UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 1999
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
5,233,864 common shares were outstanding as of August 31, 1999.
<PAGE>
AG SERVICES OF AMERICA, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial statements:
Consolidated condensed balance sheets, August 31, 1999
unaudited) and February 28, 1999 1
Unaudited consolidated condensed statements of income,
three months and six months ended August 31, 1999 and 1998 2
Unaudited consolidated condensed statements of cash
flows, six months ended August 31, 1999 and 1998 3
Consolidated statement of stockholders' equity,
six months ended August 31, 1999 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
Item 6. Exhibits and reports on form 8-K: 14
(a) Exhibits
(11) Statement re computation of earnings 15
per common share
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AG SERVICES OF AMERICA, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
<CAPTION>
August 31, February 28
ASSETS 1999 1999*
(Unaudited)
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash $34 $67
Customer notes receivable, less allowance
for doubtful notes and reserve for
discounts August 31, 1999 $10,029;
February 28, 1999 $4,440 297,400 106,211
Accounts receivable 1,006 515
Inventories 1,591 2,818
Foreclosed assets held for sale 4,189 836
Deferred income taxes, net 872 872
Other current assets 476 3,695
---------- ----------
Total current assets $305,568 $115,014
---------- ----------
LONG-TERM RECEIVABLES AND OTHER ASSETS
Customer notes receivable, less allowance
for doubtful notes August 31, 1999
$2,510 February 28, 1999 $1,755; $20,348 $16,899
Loan origination fees, less accumulated
amortization August 31, 1999 $316;
February 28, 1999 $235; 778 352
Deferred income taxes, net 650 650
---------- ----------
$21,776 $17,901
---------- ----------
EQUIPMENT, less accumulated depreciation
August 31, 1999 $1,579; February 28, 1999
$1,406; $1,820 $1,729
---------- ----------
$329,164 $134,644
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable, including current maturities $239,004 $61,817
Outstanding checks in excess of
bank balances 3,203 9,986
Accounts payable 14,045 1,732
Accrued expenses 2,368 1,553
Income taxes payable 181 536
---------- ----------
Total current liabilities $258,801 $75,624
---------- ----------
LONG-TERM LIABILITIES
Notes payable, less current maturities $13,860 $8,483
---------- ----------
STOCKHOLDERS' EQUITY
Capital stock $22,756 $22,595
Retained earnings 33,747 27,942
---------- ----------
$56,503 $50,537
---------- ----------
$329,164 $134,644
========== ==========
<CAPTION>
*Condensed from Audited Financial Statements.
<FN>
See notes to Consolidated Condensed Financial Statements.
</TABLE>
-1-
<PAGE>
<TABLE>
AG SERVICES OF AMERICA, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
Three Months and Six Months Ended August 31, 1999 and 1998
(Dollars in Thousands, Except Per Share Amounts)
<CAPTION>
Three Months Ended Six Months Ended
August 31, August 31,
1999 1999 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenues:
Farm inputs $81,385 $62,752 $210,371 $160,472
Financing income 7,795 6,645 12,592 10,454
----------- ----------- ----------- -----------
$89,180 $69,397 $222,963 $170,926
----------- ----------- ----------- -----------
Cost of revenues:
Farm inputs $76,653 $59,175 $198,363 $151,536
Financing expense 3,828 3,372 5,782 4,876
Provision for doubtful notes 1,618 1,245 4,110 3,072
----------- ----------- ----------- -----------
$82,099 $63,792 $208,255 $159,484
----------- ----------- ----------- -----------
Income before operating expenses
and income taxes $7,081 $5,605 $14,708 $11,442
Operating expenses 2,694 2,076 5,422 4,120
----------- ----------- ----------- -----------
Income before income taxes $4,387 $3,529 $9,286 $7,322
Federal and state income taxes 1,660 1,253 3,482 2,616
----------- ----------- ----------- -----------
Net income $2,727 $2,276 $5,804 $4,706
=========== =========== =========== ===========
Earnings per share:
Basic $0.52 $0.44 $1.11 $0.91
=========== =========== =========== ===========
Diluted $0.50 $0.42 $1.07 $0.87
=========== =========== =========== ===========
Weighted average shares
outstanding:
Basic 5,226 5,154 5,226 5,198
=========== =========== =========== ===========
Diluted 5,449 5,435 5,449 5,439
=========== =========== =========== ===========
<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, 1999 and 1998
(Dollars in Thousands)
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $5,804 $4,706
Adjustments to reconcile net income to
net cash (used in) operating activities:
Depreciation 197 172
Amortization 82 42
Changes in assets and liabilities (177,910) (158,262)
---------- ----------
Net cash (used in) operating activities ($171,827) ($153,342)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment ($351) ($269)
Proceeds from sale of equipment 64 -
(Increase)decrease in foreclosed assets
held for sale (3,353) 130
---------- ----------
