UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
For the quarterly period ended August 31, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number: 000-19320
Ag Services of America, Inc.
(Exact name of registrant as specified in its charter)
Iowa 42-1264455
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2302 West First Street, Cedar Falls, Iowa 50613
(Address of principal executive offices) (Zip Code)
(319) 277-0261
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report.)
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.
[X] Yes [ ] No
5,159,014 common shares were outstanding as of October 10, 1997.
<PAGE>
AG SERVICES OF AMERICA, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial statements:
Consolidated condensed balance sheets, August 31, 1997
(unaudited) and February 28, 1997 1
Unaudited consolidated condensed statements of income,
three and six months ended August 31, 1997 and 1996 2
Unaudited consolidated condensed statements of cash
flows, six months ended August 31, 1997 and 1996 3
Consolidated statement of stockholders' equity,
six months ended August 31, 1997 4
Notes to consolidated condensed financial statements
(unaudited) 5-7
Item 2. Management's discussion and analysis of
financial condition and results of operations 8-11
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders 12
Item 6. Exhibits and reports on form 8-K: 12
(a) Exhibits
(11) Statement re computation of earnings
per common share 13
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AG SERVICES OF AMERICA, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>
August 31, February 28,
ASSETS 1997 1997 *
(Unaudited)
-------------- -------------
<S> <C> <C>
CURRENT ASSETS
Cash $290,696 $880,184
Customer notes receivable, less allowance
for less allowance for doubtful notes and
reserve for discounts August 31, 1997
$4,793,000; February 28, 1997 $1,609,000 159,938,456 43,245,691
Accounts receivable 745,614 208,578
Inventories 1,065,228 2,841,417
Foreclosed assets held for sale 641,983 431,346
Deferred income taxes, net 642,000 642,000
Other current assets 505,582 1,682,478
-------------- ------------
Total current assets $163,829,559 $49,931,694
-------------- ------------
LONG-TERM RECEIVABLES AND OTHER ASSETS
Customer notes receivable, less allowance
for doubtful notes August 31, 1997
$1,623,000; February 28, 1997 $1,156,000
notes August 31, 1997 $1,623,000; February
28, 1997 $1,156,000 $11,803,187 $9,560,881
Foreclosed assets held for sale 248,296 166,829
Debt origination fees, less accumulated
amortization August 31, 1997 $56,925,
February 28, 1997 $0 514,446 --
Organizational costs, less accumulated
amortization August 31, 1997 $0,
February 28, 1997 $0 22,394 --
Deferred income taxes, net 433,000 433,000
-------------- -------------
$13,021,323 $10,160,710
-------------- -------------
EQUIPMENT, less accumulated depreciation
August 31, 1997 $888,681;
February 28, 1997 $776,207 $1,350,389 $680,306
-------------- -------------
$178,201,271 $60,772,710
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable $119,598,781 $21,000,000
Excess of outstanding checks over
bank balance 3,385,525 --
Accounts payable 10,331,768 955,871
Accrued expenses 1,693,725 600,845
Income taxes payable 649,897 --
-------------- -------------
Total current liabilities $135,659,696 $22,556,716
-------------- -------------
LONG-TERM LIABILITIES
Obligation under capital lease $280,330 $--
STOCKHOLDERS' EQUITY
Capital stock $22,136,891 $21,948,375
Retained earnings 20,124,354 16,267,619
-------------- -------------
$42,261,245 $38,215,994
-------------- -------------
$178,201,271 $60,772,710
============== =============
<CAPTION>
*Condensed from Audited Financial Statements.
