UNITED STATES
SECURITES 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 November 30, 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
5,165,554 common shares were outstanding as of January 12, 1998.
<PAGE>
AG SERVICES OF AMERICA, INC.
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial statements:
Consolidated condensed balance sheets, November 30, 1997
(unaudited) and February 28, 1997 1
Unaudited consolidated condensed statements of income,
three and nine months ended November 30, 1997
and 1996 2
Unaudited consolidated condensed statements of cash flows,
nine months ended November 30, 1997 and 1996 3
Consolidated statement of stockholders' equity, nine
months ended November 30, 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 8-12
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 13
(a) Exhibits
Item 6. Exhibits and reports on form 8-K: 13
(a) Exhibits 13
(11) Statement re computation of earnings
per common share 14
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AG SERVICES OF AMERICA, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
November 30, February 28,
ASSETS 1997 1997 *
(Unaudited)
<S> -------------- -------------
CURRENT ASSETS <C> <C>
Cash $7,066,665 $880,184
Customer notes receivable, less allowance
for less allowance for doubtful notes and
reserve for discounts November 30, 1997
$4,127,000; February 28, 1997 $1,609,000 92,419,453 43,245,691
Accounts receivable 705,567 208,578
Inventories 790,051 2,841,417
Foreclosed assets held for sale 403,889 431,346
Deferred income taxes, net 642,000 642,000
Other current assets 241,605 1,682,478
-------------- -------------
Total current assets $102,269,230 $49,931,694
-------------- -------------
LONG-TERM RECEIVABLES AND OTHER ASSETS
Customer notes receivable, less allowance
for doubtful notes November 30, 1997
$1,585,000; February 28, 1997 $1,156,000 $11,521,126 $9,560,881
Foreclosed assets held for sale 156,210 166,829
Debt origination fees, less accumulated
amortization November 30, 1997 $85,275,
February 28, 1997 $0 486,096 --
Organizational costs, less accumulated
amortization November 30, 1997 $0,
February 28, 1997 $0 22,394 --
Deferred income taxes, net 433,000 433,000
-------------- -------------
$12,618,826 $10,160,710
-------------- -------------
EQUIPMENT, less accumulated depreciation
November 30, 1997 $956,279;
February 28, 1997 $776,207 $1,480,163 $680,306
-------------- -------------
$116,368,219 $60,772,710
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable $63,700,608 $21,000,000
Accounts payable 7,340,338 955,871
Accrued expenses 1,444,663 600,845
Income taxes payable 249,694 --
Obligations under capital lease 51,754 --
-------------- -------------
Total current liabilities $72,787,057 $22,556,716
-------------- -------------
LONG-TERM LIABILITIES
Obligation under capital lease $280,330 $--
STOCKHOLDERS' EQUITY
Capital stock $22,158,114 $21,948,375
Retained earnings 21,142,718 16,267,619
-------------- -------------
$43,300,832 $38,215,994
-------------- -------------
$116,368,219 $60,772,710
============== =============
<CAPTION>
*Condensed from Audited Financial Statements.
<FN>
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
-1-
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<TABLE>
AG SERVICES OF AMERICA, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
Three Months Ended November 30, Nine Months Ended November 30,
1997 1996 1997 1996
<S> -------------- ------------- -------------- -------------
Net revenues: <C> <C> <C> <C>
Farm inputs $10,203,577 $8,150,204 $143,170,178 $118,538,930
Financing income 4,021,036 3,251,402 10,771,917 8,700,605
-------------- ------------- -------------- -------------
$14,224,613 $11,401,606 $153,942,095 $127,239,535
-------------- ------------- -------------- -------------
Cost of revenues:
Farm inputs $8,883,225 $6,908,576 $134,171,035 $110,178,530
Financing expense 1,733,350 1,544,467 4,418,880 4,081,908
Provision for doubtful notes 225,784 183,274 2,396,523 2,044,198
-------------- ------------- -------------- -------------
$10,842,359 $8,636,317 $140,986,438 $116,304,636
-------------- ------------- -------------- -------------
Income before operating expenses
and income taxes $3,382,254 $2,765,289 $12,955,657 $10,934,899
Operating expenses 1,788,890 1,508,153 5,374,138 4,670,050
-------------- ------------- -------------- -------------
Income before income taxes $1,593,364 $1,257,136 $7,581,519 $6,264,849
Federal and state income taxes 575,000 425,000 2,706,420 2,225,000
-------------- ------------- -------------- -------------
Net income $1,018,364 $832,136 $4,875,099 $4,039,849
============== ============= ============== =============
Earnings per common and common
equivalent share:
Primary $0.19 $0.16 $0.90 $0.87
============== ============= ============== =============
Fully diluted $0.19 $0.16 $0.90 $0.79
============== ============= ============== =============
Weighted average common and common
equivalent shares outstanding:
Primary 5,438,194 5,330,214 5,426,057 4,622,806
============== ============= ============== =============
Fully diluted 5,438,194 5,363,210 5,429,092 5,358,276
============== ============= ============== =============
<FN>
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
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<TABLE>
AG SERVICES OF AMERICA, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended November 30, 1997 and 1996
<CAPTION>
<S> 1997 1996
-------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES <C> <C>
Net income $4,875,099 $4,039,849
Adjustments to reconcile net income to net
Cash (used in) operating activities:
Depreciation 205,794 162,873
Amortization 84,975 21,600