Net cash (used in) investing activities ($3,640) ($139)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable $212,407 $179,007
Principal payments on notes payable (29,843) (24,348)
Increase (decrease) in excess of outstanding ( 6,783) 1,839
checks over bank balance
(Increase) in loan origination fees (508) -
Proceeds from issuance of capital stock,
net 161 264
---------- ----------
Net cash provided by financing
activities $175,434 $156,762
---------- ----------
Increase (decrease) in cash and cash equivalants ($33) $3,281
CASH
Beginning 67 174
---------- ----------
Ending $34 $3,455
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $4,344 $3,494
Income taxes $3,837 $909
<FN>
See notes to Consolidated Condensed Financial Statements
</TABLE>
-3-
<PAGE>
<TABLE>
AG SERVICES OF AMERICA, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Six Months Ended August 31, 1999
(Dollars in thousands)
<CAPTION>
Capital Stock
-----------------------
Shares Retained
Issued Amount Earnings Total
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance,
February 28, 1999 5,212,604 $22,595 $27,942 $50,537
Net income -- -- 5,805 5,805
Issuance of 20,250
shares of capital
stock upon the
exercise of
options 20,250 146 -- 146
Issuance of 1,010
shares of capital
stock under the
employee stock
purchase plan 1,010 15 15
---------- ----------- ----------- -----------
Balance,
August 31, 1999 5,233,864 $22,756 $33,747 $56,503
========== =========== =========== ===========
<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 statements
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, 1999. 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, 1999 are not necessarily
indicative of the results that may be expected for the year ending
February 28, 2000.
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.
Unless otherwise noted, all amounts presented are in thousands except
per share amounts.
Note 2. Commitments and Contingencies
Commitments:
In the normal course of business, the Company makes various commitments
That are not reflected in the accompanying consolidated condensed
financial statements. These include various commitments to extend
credit to customers. At August 31, 1999 and February 28, 1999 the
Company had approximately $42,800 and $84,000, respectively, in
commitments to supply farm inputs. No material losses or liquidity
demands are anticipated as a result of these commitments.
Contingencies:
The Company is named in lawsuits in the ordinary course of business.
Counsel for the 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.
-5-
<PAGE>
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 about the outcome of such evaluations.
Note 3. Pledged Assets and Related Debt
The Company entered into a five-year asset backed securitized financing
program through fiscal 2004, with a maximum available borrowing amount
of $275 million. 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 wholly
owned, special purpose subsidiary of the Company. Ag Acceptance
pledges its interest in these notes receivable to a commercial-paper
market conduit entity on $205 million of the facility which incurs
interest at variable rates in the commercial paper market and the
remaining $70 million is a three-year term note with interest at
a variable cost of LIBOR plus 25 basis points. 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, 1999,
the Company had a maximum amount available under the asset backed
securitized financing program of approximately $50 thousand based
on borrowing base computations as provided by the agreement.
In conjunction with the securitized financing program, the Company
maintains a $8.5 million revolving bank line of credit through fiscal
2000. The line of credit is accessible to cover any potential
deficiencies in available funds financed through the securitization
program. At August 31, 1999 the Company had a maximum amount
available under the agreement of approximately $4.6 million based on
the borrowing base computation as provided by the agreement.
During 1998, the Company negotiated an additional bank line of credit
With a maximum available borrowing amount of $12 million. The line
of credit is accessible to cover the Company's funding requirements
for its intermediate loan program. The agreement has a two year term
ending February 28, 2000. At August 31, 1999, the Company had
approximately $2.0 million available under the line of credit based
on the borrowing base computation as provided by the agreement.
-6-
<PAGE>
Note 4. Earnings Per Share
In March of 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings Per Share." Statement No. 128 replaced
the calculation of primary and fully diluted earnings per share with
basic and diluted earnings per share. Basic earnings per share is
computed by dividing net income available to common stockholders by
the weighted average number of shares outstanding. In computing
diluted earnings per share, the dilutive effect of stock options
during the periods presented as well as the effect of contingently
issuable shares also increase the weighted average number of shares.