<FN>
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
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<PAGE>
<TABLE>
AG SERVICES OF AMERICA, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
<CAPTION>
Three Months Ended August 31, Six Months Ended August 31,
1997 1996 1997 1996
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Net revenues:
Farm inputs $54,627,586 $46,128,641 $132,966,601 $110,388,726
Financing income 4,315,368 3,502,315 6,750,881 5,449,203
-------------- ------------- -------------- -------------
$58,942,954 $49,630,956 $139,717,482 $115,837,929
-------------- ------------- -------------- -------------
Cost of revenues:
Farm inputs $51,334,719 $43,128,273 $125,287,810 $103,269,954
Financing expense 1,946,597 1,619,390 2,685,530 2,537,441
Provision for doubtful notes 914,027 800,059 2,170,739 1,860,924
-------------- ------------- -------------- -------------
$54,195,343 $45,547,722 $130,144,079 $107,668,319
-------------- ------------- -------------- -------------
Income before operating expenses
and income taxes $4,747,611 $4,083,234 $9,573,403 $8,169,610
Operating expenses 1,703,701 1,531,237 3,585,248 3,161,897
-------------- ------------- -------------- -------------
Income before income taxes $3,043,910 $2,551,997 $5,988,155 $5,007,713
Federal and state income taxes 1,109,420 917,000 2,131,420 1,800,000
-------------- ------------- -------------- -------------
Net income $1,934,490 $1,634,997 $3,856,735 $3,207,713
============== ============= ============== =============
Earnings per common and common
equivalent share:
Primary $0.36 $0.39 $0.71 $0.79
============== ============= ============== =============
Fully diluted $0.36 $0.31 $0.71 $0.63
============== ============= ============== =============
Weighted average common and common
equivalent shares outstanding:
Primary 5,435,178 4,221,940 5,423,834 4,035,981
============== ============= ============== =============
Fully diluted 5,443,339 5,337,086 5,439,665 5,337,137
============== ============= ============== =============
<FN>
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
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<PAGE>
<TABLE>
AG SERVICES OF AMERICA, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Six Months Ended August 31, 1997 and 1996
<CAPTION>
1997 1996
-------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $3,856,735 $3,207,713
Adjustments to reconcile net income to net
Cash (used in) operating activities:
Depreciation 121,338 106,229
Amortization 56,625 21,600
Deferred income taxes 0 (30,000)
(Gain) loss on sale of equipment (2,737) (3,553)
Change in assets and liabilities (105,120,018) (81,123,276)
-------------- -------------
Net cash (used in) operating activities ($101,088,057)($77,821,287)
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of equipment $3,000 $14,200
Purchase of equipment (791,683) (156,097)
(Increase) decrease in foreclosed assets
held for sale (292,104) 1,965,004
(Increase) in debt origination fees (571,070) --
(Increase) in organizational costs (22,394) --
-------------- -------------
Net cash (used in) investing activities ($1,674,251) $1,823,107
-------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings $100,295,380 $74,100,000
Principal payments on short-term borrowings (1,696,601) (1,250,000)
Net payments on conversion or redemption of
convertible subordinated debentures -- (49,266)
Increase in excess of outstanding checks
over bank balance 3,385,525 1,524,639
Proceeds from the issuance of capital stock
upon exercise of options 184,166 98,825
Proceeds from the issuance of capital stock
under stock purchase plan 4,350 6,737
-------------- -------------
Net cash provided by financing activities $102,172,820 $74,430,935
-------------- -------------
(Decrease) in cash ($589,488) ($1,567,245)
CASH
Beginning 880,184 1,808,778
-------------- -------------
Ending $290,696 $241,533
============== =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $1,684,400 $1,843,600
Income taxes $1,285,500 $1,026,800
<FN>
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
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<PAGE>
<TABLE>
AG SERVICES OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Six Months Ended August 31, 1997
(Unaudited)
<CAPTION>
Capital Stock
Shares Retained
Issued Amount Earnings Total
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Balance, February 28, 1997 5,135,719 $21,948,375 $16,267,619 $38,215,994
Net income - - - - 3,856,735 3,856,735
Issuance of 21,625 shares of capital stock
upon the exercise of options 21,625 184,166 - - 184,166
Issuance of 300 shares of capital stock under
employee stock purchase plan 300 4,350 - - 4,350
-------------- ------------- -------------- -------------
Balance, August 31, 1997 5,157,644 $22,136,891 $20,124,354 $42,261,245
============== ============= ============== =============
<FN>
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
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<PAGE>
AG SERVICES OF AMERICA, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Basis of Presentation
The accompanying unaudited consolidated condensed financial state-
ments have been prepared in accordance with the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X. Certain information
and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested these interim
consolidated condensed financial statements be read in
conjunction with the financial statements and notes thereto
included in the Company's Annual Report for the year ended February
28, 1997. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary for a fair
presentation of the financial position, results of operations and
cash flows for the interim periods presented have been made.
