<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1996
Commission file number: 0-25620
A.S.V., INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1459569
--------------------------- --------------------
State or other jurisdiction of I.R.S. Employer Identification No.
incorporation of organization
840 LILY LANE
P.O. BOX 5160
GRAND RAPIDS, MN 55744 (218) 327-3434
------------------------------ ---------------------
Address of principal executive offices Registrant's telephone number
Check whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 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
At June 30, 1996, 3,200,906 shares of registrant's $.01 par value
Common Stock were outstanding.
Transitional Small Business Issuer Format [_] Yes [X] No
Page 1
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
A.S.V., INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, December 31,
1996 1995
------------ ----------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................... $1,071,777 $ 437,727
Marketable security......................... 50,000 50,000
Accounts receivable, net.................... 891,067 737,323
Inventories................................. 3,400,463 3,685,975
Prepaid expenses and other.................. 123,793 62,224
---------- ----------
Total current assets.................. 5,537,100 4,973,249
Property and equipment, net................... 1,392,098 1,348,966
---------- ----------
Total Assets $6,929,198 $6,322,215
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term liabilities.... $ 12,520 $ 21,638
Accounts payable............................ 536,665 179,382
Accrued expenses:
Compensation.............................. 44,628 70,220
Taxes, other than income.................. 47,412 21,182
Other..................................... 75,133 66,163
Income taxes payable........................ 76,761 229,591
---------- ----------
Total current liabilities........... 793,119 588,176
---------- ----------
LONG-TERM LIABILITIES, less current portion... 672,530 656,297
---------- ----------
SHAREHOLDERS' EQUITY
Capital stock, $.01 par value:
Preferred stock, 5,000,000 shares
authorized; no shares outstanding....... - -
Common stock, 15,000,000 shares
authorized; 3,200,906 shares issued
and outstanding in 1996; 3,175,906
shares issued and outstanding in 1995... 32,009 31,759
Additional paid-in capital.................. 4,987,004 4,929,504
Retained earnings........................... 444,536 116,479
---------- ----------
5,463,549 5,077,742
---------- ----------
Total Liabilities and
Shareholders' Equity................ $6,929,198 $6,322,215
========== ==========
</TABLE>
See notes to consolidated financial statements.
2
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A.S.V., INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- ----------------------------
1996 1995 1996 1995
------------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Net sales................................... $ 2,862,298 $ 1,958,421 $ 5,343,971 $ 3,705,516
Cost of goods sold.......................... 2,230,025 1,553,534 4,148,661 2,961,752
------------ ------------ ------------ ------------
Gross profit....................... 632,273 404,887 1,195,310 743,764
------------ ------------ ------------ ------------
Operating expenses:
Selling, general and administrative...... 309,253 231,329 591,280 485,168
Research and development................. 43,233 11,524 73,713 22,173
------------ ------------ ------------ ------------
352,486 242,853 664,993 507,341
------------ ------------ ------------ ------------
Operating Income................... 279,787 162,034 530,317 236,423
------------ ------------ ------------ ------------
Other income (expense)
Interest expense......................... (11,710) (9,239) (23,749) (11,613)
Other, net............................... 14,284 6,390 22,589 18,390
------------ ------------ ------------ ------------
2,574 (2,849) (1,160) 6,777
------------ ------------ ------------ ------------
Income before income taxes......... 282,361 159,185 529,157 243,200
Provision for income taxes.................. 107,300 58,900 201,100 90,000
------------ ------------ ------------ ------------
NET INCOME ........................ $ 175,061 $ 100,285 $ 328,057 $ 153,200
============ ============ ============ ============
Net income per common share................. $ .05 $ .03 $ .09 $ .05
============ ============ ============ ============
Weighted average number of common and
common equivalent shares outstanding..... 3,478,146 3,334,012 3,436,180 3,283,799
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
3
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A.S.V., INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net income........................................... $ 328,057 $ 153,200
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation........................................ 55,800 37,190
Interest accrued on capital lease obligation........ 22,800 -
Changes in assets and liabilities:
Accounts receivable............................... (153,744) (250,605)
Inventories....................................... 285,512 (497,068)
Prepaid expenses.................................. (61,569) 61,313
Accounts payable.................................. 357,283 323,036
Accrued expenses.................................. 9,608 119,857
Income taxes payable.............................. (152,830) 78,879
---------- ------------
Net cash provided by operating activities............. 690,917 25,802
---------- ------------
Cash flows from investing activities:
Purchase of property and equipment................... (98,932) (334,876)
Redemption of marketable security.................... - 500,000
Purchase of marketable security...................... - (311,282)
---------- ------------
Net cash used in investing activities................. (98,932) (146,158)
---------- ------------
Cash flows from financing activities:
Exercise of stock options............................ 57,750 -
Principal payments on long-term liabilities.......... (15,685) (51,444)
---------- ------------
Net cash provided by (used in) financing activities... 42,065 (51,444)
---------- ------------
Net increase (decrease) in cash and cash equivalents.. 634,050 (171,800)
Cash and cash equivalents at beginning of period...... 437,727 457,980
---------- ------------
Cash and cash equivalents at end of period............ $1,071,777 $ 286,180
========== ============
</TABLE>
See notes to consolidated financial statements.