Deferred income taxes 0 (30,000)
(Gain) loss on sale of equipment 2,917 (774)
Change in assets and liabilities (40,473,569) (31,679,287)
-------------- -------------
Net cash (used in) operating activities ($35,304,784) ($27,485,739)
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of equipment $21,850 $29,750
Purchase of equipment (1,034,821) (256,842)
(Increase) decrease in foreclosed assets
held for sale 187,353 1,874,546
(Increase) in organizational costs (22,394) --
-------------- -------------
Net cash (used in) investing activities ($848,012) $1,647,454
-------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings $104,879,461 $78,425,000
Principal payments on short-term borrowings (62,178,853) (50,775,000)
(Increase) in debt origination fees (571,070) --
Net payments on conversion or redemption of
convertible subordinated debentures -- (49,756)
Proceeds from the issuance of capital stock
upon exercise of options 205,389 173,275
Proceeds from the issuance of capital stock
under stock purchase plan 4,350 12,543
-------------- -------------
Net cash provided by financing activities $42,339,277 $27,786,062
-------------- -------------
(Decrease) in cash $6,186,481 $1,947,777
CASH
Beginning 880,184 1,808,778
-------------- -------------
Ending $7,066,665 $3,756,555
============== =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $3,683,700 $3,781,900
Income taxes $2,260,700 $1,996,000
<FN>
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
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<TABLE>
AG SERVICES OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Nine Months Ended November 30, 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 - - - - 4,875,099 4,875,099
Issuance of 21,625 shares of capital stock
upon the exercise of options 24,245 205,389 - - 205,389
Issuance of 300 shares of capital stock under
employee stock purchase plan 300 4,350 - - 4,350
-------------- ------------- -------------- -------------
Balance, November 30, 1997 5,160,264 $22,158,114 $21,142,718 $43,300,832
============== ============= ============== =============
<FN>
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
-4-
<PAGE>
AG SERVICES OF AMERICA, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared
in accordance with the instructions of 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 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. Operation results for the three and nine-month
periods ended November 30, 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 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
that are not reflected in the accompanying condensed financial statements.
These include various commitments to extend credit to customers. At November
30, 1997 and February 28, 1997 the Company had approximately $13,200,000
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.
Contingencies:
The Company is named in lawsuits in the ordinary course of business. Counsel
for the
-5-
<PAGE>
AG SERVICES OF AMERICA, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Company has 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 November 30,1997, the Company had a maximum amount available
under the asset backed securitized financing program of approximately
$950,000 based on borrowing base computations as provided by the agreement.
In conjunction with the securitized financing program, the Company 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 the issuance
of stock, declaration or payment of dividends, transactions with affiliates,
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 second fiscal quarter.
Advances under the facility are made subject to portfolio performance,
financial covenant restrictions and borrowing base calculations. At
November 30, 1997, the Company had a maximum amount available under the
agreement of approximately $3,600,000 based on borrowing base computations
as provided by the agreement.
-6-
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AG SERVICES OF AMERICA, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
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 Standard 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 common stock, such as stock issuable pursuant to the exercise of
stock options outstanding. If the provisions of SFAS No. 128 had been applied
in each of the first three 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 in 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 nine months ended November 30, 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 Nine Months ended
November 30, November 30,
1997 1996 1997 1996
------ ------ ------ ------
Net Revenues:
Farm inputs 71.7% 71.5% 93.0% 93.2%
Financing income 28.3% 28.5% 7.0% 6.8%
------- ------ ------- ------
100.0% 100.0% 100.0% 100.0%
Cost of revenues:
Farm inputs 62.4% 60.6% 87.1% 86.6%
Financing expense 12.2% 13.5% 2.9% 3.2%
Provision for doubtful notes 1.6% 1.6% 1.6% 1.6%
------- ------ ------- -------
76.2% 75.7% 91.6% 91.4%
------- ------ ------- -------
Income before operating
expenses and income taxes 23.8% 24.3% 8.4% 8.6%
Operating expenses 12.6% 13.3% 3.5% 3.7%
------- ------ ------- -------
Income before income taxes 1.2% 11.0% 4.9% 4.9%
Federal and state income tax 4.0% 3.7% 1.7% 1.7%
------- ------ ------- -------
Net income 7.2% 7.3% 3.2% 3.2%
======= ====== ======= =======
Net Revenues:
Net revenues increased $2.8 million or 24.8% to $14.2 million for the three
months ended November 30, 1997, compared with $11.4 million for the three
months ended November 30, 1996. Net Revenues increased $26.7 million or
21.0% to $153.9 million for the nine months ended November 30, 1997,
compared with $127.2 million for the nine months ended November 30, 1996.