Operating results for the three and six month periods ended August
31, 1997 are not necessarily indicative of the results that may be
expected for the year ending February 28, 1998.
Principles of Consolidation:
The consolidated financial statements include the accounts of Ag
Services of America, Inc. (the Company) and its wholly owned
subsidiary, Ag Acceptance Corporation. All material intercompany
balances and transactions have been eliminated in consolidation.
According to the terms related to the asset backed securitized
financing program as described in Note 3 of the consolidated
condensed financial statements, the Company formed Ag Acceptance
Corporation, a wholly owned, special purpose corporation.
Note 2. Commitments and Contingencies
Commitments:
In the normal course of business, the Company makes various
commitments which are not reflected in the accompanying consolidated
condensed financial statements. These include various
commitments to extend credit to customers. At August 31, 1997 and
February 28, 1997 the Company had approximately $13,252,000 and
$50,180,000, respectively, in commitments to supply farm inputs.
No material losses or liquidity demands are anticipated as a result
of these commitments.
In June 1997, the Company entered into an agreement to lease three
retail agricultural chemical and fertilizer service centers in
northwestern Illinois. Under the terms of the agreement, the
Company has the option to purchase the facilities at the end of the
three year lease term.
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<PAGE>
AG SERVICES OF AMERICA, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Contingencies:
The Company is named in lawsuits in the ordinary course of
business. Counsel for the Company have advised the Company, while
the outcome of various legal proceedings is not certain,it is
unlikely that these proceedings will result in any recovery which
will materially affect the financial position or operating results
of the Company.
The availability of lines of credit to finance operations and the
existence of a multi-peril crop insurance program are essential to
the Company's operations. If the federal multi-peril crop
insurance program currently in existence were terminated or
negatively modified and no comparable private or government program
were established, this could have a material adverse effect on the
Company's future operations. The government has from time to time
evaluated the federal multi-peril insurance program and is likely
to review the program in the future, and there can be no assurance
of the outcome of such evaluations.
Note 3. Pledged Assets and Related Debt
On March 11, 1997, the Company implemented an asset backed
securitized financing program with a maximum available borrowing
amount of $135 million. This facility replaces the $100 million
line of credit used in fiscal 1997. Under the terms of the five-
year facility, the Company sells and may continue to sell or
contribute certain notes receivable to Ag Acceptance Corporation
("Ag Acceptance"), a newly formed, wholly owned, special purpose
subsidiary of the Company. Ag Acceptance pledges its interest in
these notes receivable to a commercial-paper market conduit entity
and incurs interest at variable rates in the commercial paper
market. The agreement contains various restrictive covenants
including, among others, restrictions on mergers, issuance of
stock, declaration or payment of dividends, transactions with
affiliates and requires the Company to maintain certain levels of
equity and pretax earnings. Advances under the facility are made
subject to portfolio performance, financial covenant restrictions
and borrowing base calculations. At August 31, 1997, the Company
had a maximum amount available under the asset backed securitized
financing program of approximately $8,000, based on borrowing base
computations as provided by the agreement.
In conjunction with the securitized financing program, the Compnay
will maintain an $8.5 million bank line of credit in fiscal 1998.
The line of credit is accessible to cover any potential
deficiencies in available funds financed through the securitization
program. The agreement contains various restrictive covenants
including, among others, restrictions on issuance of stock,
declaration or payment of dividends, and requires the Company to
maintain certain levels of equity and pretax earnings. The
agreement also requires that outstanding borrowings be repaid in
full for 10 consecutive days during the Company's fiscal second
quarter. Advances under the agreement are also subject to
portfolio performance, covenant restrictions, and borrowing base
calculations. At August 31, 1997, the Company had a maximum amount
available under the agreement of approximately $69,000 based on
borrowing base calculations as provided by the agreement.
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<PAGE>
Note 4. Earnings per Common and Common Equivalent Share
Earnings per common and common equivalent share was computed by
dividing net income by the weighted average number of common and
common equivalent shares outstanding during each respective period.