4
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A.S.V., INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INTERIM FINANCIAL INFORMATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal, recurring
adjustments) considered necessary for a fair presentation have been included.
Results for the interim periods are not necessarily indicative of the results
for an entire year.
RECLASSIFICATION
Certain 1995 balance sheet amounts have been reclassified to be consistent
with the 1996 presentation, with no effect on shareholders' equity or net
income.
5
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth certain Statement of Earnings data as a
percentage of net sales:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1996 1995 1996 1995
-------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Net sales............................ 100.0% 100.0% 100.0% 100.0%
Cost of goods sold................... 77.9 79.3 77.6 79.9
Gross profit......................... 22.1 20.7 22.4 20.1
Selling, general and administrative.. 10.8 11.8 11.1 13.1
Operating income..................... 9.8 8.3 9.9 6.4
Interest expense..................... (0.4) (0.5) (0.4) (0.3)
Net income........................... 6.1 5.1 6.1 4.1
</TABLE>
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995.
Net Sales. Net sales increased 46%, or approximately $904,000, to
approximately $2,862,000 for the three months ended June 30, 1996 compared with
the three month period ended June 30, 1995. The increase was due primarily to
continued increased sales of Posi-Track vehicles and related accessories. Of
this increase, approximately $854,000 was due to increased demand and the new
dealers added in second quarter 1996. Of the Posi-Track vehicles shipped in
second quarter 1996, 42% were to new dealers added in 1996. Additionally, the
Company occupied its new manufacturing facility in Grand Rapids, Minnesota in
May 1995, which provides approximately three times the production space of the
Company's former facility. Sales of the Company's Track Truck vehicle in the
second quarter of 1996 decreased approximately $54,000 from second quarter 1995
and represented 1.7% and 5.2% of net sales for the three months ended June 30,
1996 and 1995, respectively. The decrease is due to one less Track Truck being
shipped in second quarter 1996, compared with second quarter 1995. Sales of
parts, used equipment and other items increased approximately $104,000 for the
three month period ended June 30, 1996 compared with the same period in 1995.
This increase is primarily due to a 47% increase in the sale of parts as the
number of vehicles in the field has increased and an increase in the sale of
used equipment which had been taken in on trade.
Gross Profit. Gross profit for the three months ended June 30, 1996
increased to approximately $632,000, or 22.1% of net sales, compared with
$405,000, or 20.7% of net sales, in 1995. The increased gross profit is
attributable to increased sales volume in 1996. The increased gross profit
percentage is attributable to the increased space of the new manufacturing
facility allowing the Company to buy raw materials in greater quantities
resulting in lower costs. Also, the increased number of Posi-Track vehicles
sold has resulted in greater efficiencies in the production process.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased from 11.8% of net sales in second quarter
1995, to 10.8% of net sales in second quarter 1996. The increased dollar amount
of expenses of approximately $78,000 was due to higher compensation costs as
sales and administrative personnel have been added to support expanded sales and
customer service roles and increased occupancy costs. The decreased percentage
of selling, general and administrative expenses is due to the Company closely
managing its costs as sales increase.
Research and Development. Research and development expenses increased
from approximately $12,000 in second quarter 1995 to approximately $43,000 in
1996. The increase is due mainly to the Company having the necessary funds
available to invest in this area in 1996 from increased profitability. The
research and development efforts have focused primarily on improvements to the
Company's existing product line.