Financing income as a percentage of net revenues decreased to 28.3% of
net revenues for the three months ended November 30, 1997 from 28.5% of
net revenues for the three months ended November 30, 1996 and increased to
7.0% of net revenues for the nine months ended November 30, 1997 from 6.8%
of net revenues for the nine months ended November 30, 1996. The Company
reached these record net revenue levels through the first three quarters of
fiscal 1998, by increasing marketing and sales efforts in our 28 state market
area.
-8-
<PAGE>
Cost of Revenues:
The total cost of revenues increased from 75.7% to 76.2% of net revenues for
the three months ended November 30, 1996 and 1997, respectively and increased
slightly from 91.4% to 91.6% for the nine months ended November 30, 1996 and
1997. The increase in the total cost of net revenues for the nine months
ended November 30, 1997 was due to a decrease in the gross margin on the
sale of farm inputs, but was offset by an increase in gross margin on
financing income. The gross margin on farm inputs, alone, decreased to 12.9%
from 15.2% for the three months ended November 30, 1997 and 1996. For the
nine months ending November 30, 1997 and 1996, gross margin on farm inputs
dropped to 6.3% in 1997 from 7.1% in 1996. This decrease was the result of
new marketing programs and changes in the sales mix. In fiscal 1997 we
nitiated new programs designed to attract large, 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 were replaced by
lower margin sales, such as irrigation and fuel advances, concentrated in the
western corn belt and lower Midwest plain states. The gross margin on
financing income alone, increased to 56.9% and 59.0% for the three and nine
months ended November 30, 1997, from 52.5% and 53.1% for the three and nine
months ending November 30, 1996. This increase resulted from 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 pretax interest savings of $240,000 for
the nine months ended November 30, 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 has been 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 nine months ended November 30, 1997 and 1996.
Operating Expenses:
Operating expenses decreased to 3.5% from 3.7% of the revenues for the nine
months ended November 30, 1997 and 1996, and decreased to 12.6% form 13.2%
for the three months ended November 30, 1997 and 1996, respectively. The
increase in operating expense is primarily due to the increase in payroll to
$1,062,600 and $3,126,900 for the three and nine months ended November 30,
1997, respectively, from $885,800 and $2,722,200 for the three and nine
months ended November 30, 1996. The increase is a result of the Company
adding employees after November 30, 1996, most significantly an increased
sales force as well as general wage rate increases to existing employees.
The balance of the increase in operating expenses is attributed principally
to the Company's growth.
Net Income:
Net income increased 22.4% to $1,018,364 for the three months ended November
30, 1997 from $832,136 for the three months ended November 30, 1996 and
increased 20.7% to $4,875,099 for the nine months ended November 30, 1997
from $4,039,849 for the nine months ended November 30, 1996. The increase
in net income is attributable to the increase in net revenues, improvement
in the gross margin on financing income, and total operating expenses
increasing at a lower rate than net revenues.
-9-
<PAGE>
Inflation:
The Company does not believe inflation or changing prices in fiscal 1997 or
the first three quarters of fiscal 1998 significantly impacted the Company's
net revenues and income from continuing operations.
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 three 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 $58,942 $14,225
Net income $1,922 $1,935 $1,018
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 and led to a generally favorable
harvest season. The delayed germination did however shift a portion of
chemical sales from the first to second quarter.
Liquidity and Capital Resources:
At November 30, 1997, the Company had working capital of $29,482,000, an
increase of $2,721,000 over a year ago and an increase of $2,107,000 since
February 28, 1997. The components of this net increase, since February 28,
1997, were (i) $2,932,000 resulting from operating activities, consisting of
approximately $4,875,000 in net income, $206,000 in depreciation, $85,000 in
amortization, and the remainder from a net change in other working capital
items, (ii) capital expenditures of approximately $1,035,000 related to the
acquisition of equipment and furniture, which includes $803,000 of equipment
purchases for the three retail chemical and fertilizer service centers as
described in note 2 of the attached unaudited consolidated financial
statements and (iii) net proceeds of $210,000 from the issuance of common
stock upon exercise of options and sales of stock through the employee stock
purchase plan.
- -10-
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 November 30, 1997, the Company had a maximum amount available under the
asset backed securitized financing program of approximately $950,000 based on
borrowing base computations as provided by the agreement.