In March 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 128,
"Earnings per Share", (SFAS No. 128). The Statement will become
effective for public companies for financial statements issued
after December 15, 1997, and early adoption is not permitted.
Under SFAS 128, the Company will present two earnings per share
(EPS) amounts. Basic EPS will be calculated based on income
available to common shareholders and the weighted average number
of shares outstanding during the reported period. Diluted EPS
includes additional dilution from potential commmon stock, such as
stock issuable pursuant to the exercise of stock options out-
standing. If the provisions of SFAS No. 128 had been applied in
the first two quarters of fiscal 1998, Basic EPS would have been
approximately 1 to 2 cents higher than, and Diluted EPS would have
been approximately the same as, reported EPS for each of those
quarters.
-7-
<PAGE>
AG SERVICES OF AMERICA, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth percentages of net revenues represented by the
selected items in the unaudited condensed statements of income of the Company
for the three and six months ended August 31, 1997 and 1996. In the opinion
of management, all normal and recurring adjustments necessary for a fair
statement of the results for such periods have been included. The operating
results for any period are not necessarily indicative of results for any
future period.
Percentage Percentage
of Net Revenues of Net Revenues
Three Months Ended Six Months Ended
August 31, August 31
1997 1996 1997 1996
Net Revenues:
Farm inputs 92.7% 92.9% 95.2% 95.3%
Financing Income 7.3% 7.1% 4.8% 4.7%
-------- -------- -------- ------
100.0% 100.0% 100.0% 100.0%
-------- -------- -------- ------
Cost of Revenues:
Farm inputs 87.1% 86.9% 89.7% 89.1%
Financing expense 3.3% 3.3% 1.9% 2.2%
Provision for doubtful notes 1.5% 1.6% 1.5% 1.6%
------- ------- ------- ------
91.9% 91.8% 93.1% 92.9%
------- ------- ------- ------
Income before operating
expenses and income taxes 8.1% 8.2% 6.9% 7.1%
Operating expenses 2.9% 3.1% 2.6% 2.7%
------- ------- ------- ------
Income before income taxes 5.2% 5.1% 4.3% 4.4%
Federal and state income taxes 1.9% 1.8% 1.5% 1.6%
------- ------- ------- ------
Net income 3.3% 3.3% 2.8% 2.8%
======= ======= ======= ======
Net Revenues:
Net revenues increased $9.3 million or 18.8% during the three months ended
August 31, 1997, compared with the three months ended August 31, 1996. Net
revenues increased $23.9 million or 20.6% during the six months ended August
31, 1997, compared with the six months ended August 31, 1996. The Company
reached this record level through increased marketing and sales efforts in
our 28 state market area.
-8-
<PAGE>
Cost of Revenues:
The total cost of revenues increased slightly from 91.8% and 92.9% of net
revenues for the three and six months ended August 31, 1996, respectively, to
91.9% and 93.1% of net revenues for the three and 6 months ended August 31,
1997. The increase in total cost of revenues as a percentage of net revenues
was due to the decrease in gross margin on the sale of farm inputs, but was
offset by an increase in gross margin on financing income. The gross margin
on the sale of farm inputs alone, decreased to 6.03% and 5.77% for the three
and six months ended August 31, 1997, respectively, from 6.50% and 6.45% for
the three and six months ended August 31, 1996. This decrease was the result
of new marketing programs and changes in the sales mix. In fiscal 1997, we
initiated new programs designed to attract larger financially stable,
customers to increase our customer loan portfolio quality. However, we now
compete more directly with traditional sources of agricultural lending, such
as banks and the Farm Credit System for the elite customer market share. As
a result, we have been pricing our products more competitively, and gross
margin on the sale of farm inputs declined. In addition, our continued
marketing reductions in the South due to poor collection history have also
caused a change in the product mix. Higher margin cotton seed and chemical
sales in the South were replaced by lower margin sales, such as irrigation
and fuel advances, concentrated in the western corn belt and lower midwest
plain states. Concerning the gross margin on financing income alone, the
percentages increased to 54.9% and 60.2% for the three and six months ended
August 31, 1997, from 53.8% and 53.4% for the three and six months ended
August 31, 1996. The increase in gross margin on financing income was the
result of two events. Firstly, year to date gross margin on financing income
improved due to the conversion of the 7% Convertible Subordinated Debentures
in the second quarter of fiscal 1997. This allowed for a pre-tax interest
savings of $240,000 for the six months ended August 31, 1997 over the same
period in the prior year. Secondly, contributing to current interest savings
is our new asset backed securitization program, initiated in March 1997,
which allows the Company to borrow funds by means of the commercial paper
market at lower interest rates. A portion of these savings will be passed
along to our customers to maintain competitive pricing in the market. The
provision for doubtful notes was 1.6% of net revenues for the three and six
months ended August 31, 1997 and 1996.
