal year. The Company has analyzed its operations and
determined that it has no reportable segments.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information set forth below relating to matters that are not historical
facts are "forward-looking statements" within the meaning of Section 21E of the
Securities Exchange Act of 1934 and involve risks and uncertainties which could
cause actual results to differ materially from those set forth below.
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 for the year ended December 31, 1997, 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
June 30, 1998, compared to the results of operations for the three-month period
ended June 30, 1997, and to the results of operations for the six-month period
ended June 30, 1998, compared to the results of operations for the six-month
period ended June 30, 1997, and to changes in the Company's financial condition
from December 31, 1997 to June 30, 1998.
On December 5, 1997, the Company's Board of Directors approved a strategic
realignment of the Company.
The realignment involved the sale of the Company's U.K. subsidiary which
had not been performing at a profitable level due to the BSE (Mad Cow) problem
within the British farming industry. The U.K. subsidiary sold several of its
bagging machines in its rental fleet early in 1997 with the anticipation of
improving the ongoing operations through increased concentration on more
profitable custom work. This proved unsuccessful due in large part to the poor
weather conditions experienced throughout the traditionally busy spring and
summer months in England and the continued escalation during the year of the BSE
problem within the British farming industry depressing the custom work. The
results of Ag-Bag Europe, PLC are shown as discontinued operations for the
quarter and six-month period ended June 30, 1997.
The Board of Directors decided to implement additional realignment of the
Company by re-focusing the Company's sales efforts back to its core business
products. As a result, certain non-core, long-term inventory was written down to
fair market value or abandoned. The non-core products that were discontinued and
abandoned as a result of the strategic realignment were both new and used older
style tuber, feed table and grain bagging machines along with general accessory
machinery products such as mixer wagons, bale feeders, airvents, unloaders and
parts. During 1995, 1996 and 1997, sales of inventory which was later determined
to be non-core products as a result of the strategic realignment were $719,408,
$760,497 and $514,556, respectively. In addition, in 1997, the Company refined
its policy for establishing inventory valuation reserves. In 1997, in connection
with the strategic realignment and resultant refocusing of the Company's sales
efforts and in accordance with the refined policy for valuation reserves, the
Company reassessed and revised its estimates of fair market value resulting in
an inventory write-down charge totaling $2,418,778, of which $2,088,223 relates
to non-core products and $330,555 relates to core products.
9
<PAGE>
In addition to the strategic realignment, certain patent rights were
determined during the year to be obsolete, due to recent technological
improvements in the Company's and industry's bagging machinery. As a result,
certain patent rights were written-off during the year resulting in a charge to
earnings. This action resulted in an unusual charge of $979,762 during the
fourth quarter of 1997. Beginning in 1996, the Company and its competitors
instituted minor machine design changes involving the processes covered by the
patent. In the Company's view, these design changes were minor and did not
significantly diminish the prospects for sales of machines which incorporate the
processes covered by the patent.
In response to a competitor's introduction of a cable-less machine in early
1995, the Company began research and development on its own cable-less machine
in early 1996. The Company began production of its own cable-less machine in
1997. The cable-less machines do not use the processes covered by the patent,
accordingly, in 1997, the Company reevaluated the value of the patent. In its
evaluation, the Company determined that the new cable-less machines demonstrated
a change in direction for the industry which impaired the future value of the
rights covered by the patent. Accordingly, the value of the patent, $979,762 was
written off during 1997.
The core business of the Company is historically seasonal due to the
harvest seasons in the northern hemisphere. Approximately 95% of the Company's
business is concentrated in the Northern Hemisphere resulting in between 60 to
75% of the Company's revenue occurring during the spring and summer (2nd and 3rd
Quarters). The following table outlines the percentage of revenue over the past
3 years by quarter:
-----------------------------------------------------------------
Quarter 1995 1996 1997*
-----------------------------------------------------------------
1st 26% 17% 14%
---------------- --------------- ---------------- ---------------
2nd 33% 30% 40%
---------------- --------------- ---------------- ---------------
3rd 30% 36% 35%
---------------- --------------- ---------------- ---------------
4th 11% 17% 11%
---------------- --------------- ---------------- ---------------
* In addition to seasonal factors, revenues which normally would have occurred
in the first quarter of 1997 were not earned until the second quarter due to the
delay in the start up of the Company's new production facility in Blair,
Nebraska.