In conjunction with the securitized financing program, the Company 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 the issuance of
stock, declaration or payment of dividends, transactions with affiliates, 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 second fiscal quarter. Advances
under the facility are made subject to portfolio performance, financial
covenant restrictions and borrowing base calculations. At November
30, 1997, the Company had a maximum amount available under the agreement of
approximately $3,600,000 based on borrowing base computations 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 is paid semi-
annually on May 31 and November 30 of each year and is 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. At November 30, 1997, the balance of the Debentures was $0.
On June 7, 1996, the Company called for redemption of conversion all of its
outstanding 7% Convertible Subordinated Debentures due 2003 (the "Deben-
tures"). From June 7, 1996 through July 10, 1996, the redemption date,
the Company issued 1,483,345 shares of common stock upon conversion of
$13,721,000 of Debentures and redeemed $39,000 of Debentures as full
settlement of all $13,760,000 of the Debentures outstanding at May 31, 1996.
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.
-11-
<PAGE>
"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; and other risks detailed in the Company's Securities and
Exchange Commission filings.
-12-
<PAGE>
AG SERVICES OF AMERICA, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Statements re computation of earnings per common share is attached.
(b) Reports on From 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 Schlotfeldt
Brad D. Schlotfeldt
Vice President of Finance & Treasurer
(Principal Financial and Accounting Officer)
Date: January 14, 1998
-13-
<PAGE>
<TABLE>
AG SERVICES OF AMERICA, INC.
EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
<CAPTION>
Three Months Ended Three Months Ended
November 30, November 30,
1997 1996 1997 1996
----------- ----------- ---------- -----------
<S>
Computation of weighted average number of common
shares outstanding and common equivalent shares:
Primary:
Common shares outstanding at beginning <C> <C> <C> <C>
of the period 5,157,644 5,112,569 5,135,719 3,611,350
Weighted average common shares issued
during the period 1,535 4,193 15,852 12,693
Weighted average common shares issued under
the stock purchase plan this period -- 270 139 389
Weighted average common shares issued due
to conversion of the 7% subordinated
convertible debentures -- -- -- 776,693
Weighted average of the common equivalent shares
computed using the treasury stock method using
the average market price during the period:
Options (1) 279,015 213,182 274,374 221,681
----------- ----------- --------- ---------
Weighted average number of common and common
equivalent shares 5,438,194 5,330,214 5,426,057 4,622,806
=========== =========== =========== ========== =====
Net income $1,018,364 $832,136 $4,875,099 $4,039,849
=========== =========== =========== ==========
Earnings per common and common equivalent share $0.19 $0.16 $0.90 $0.87
=========== =========== =========== ==========
Fully diluted:
Common shares outstanding at beginning
of the period 5,157,644 5,112,569 5,135,719 3,611,350
Common shares issued due to conversion
of the 7% convertible debentures -- -- -- 1,487,669
Weighted average common shares issued
during the period 1,535 4,193 15,852 12,693
Weighted average common shares issued under
the stock purchase plan this period -- 270 139 389
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) 279,015 246,178 277,382 246,175
----------- ----------- ---------- ---------
Weighted average number of common and common
equivalent shares 5,438,194 5,363,210 5,429,092 5,358,276
=========== =========== ========== ==========
Income $1,018,364 $832,136 $4,875,099 $4,039,849
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 $1,018,364 $832,136 $4,875,099 $4,207,707
=========== =========== ========== ==========
Earnings per common and common equivalent share $0.19 $0.16 $0.90 $0.79
=========== =========== ========== ==========
<CAPTION>
(1) Some of the stock options have not been included because they are
antidilutive.
</TABLE>
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-END> NOV-30-1997
<CASH> 7,066,665
<SECURITIES> 0
<RECEIVABLES> 110,358,146
<ALLOWANCES> 5,712,000
<INVENTORY> 790,051
<CURRENT-ASSETS> 102,269,230
<PP&E> 2,436,442
<DEPRECIATION> 956,279
<TOTAL-ASSETS> 116,368,219
<CURRENT-LIABILITIES> 72,787,057
<BONDS> 0
0
0
<COMMON> 22,158,114
<OTHER-SE> 21,142,719
<TOTAL-LIABILITY-AND-EQUITY> 116,368,219
<SALES> 143,170,178
<TOTAL-REVENUES> 153,942,095
<CGS> 134,589,915
<TOTAL-COSTS> 138,589,915
<OTHER-EXPENSES> 5,374,138
<LOSS-PROVISION> 2,396,523
<INTEREST-EXPENSE> 4,418,880
<INCOME-PRETAX> 7,581,519
<INCOME-TAX> 2,706,420
<INCOME-CONTINUING> 4,875,099
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,875,099
<EPS-PRIMARY> 0.90
<EPS-DILUTED> 0.90
</TABLE>