Operating Expenses:
Operating expenses decreased to 2.9% and 2.6% of net revenues for the three
and six months ended August 31, 1997, respectively, from 3.1% and 2.7% of net
revenues for the three and six months ended August 31, 1996. The decrease is
the result of the Company's operating expenses increasing at a lower rate
(11.3% and 13.4%) than net revenues (18.8% and 20.6%) for the three and six
months ended August 31, 1997 due to the efforts by management to control
spending. The increase in operating expense is attributed primarily to the
increase in payroll and payroll related expenses due to the Company's growth.
Payroll and payroll related expenses increased to $1,231,338 and $2,432,028
for the three and six months ended August 31, 1997, respectively, from
$1,049,309 and $2,136,021 for the three and six months ended August 31, 1996.
Net Income:
Net income increased 18.3% to $1,934,490 for the three months ended August
31, 1997 from $1,634,997 for the three months ended August 31, 1996 and 20.2%
to $3,856,735 for the six months ended August 31, 1997 from $3,207,713 for
the six months ended August 31, 1996. The increase in net income is
attributable to the increase in net revenues and the decline in operating
expenses as a percentage of net revenues.
Inflation:
The Company does not believe the Company's net revenues and income from
continuing operations were significantly impacted by inflation or changing
prices in fiscal 1997 or the first six months of fiscal 1998.
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<PAGE>
Seasonality:
The Company's revenues and income are directly related to the growing cycle
for crops. Accordingly, quarterly revenues and income vary during each
fiscal year. The following table shows the Company's quarterly net revenues
and net income for fiscal 1997 and the first two quarters of fiscal 1998.
This information is derived from unaudited financial statements which
include, in the opinion of management, all normal and recurring adjustments
which management consider necessary for a fair statement of results of those
periods. The operating results for any quarter are not necessarily
indicative of the results for any future period.
Fiscal 1998 Quarter Ended
------------------------------------------------
May 31 August 31 November 30 February 28
--------- ---------- ----------- -------------
(Dollars in thousands)
Net revenues $80,775 $58,943
Net income $1,922 $1,934
Fiscal 1997 Quarter Ended
-------------------------------------------------
May 31 August 31 November 30 February 28
---------- ----------- ----------- -------------
(Dollars in thousands)
Net revenues $66,207 $49,631 $11,402 $20,407
Net income $1,573 $1,635 $832 $306
The 1997 crop planting season commenced ahead of normal, however, an
unusually cool spring throughout the corn belt initially delayed plant
germination and plant development. Rains and warmer weather in the second
quarter improved overall crop development. The delayed germination and an
increase in the use of post emergent chemicals have however, shifted a
portion of chemical sales to the second quarter.
Liquidity and Capital Resources:
At August 31, 1997, the Company had working capital of $28,170,000 an
increase of $2,476,000 over a year ago and an increase of $795,000 since
February 28, 1997. The components of this net increase, since February 28,
1997, were (i) $1,398,000 resulting from operating activities, consisting of
approximately $3,857,000 in net income, $121,000 in depreciation, $57,000 in
amortization, and the remainder from a net change in other working capital
items, (ii) capital expenditures of approximately $792,000 related to the
acquisition of equipment and furniture, which includes $699,000 of equipment
purchases for the three retail chemical and fertilizer service centers as
described in Note 2 of the attached unaudited consolidated financial
statements (iii) net proceeds of $189,000 from the issuance of common stock
upon exercise of options and sales of stock through the employee stock
purchase plan.