Sales for the quarter ended June 30, 1998 increased 20.35% to $9,723,185
compared to $8,079,262 for the quarter ended June 30, 1997. Sales for the
six-month period ended June 30, 1998 increased 33.52% to $14,493,481 compared to
$10,854,888 for the six-month period ended June 30, 1997. Sales for the quarter
were up as a result of the stabilizing milk prices and lower feed costs (grain)
which spurred capital expenditures for machinery and equipment. Recent
university research articles published on the benefits of bagging over the use
of bunkers has also helped to increase sales, as farmers are realizing the
benefits of bagging their feed instead of storing it in bunkers or silos.
Machine and bag sales for the second quarter were up over 15% compared to the
second quarter of 1997. Additionally, the environmental division of the Company
sold several composting systems during the second quarter of 1998(generating
over $300,000 in revenue) where as none were sold in the second quarter of 1997.
This reflects what the company believes, is a growing interest in Ag-Bag's
composting system and technology coupled with continued successes in pilot
projects.
10
<PAGE>
Sales for the six-month period were up as a result of the above mentioned
factors coupled with the Company's introduction of its next generation
(hydraulic finger controlled) silage Bagger during the first quarter of 1998.
Machine sales for the six-month period were up over 33% compared to the same
period in 1997 and bag sales were up over 22% compared to the same period in
1997. Additionally, environmental division sales of composting systems for the
six-month period were over $450,000 compared to $10,000 for the same period in
1997.
The Company sells its product primarily through a worldwide dealer network,
however, some sales are made directly to large volume customers because a dealer
is not present in the customer's geographic market. For each of the last 2
years, the Company estimates direct sales at between 30-33% of total sales and
the Company expects this historical sales mix to continue in the future. The
gross margin realized on the Company's direct sales are typically within 200 to
300 basis points of those sales realized through the Company's dealer network.
However, various economic, volume and market factors in the geographic area
impact the ultimate margin.
Gross profit from sales for the quarter ended June 30, 1998 increased
29.08% to $2,656,949 compared to $2,058,369 for the quarter ended June 30, 1997.
Gross profit from sales for the six-month period ended June 30, 1998 increased
45.27% to $3,827,573 compared to $2,634,809 for the six-month period ended June
30, 1997. The increase for the quarter and six-month period were the result of
increased sales volumes and improved margins.
Selling expenses for the quarter ended June 30, 1998 increased 18.26% to
$792,305 compared to $669,947 for the quarter ended June 30, 1997. Selling
expenses for the six-month period ended June 30, 1998 increased 18.39% to
$1,450,021 compared to $1,224,782 for the six-month period ended June 30, 1997.
The increase for the quarter and six-month period were the result of increased
meeting and travel expenses, coupled with increased commissions from higher
sales volumes and increased advertising expenses related to the Company's new
image and product advertising campaign.
Administrative expenses for the quarter ended June 30, 1998 increased 6.19%
to $621,888 compared to $585,617 for the period ended June 30, 1997.
Administrative expenses for the six-month period ended June 30, 1998 decreased
4.45% to $1,039,790 in comparison to $1,088,310 for the six-month period ended
June 30, 1997. The increase for the quarter was the result of slightly higher
personnel costs and general administrative overheads, which were offset by lower
amortization expense as a result of the fourth quarter 1997 strategic
realignment. The decrease for the six-month period was the result of the above
mentioned factors coupled with lower professional fees.