-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 months and six
months ended August 31, 1999 and 1998. 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,
------------------ -----------------
1999 1998 1999 1998
-------- --------- ------- --------
Net Revenues:
Farm inputs 91.3% 90.4% 94.4% 93.9%
Financing Income 8.7% 9.6% 5.6% 6.1%
------ ------ ------ ------
100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------
Cost of Revenues:
Farm inputs 86.0% 85.3% 89.0% 88.7%
Financing expense 4.3% 4.9% 2.6% 2.8%
Provision for doubtful
notes 1.8% 1.8% 1.8% 1.8%
----- ----- ----- -----
92.1% 92.0% 93.4% 93.3%
----- ----- ----- -----
Income before operating
expenses and income taxes 7.9% 8.0% 6.6% 6.7%
Operating expenses 3.0% 2.9% 2.4% 2.4%
----- ----- ---- ----
Income before income taxes 4.9% 5.1% 4.2% 4.3%
Federal and state income
taxes 1.9% 1.8% 1.6% 1.5%
----- ---- ---- ----
Net income 3.0% 3.3% 2.6% 2.8%
======== ======== ======== ========
Net Revenues:
Net revenues increased $19.8 million or 28.5% during the three months
ended August 31, 1999, compared with the three months ended August
31, 1998. Net revenues increased $52.0 million or 30.5% during the
six months ended August 31, 1999, compared with the six months ended
August 31, 1998. The Company reached this record level through
greater market penetration with the increased name recognition gained
by the Company's Agri-Flex Credit(R) program in its 30 state market
area. Financing income as a percentage of net income decreased
slightly to 8.7% and 5.6% for the three and
-8-
<PAGE>
six months ended August 31, 1999, respectively, from 9.6% and 6.1%
for the same periods of the previous year. This decline was
primarily a result of a decrease in the prime lending rate by
approximately 50 basis points, which is the base rate used by the
Company to charge interest on a variable rate basis to its customers,
as compared to a year ago and a decline in volume under the Company's
servicing and marketing agreement.
Cost of Revenues:
The total cost of revenues remained relatively constant at 92.1% and
93.4% of net revenues for the three and six months ended August 31,
1999 ascompared to 92.0% and 93.3% for the three and six months ended
August 31, 1998. The gross margin on the sale of farm inputs
increased to 5.8% and 5.7% for the three and six months ended August
31, 1999, respectively, compared to 5.7% and 5.6% for the three and
six months ended August 31, 1998. The increase in gross margin on
the sale of farm inputs was the result of opportunistic purchasing
from manufacturers and distributors and gains realized on foreclosed
assets held for sale. Concerning the gross margin on financing income
alone, the percentages increased to 50.9% and 54.1% for the three and
six months ended August 31, 1999 from 49.3% and 53.4% for the three
and six months ended August 31, 1998. The increase in financing
margins is a result of better utilization of commercial paper debt
due to an increased advance rate, which decreased the amount of
outstanding debt on the Company's line of credit which carries a
higher interest cost. The provision for doubtful notes remained
relatively constant at 1.8% of net revenues for the three and six
months ended August 31, 1999 and 1998, respectively.
Operating Expenses:
Operating expenses increased slightly to 3.0% of net revenues for the
three months ended August 31, 1999 from 2.9% for the three months
ended August 31, 1998 due to an increase in incentive compensation
related to the Company profit level. Operating expenses remained at
2.4% of net revenues for the six months ended August 31, 1999 and
1998. The increase in operating expenses is attributed primarily to
the Company's growth. Payroll and payroll related expenses increased
to $1,984 and $3,925 for the three and six months ended August 31,
1999 from $1,516 and $2,945 for the three and six months ended
August 31, 1998.
Net Income:
Net income increased 19.9% to $2,728 for the three months ended August
31, 1999 from $2,276 for the three months ended August 31, 1998 and
23.4% to $5,804 for the six months ended August 31, 1999 from $4,706
for the six months ended August 31, 1998. The increase in net income
is attributable to the increase in net revenues and the corresponding
increase in gross profit. The percentage increase in net income was
less than the increase in revenue due to the larger percentage increase
in farm input revenue over the percentage increase in financing income
as discussed above. Also contributing to the decline was the increase
in operating expenses and federal tax expense being at the maximum
level due to greater federal earnings.