On March 11, 1997, the Company implemented an asset backed securitized
financing program with a maximum available borrowing amount of $135 million.
This facility replaces the $100 million line of credit used in fiscal 1997.
Under the terms of the five year facility, the Company sells and may continue
to sell or contribute certain notes receivable to Ag Acceptance Corporation
("Ag Acceptance"), a newly formed, wholly owned, special purpose subsidiary
of the Company. Ag Acceptance pledges its interest in these notes receivable
to a commercial-paper market conduit entity and incurs interest at variable
rates in the commercial paper market. The agreement contains various
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<PAGE>
restrictive covenants, including, among others, restrictions on mergers,
issuance of stock, declaration or payment of dividends, transactions with
affiliates, and requires the Company to maintain certain levels of equity and
pretax earnings. Advances under the facility are made subject to portfolio
performance, financial covenant restrictions and borrowing base calculations.
At August 31, 1997, the Company had a maximum amount available under the
asset backed securitized financing program of approximately $8,000, based on
borrowing base computations as provided by the agreement.
In conjunction with the securitized financing program, Ag Services will
maintain an $8.5 million revolving bank line of credit in fiscal 1998. The
line of credit is accessible to cover any potential deficiencies in available
funds financed through the securitization program. All borrowings are
collateralized by substantially all assets of the Company. The agreement
requires that the total outstanding borrowings be repaid in full for 10
consecutive days during the Company's fiscal second quarter. The agreement
contains various restrictive covenants, including, among others, restrictions
on mergers, issuance of stock, declaration or payment of dividends, loans to
stockholders, and requires the Company to maintain certain levels of equity
and pretax earnings. At August 31, 1997, $69,000 was available based on the
borrowing base computation as provided by the agreement.
In April 1993, the Company completed the public offering of $13.8 million
(including $1.8 million as a result of over-allotments) principal amount of
7% Convertible Subordinated Debentures due 2003. Interest was paid semi-
annually on May 31 and November 30 of each year and was convertible into
Common Stock of the Company at $9.25 per share, subject to adjustment under
certain conditions, at any time prior to maturity, unless previously redeemed
or repurchased.
On June 7, 1996, the Company called for redemption or conversion all of its
outstanding 7% Convertible Subordinated Debentures due 2003 (the "Debentures").
From June 7, 1996 through July 10, 1996, the redemption date, the Company
issued 1,487,669 shares of common stock upon conversion of $13,761,000 of
Debentures and redeemed $39,000 of Debentures as full settlement of all
$13,800,000 of the Debentures outstanding at that date.
Management believes that the financial resources available to it, including
its bank line of credit, trade credit, its equity, and internally generated
funds, will be sufficient to finance the Company and its operations in the
foreseeable future. The Company currently has no significant capital
commitments.
"Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995
Information contained in this report, other than historical information,
should be considered forward looking which reflect Management's current views
of future events and financial performance that involve a number of risks and
uncertainties. The factors that could cause actual results to differ
materially include, but are not limited to, the following: general economic
conditions within the agriculture industry; competitive factors and pricing
pressures; changes in product mix; changes in the seasonality of demand
patterns; changes in weather conditions; changes in agricultural regulations;
unknown risks; and other risks detailed in the Company's Securities and
Exchange Commission filings.
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<PAGE>
AG SERVICES OF AMERICA, INC.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Stockholders on August 6,
1997. Proxies for such meeting were solicited pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as
amended. At such meeting, management's entire slate of six
Directors was elected for a one year term, (until the
Company's 1998 Annual Meeting), and until the directors' respective
successors are duly elected and qualified;
Votes Votes
Director Name in Favor Withheld
Gaylen D. Miller 4,838,153 13,321
Henry C. Jungling, Jr. 4,838,153 13,221
Kevin D. Schipper 4,838,153 13,221
James D. Gerson 4,838,153 10,519
Michael Lischin 4,838,153 10,919
Ervin J. Mellema 4,838,153 11,819
In addition, a proposal to ratify the appointment of McGladrey &
Pullen, LLP as independent auditors for the Company for the fiscal
year ending February 28, 1998 was approved by a vote of 4,822,417
votes in favor, 4,888 votes against, and 21,267 votes abstaining.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Statement re computation of earnings per common
share is attached.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the period
covered by this report.