11
<PAGE>
Interest expense for the quarter ended June 30, 1998 decreased 2.85% to
$134,674 in comparison to $138,631 for the period ended June 30, 1997. Interest
expense for the six-month period ended June 30, 1998 increased 24.94% to
$233,918 compared to $187,222 for the six-month period ended June 30, 1997. The
decrease for the quarter was the result of reduced usage of the Company's line
of credit which were was offset by additional interest expense from the new
long-term construction and equipment loans taken out in July, 1997 to finance
the Company's new Blair, Nebraska facilities. The increase for the six-month
period was the result of the Company utilizing a larger portion of its credit
facilities during the first quarter of the year as a result of extended term
sales offered during the fourth quarter of 1997. Additionally, the Company added
a long-term construction and equipment loan in July, 1997 to finance its new
Blair, Nebraska facilities.
Net income for the quarter ended June 30, 1998 increased 33.88% to $766,304
compared to $572,360 for the period ended June 30, 1997. Net income for the
six-month period ended June 30, 1998 increased 408.13% to $791,307 compared to
$193,883 for the six-month period ended June 30, 1997. The increase for the
quarter was the result of increased sales and improving margins, which were
offset by higher selling and administrative costs. The increase for the
six-month period was the result of increased sales and improving margins, which
were offset by higher selling and interest costs. The Company recorded income
from discontinued operations of its U.K. subsidiary, Ag-Bag Europe, PLC, in the
amount of $85,387 during the second quarter of 1997 and $2,766 for the six-month
period ended June 30, 1997. As part of the strategic realignment in December,
1997, the Company sold Ag-Bag Europe, PLC.
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 10.00% as of June 30, 1998 to $6,004,442 from
the June 30, 1997 level of $6,671,815. The decrease in accounts receivable was
the result of increased collection efforts coupled with tighter credit terms.
12
<PAGE>
Inventory at June 30, 1998 was $5,871,385, which was 31.44% lower than
inventory at June 30, 1997 of $8,564,045. The decrease in inventory resulted
from increased sales volumes. In addition, certain noncore, long-term inventory
was written down to fair market value in accordance with the Company's refined
policy for valuation reserves or abandoned as part of the strategic realignment
of the Company in December of 1997.
Other current assets at June 30, 1998 decreased to $349,166 compared to
$580,025 at June 30, 1997. The decrease was the result of lower deposits and
office/advertising supplies.
Intangible assets at June 30, 1998 decreased to $92,199 compared to
$1,605,427 at June 30, 1997. The decrease was the result of the sale of the
Company's U.K. subsidiary and the goodwill and intangibles associated with that
investment equaling $431,420, coupled with certain patent rights that were
written off at December 31, 1997 equaling $979,762 and related accumulated
amortization.
The Company entered into a new long-term $5,000,000 operating line of
credit on April 20, 1998. The new line of credit, which is with a new lender,
replaced the old line of credit and is secured by accounts receivable, inventory
and other assets of the Company. As of June 30, 1998, the outstanding balance
under the line of credit was $2,059,391. Management believes that, along with
funds generated from operations and its credit facility, it will be able to meet
the Company's cash requirements through 1998.
In 1997, the Nasdaq listing requirements were substantially expanded. The
Company does not currently qualify under the more stringent requirements because
the price at which its Common Stock is trading is below the $1 per share
minimum. The Company was formally notified on February 27, 1998 that its Common
Stock will be removed from quotation on the Nasdaq inter-dealer quotation system
on May 28, 1998 if the Company continues to not qualify under the new Nasdaq
listing requirements. On May 29, 1998 the Company was formally notified that its
stock would be delisted within 5 days unless it submitted a formal plan and
written request for exemption from the new listing requirements. On June 4, 1998
the Company submitted information to Nasdaq requesting an exemption from this $1
per share minimum bid price listing requirement and has been informed that its
request will be reviewed. On July 13, 1998 the Company received notification
that its request for exemption had been denied. The Company has appealed this
decision and has requested a written hearing on the matter. The Company is
currently awaiting a response to its written appeal for exemption.