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 1999 or the first six months of fiscal
2000.
-9-
<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 1999 and the first
two quarters of fiscal 2000. This information is derived from
unaudited consolidated 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 2000 Quarter Ended
May 31 August 31 November 30 February 29
------ --------- ----------- -----------
(Dollars in thousands)
Net revenues $133,783 $89,180
Net income $3,077 $2,727
Fiscal 1999 Quarter Ended
May 31 August 31 November 30 February 28
------- ---------- ----------- -----------
(Dollars in thousands)
Net revenues $101,529 $69,397 $16,447 $37,920
Net income $2,429 $2,276 $1,406 $381
Except for the Dakotas, the Company's primary market area experienced
a normal 1999 crop planting season. Wet weather conditions in the
Dakotas have caused reduced delayed sales of fertilizer and chemicals,
as well as some shifting from corn to soybean production.
Liquidity and Capital Resources:
At August 31, 1999 the Company had working capital of $46,767 an
increase of $10,475 over a year ago and an increase of $7,377 since
February 28, 1999. The components of this net increase, since
February 28, 1999, were (i) $7,567 resulting from operating activities,
consisting of approximately, $5,804 in net income, $197 in depreciation,
$82 in amortization, and the remainder from a net change in other
working capital items, (ii) capital expenditures of approximately $351
related to the acquisition of equipment and furniture, and (iii) net
proceeds of $161 from the issuance of common stock upon exercise of
options and sales of stock through the employee stock purchase plan.
The Company entered into a five-year asset backed securitized financing
program through fiscal 2004 with a maximum available borrowing amount
of $275 million. Under the terms of the five-year facility, the Company
sells andmay continue to sell or contribute certain notes receivable to
Ag Acceptance Corporation ("Ag Acceptance"), wholly owned, special
purpose subsidiary of the Company. Ag Acceptance pledges its interest
in these notes receivable to a commercial paper market conduit entity
on $205 million of the facility which incurs interest at variable rates
in the commercial paper market and the remaining $70 million is a
three-year term note with interest at a variable cost of LIBOR plus 25
basis points. 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, 1999, the Company had a maximum amount
available under the asset backed securitized financing program of
approximately $50 thousand, based on borrowing base computations as
provided by the agreement.
-10-
<PAGE>
In conjunction with the securitized financing program, the Company will
maintain an $8.5 million bank line of credit in fiscal 2000. 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 also requires that the total outstanding borrowings be repaid
in full for 10 consecutive days during the Company's second fiscal
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, 1999, the Company had a maximum amount available under the
agreement of approximately $4.6 million based on the borrowing base
computation as provided by the agreement.
During 1998, the Company negotiated an additional bank line of credit
witha maximum available borrowing amount of $12 million. The line of
credit is accessible to cover the Company's funding requirements for its
intermediate loan program. All borrowings are collateralized by
substantially all assets of the Company. 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. Advances under the line of credit agreement
are also subject to portfolio performance, financial covenant
restrictions, and borrowing base calculations. At August 31, 1999,
approximately $2.0 million was available based on the borrowing base
computation as provided by the agreement.
Management believes that the financial resources available to it,
including its bank lines of credit and asset backed securitization
program, 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.
Year 2000:
The Company has established a company-wide plan to prepare our
information technology systems and non-information technology systems
with embedded technology applications for the year 2000 issue. The
plan includes identification and assessment of critical functions,
compliance plan development, testing and contingency planning. The
respective vendors of the principal financial systems have advised the
Company, that these systems are in compliance with the upcoming
millennium change. With the assistance of an outside consultant, the
Company has determined the Company's information systems will be Year
2000 compliant.
The final testing phases for information and telecommunication systems
were completed during the second quarter of fiscal 2000. No system
failures occurred during this testing which would require additional
remedial action. The Company feels that all internal systems are Year
2000 compliant and expects no internal system disruptions. The Company
is developing a contingency plan which will allow the Company to select
alternative third party vendors and suppliers, where appropriate, to
fulfill customer orders.