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 SERVICES OF AMERICA, INC.
(Registrant)
/s/ Brad D. Schlotfeldt
Brad D. Schlotfeldt
Vice President of Finance & Treasurer
(Principal Financial & Accounting Officer)
Date: October 14, 1997
-12-
<PAGE>
<TABLE>
AG SERVICES OF AMERICA, INC.
EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
<CAPTION>
Three Months Ended Six Months Ended
August 31, August 31,
1997 1996 1997 1996
----------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Computation of weighted average number of common
shares outstanding and common equivalent shares:
Primary:
Common shares outstanding at beginning
of the period 5,146,916 3,627,424 5,135,719 3,611,350
Weighted average common shares issued
during the period 7,397 801 12,239 9,906
Weighted average common shares issued under
the stock purchase plan this period -- 103 208 152
Weighted average common shares issued due
to conversion of the 7% subordinated
convertible debentures -- 368,200 -- 186,632
Weighted average of the common equivalent shares
computed using the treasury stock method using
the average market price during the period:
Options (1) 280,865 225,412 275,668 227,941
----------- ----------- ----------- -----------
Weighted average number of common and common
equivalent shares 5,435,178 4,221,940 5,423,834 4,035,981
=========== =========== =========== ===========
Net income $1,934,490 $1,634,997 $3,856,735 $3,207,713
=========== =========== =========== ===========
Earnings per common and common equivalent share $0.36 $0.39 $0.71 $0.71
=========== =========== =========== ===========
Fully diluted:
Common shares outstanding at beginning
of the period 5,146,919 3,627,424 5,135,719 3,611,350
Common shares issued due to conversion
of the 7% convertible debentures -- 1,483,345 -- 1,487,669
Weighted average common shares issued
during the period 7,397 801 12,239 9,906
Weighted average common shares issued under
the stock purchase plan this period -- 103 208 152
Weighted average of the common equivalent
shares computed using the treasury stock
method using the greater of the quarter end
market price or average market price during
the period:
Options (1) 289,023 225,413 291,499 228,060
----------- ----------- --------- -----------
Weighted average number of common and common
equivalent shares 5,443,339 5,337,086 5,439,665 5,337,137
=========== =========== ========== ============
Net income $1,934,490 $1,634,997 $3,856,735 $3,207,713
Add: Interest on $13.8 million 7% convertible
subordinated debentures, net of income
tax effect -- -- -- 154,077
Amortization of debt issuance costs,
net of income tax effect -- -- -- 13,781
----------- ----------- ----------- -----------
Total $1,934,490 $1,634,997 $3,856,735 $3,375,751
=========== =========== =========== ===========
Earnings per common and common equivalent share $0.36 $0.31 $0.71 $0.63
=========== =========== ========== ===========
<CAPTION>
(1) Some of the stock options have not been included because they are a
</TABLE>
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-END> AUG-31-1997
<CASH> 290,696
<SECURITIES> 0
<RECEIVABLES> 178,903,257
<ALLOWANCES> 6,416,000
<INVENTORY> 1,065,228
<CURRENT-ASSETS> 163,829,559
<PP&E> 2,239,070
<DEPRECIATION> 888,681
<TOTAL-ASSETS> 178,201,271
<CURRENT-LIABILITIES> 135,659,696
<BONDS> 0
0
0
<COMMON> 22,136,891
<OTHER-SE> 20,124,354
<TOTAL-LIABILITY-AND-EQUITY> 178,201,271
<SALES> 132,966,601
<TOTAL-REVENUES> 139,717,482
<CGS> 125,287,810
<TOTAL-COSTS> 127,973,340
<OTHER-EXPENSES> 3,585,248
<LOSS-PROVISION> 2,170,739
<INTEREST-EXPENSE> 2,685,530
<INCOME-PRETAX> 5,988,155
<INCOME-TAX> 2,131,420
<INCOME-CONTINUING> 3,856,735
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,856,735
<EPS-PRIMARY> 0.71
<EPS-DILUTED> 0.71
</TABLE>