13
<PAGE>
In the event the Company's common Stock is removed from quotation on the
Nasdaq, the Company anticipates the Common Stock would be traded in the
over-the-counter market (bulletin board system). The removal from quotation on
Nasdaq could have a material adverse effect on the Company's ability to raise
additional equity capital in a public stock offering should that become
necessary.
Year 2000
- ---------
The Company has made an assessment of the effect of the Year 2000 issue on
its systems, equipment and software. Based on this assessment and consultation
with outside consultants, the Company believes its systems, equipment and
software will properly recognize calendar dates beginning in the year 2000,
without any significant changes. The Company intends to evaluate the information
systems and software of its outside vendors in connection with the Year 2000
issue, but anticipates any potential modification to its systems and software
will not materially effect the Company's future financial results. Accordingly,
the Company expects the Year 2000 issue will not have a material adverse
financial impact on the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable.
14
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) An Annual Meeting of Stockholders was held on June 1, 1998.
(b) Larry R. Inman, Lemuel E. Cunningham and Robert N. Thurston
were elected as directors of the Company. Michael B. Leahy,
Arthur P. Schuette, Rolf E. Soderstrom, Michael W. Foster and
Roy I. Anderson continued as directors of the Company after
the Annual Meeting of Stockholders.
(c) The only matter voted upon at the Annual Meeting of
Stockholders was the election of Larry R. Inman, Lemuel E.
Cunningham and Robert N. Thurston. The results of the election
were as follows:
<TABLE>
<CAPTION>
Votes
Against or Broker
Nominee Votes For Withheld Abstentions Nonvotes
------- --------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Larry R. 9,342,887 0 536,893 0
Inman
Lemuel E. 9,342,887 0 536,893 0
Cunningham
Robert N. 9,312,710 0 567,010 0
Thurston
</TABLE>
(d) None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 27, Financial Data Schedule (Edgar Only)
(b) A report on Form 8-K dated June 12, 1998 was filed with
respect to a change in the Company's certifying accountant.
Effective June 8, 1998, the Company engaged Yergen & Meyer,
LLP as its new independent accountants and dismissed KPMG Peat
Marwick, LLP as its independent accountants.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amended report to be signed on its behalf by the
undersigned thereunto duly authorized.
AG-BAG INTERNATIONAL LIMITED,
a Delaware corporation
(Registrant)
Date: February 16, 1998 By: /s/ Michael R. Wallis
-------------------------------------
Michael R. Wallis
Chief Financial Officer and
Vice President, Finance
16
<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 JUNE 30, 1998, AND FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY Y REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000842289
<NAME> AG-BAG INTERNATIONAL LIMITED
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> APR-01-1998 APR-01-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997
<EXCHANGE-RATE> 1 1
<CASH> 0 0
<SECURITIES> 656 656
<RECEIVABLES> 6,231,735 6,902,058
<ALLOWANCES> 227,293 230,243
<INVENTORY> 5,871,385 8,564,045
<CURRENT-ASSETS> 12,225,649 14,472,207
<PP&E> 7,901,127 9,091,762
<DEPRECIATION> 3,783,667 4,134,432
<TOTAL-ASSETS> 17,360,925 22,602,375
<CURRENT-LIABILITIES> 5,919,998 7,778,924
<BONDS> 0 0
0 0
696,000 696,000
<COMMON> 120,619 120,537
<OTHER-SE> 8,237,398 11,499,956
<TOTAL-LIABILITY-AND-EQUITY> 17,360,925 22,602,375
<SALES> 14,493,481 10,854,888
<TOTAL-REVENUES> 14,710,078 11,025,847
<CGS> 10,665,908 8,220,079
<TOTAL-COSTS> 13,202,653 10,569,828
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 233,918 187,222
<INCOME-PRETAX> 1,273,507 268,797
<INCOME-TAX> 482,200 77,680
<INCOME-CONTINUING> 791,307 191,117
<DISCONTINUED> 0 2,766
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 791,307 193,883
<EPS-PRIMARY> .06 .02
<EPS-DILUTED> .06 .02
</TABLE>