Costs associated with year 2000 issues are estimated to be approximately
$30,000 from 1998 through 2000, of which $2,000 has already been spent
to date. The Company has excluded the costs from the above estimates
associated with information specialists already on staff. These cost
estimates assume that the Company will not incur any significant year
2000 costs associated with third party non-compliance. Based upon its
review efforts to date, the Company believes that future external and
internal costs to be incurred to address year 2000 issues will not have
a material adverse effect on the Company's financial position, cash
flows or results of operations.
-11-
<PAGE>
Our most likely worst case scenario is the temporary inability of our
suppliers to provide our customers with the farm inputs they require on
a timely basis. Due to the uncertainty of the year 2000 compliance
with third parties, including governmental agencies, the Company can not
reasonably estimate the financial effects of the worst case scenario.
Through the development and use of a contingency plan, the Company
hopes to mitigate all potential problems associated with the year 2000
issue.
"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; technological
problems (including Year 2000 compliance); the amount and availability
under its asset backed securitization program; unknown risks; 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 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Stockholders on July
29, 1999. 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 2000 Annual Meeting), and until the director's
Respective successors are duly elected and qualified;
Votes Votes
Director Name in Favor Withheld
Gaylen D. Miller 3,938,500 24,000
Henry C. Jungling, Jr. 3,938,500 24,000
Kevin D. Schipper 3,938,500 24,000
James D. Gerson 3,938,500 24,000
Michael Lischin 3,962,400 100
Ervin J. Mellema 3,962,200 300
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, 2000 was approved by a vote of
3,940,589 votes in favor, 620 votes against, and 25,013 votes
abstaining.
-13-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Statement re computation of per share earnings 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 15, 1999
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<TABLE>
AG SERVICES OF AMERICA, INC.
EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<CAPTION>
Three Months Ended Six Months Ended
August 31, August 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Computation of weighted average
number of basic shares:
Basic:
Common shares outstanding at
beginning of the period 5,231,264 5,199,304 5,212,604 5,177,165
Weighted average number of
shares issued during the
period 2,049 3,816 13,587 20,267
----------- ----------- ----------- -----------
Weighted average shares
outstanding (basic) 5,233,313 5,203,120 5,226,191 5,197,521
=========== =========== =========== ===========
Net income $2,727,792 $2,276,085 $5,804,345 $4,705,523
=========== =========== =========== ===========
Basic earnings per share $0.52 $0.44 $1.11 $0.91
=========== =========== =========== ===========
Diluted:
Common shares outstanding at
beginning of the period 5,231,264 5,199,304 5,212,604 5,177,154
Weighted average number of
shares issued during the
period 2,049 3,816 13,587 20,267
Weighted average of potential
dilutive shares computed
using the treasury stock
method using the average
market price during the period:
Options (1) 227,713 233,163 223,289 241,510
----------- ----------- ----------- -----------
Weighted average shares
outstanding, (diluted) 5,461,026 5,436,283 5,449,480 5,439,031
=========== =========== =========== ===========
Net income $2,727,792 $2,276,085 $5,804,345 $4,705,523
=========== =========== =========== ===========
Diluted earnings per share $0.50 $0.42 $1.07 $0.87
=========== =========== =========== ===========
<CAPTION>
(1) Some of the stock options have been excluded because they are
antidilutive.
</TABLE>
-15-
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-2000
<PERIOD-END> AUG-31-1999
<CASH> 33,830
<SECURITIES> 0
<RECEIVABLES> 331,292,803
<ALLOWANCES> 12,539,000
<INVENTORY> 1,590,565
<CURRENT-ASSETS> 305,567,231
<PP&E> 3,398,951
<DEPRECIATION> 1,579,000
<TOTAL-ASSETS> 329,163,500
<CURRENT-LIABILITIES> 258,801,006
<BONDS> 0
0
0
<COMMON> 22,756,299
<OTHER-SE> 33,746,535
<TOTAL-LIABILITY-AND-EQUITY> 329,163,500
<SALES> 81,385,105
<TOTAL-REVENUES> 89,180,084
<CGS> 76,653,318
<TOTAL-COSTS> 76,653,318
<OTHER-EXPENSES> 2,694,003
<LOSS-PROVISION> 1,617,762
<INTEREST-EXPENSE> 3,827,213
<INCOME-PRETAX> 4,387,788
<INCOME-TAX> 1,660,000
<INCOME-CONTINUING> 2,727,788
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<NET-INCOME> 2,727,788
<EPS-BASIC> 0.52
<EPS-DILUTED> 0.50
</TABLE>