Interest Expense. Interest expense increased from approximately
$9,000 for the second quarter of 1995 to approximately $12,000 for the second
quarter of 1996. This increase is due to the capitalization of the Company's
lease for its new manufacturing facility (occupied May 1995), for which the
Company records interest expense on a monthly basis throughout the twenty-year
lease term.
6
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Net Income. Net income for the second quarter of 1996 was approximately
$175,000, compared with approximately $100,000 for the second quarter of 1995.
The increase in 1996 resulted primarily from additional gross profit on
increased sales, offset in part by increased operating costs.
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995.
Net Sales. Net sales for the six months ended June 30, 1996 increased 44%,
or approximately $1,638,000, to approximately $5,344,000. The increase was due
primarily to the increased sales of the Company's Posi-Track vehicle, along with
increases in parts and other sales, offset by a slight decrease in Track Truck
sales. Posi-Track related sales increased 52% due to the increased demand and
new dealers added in 1996. Track Truck related sales decreased slightly due to
one less Track Truck being sold in 1996. Sales of parts, used equipment and
other increased approximately 37% from 1995 due primarily to a greater number of
machines in service in 1996.
Gross Profit. Gross profit increased for the six months ended June 30, 1996
to approximately $1,195,000, or 22.4% of net sales, from $744,000, or 20.1% of
net sales, for the six months ended June 30, 1995. The increased gross profit
was due to increased sales while the increased gross profit percentage was due
to the increased efficiencies obtained from the Company's new manufacturing
facility which was occupied in May 1995. Also, the increased number of Posi-
Track vehicles sold has resulted in additional efficiencies in the production
process.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased from 13.1% of net sales for the six months
ended June 30, 1995 to 11.1% of net sales for the six months ended June 30,
1996. The increased dollar amount of approximately $158,000 is due to increased
sales and marketing costs and increased costs for administrative personnel hired
to support increased sales volumes. The decreased percentage of selling, general
and administrative expenses is due to the Company closely managing its costs as
sales increase.
Research and Development. Research and development expenses increased from
approximately $22,000 in 1995 to approximately $74,000 in 1996. The increase is
due mainly to the Company having the necessary funds available to invest in this
area in 1996 from increased profitability. The research and development efforts
have focused primarily on improvements to the Company's existing product line.
Interest Expense. Interest expense increased from approximately $12,000 for
the six months ended June 30, 1995 to approximately $24,000 for the same period
in 1996 due to the required capitalization of the lease for the Company's new
manufacturing facility.
Net Income. Net income for the six months ended June 30, 1996 increased to
approximately $328,000 from approximately $153,000 for 1995. The increase was
due to increased sales and gross profit, offset in part by increased operating
expenses and interest expense.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had working capital of approximately
$4,740,000 compared with working capital of approximately $4,076,000 at June 30,
1995. Cash and marketable securities increased approximately $524,000 to
$1,121,777 at June 30, 1996. This increase is due primarily to cash generated
from profitable operations and changes in other working capital components.
The Company believes its existing cash and marketable securities, together
with cash expected to be provided by operations, available credit lines and its
ability to secure additional debt or equity financing will satisfy the Company's
projected working capital needs and other cash requirements at least through the
end of June 1997.
During the second quarter of 1996, the Company received an order in excess
of $3 million from one of its Posi-Track dealers. The order is for Posi-Tracks
which are to be delivered throughout 1996. Should the order be completely
filled, the Company estimates it will take approximately 30-40% of the projected
production for the remainder of 1996. In order to meet its anticipated
production levels for 1996, the Company expects it will increase the number of
employees by approximately 10-30% over the next six to twelve months. It is
anticipated nearly all the additional employees will be in the production area.
The Company believes the local work force is sufficient to hire the additional
employees. The Company also believes it can secure additional manufacturing and
office space should it be necessary or advantageous to expand its existing
facility.
7
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In order to maintain its competitive advantage over other manufacturers of
similar products, the Company believes it will increase the level of spending on
research and development activities. It is expected the main thrust of these
activities will be directed towards improvements of and variations on existing
products.
The statements set forth above under 'Liquidity and Capital Resources'
which are not historical facts are forward-looking statements and involve risks
and uncertainties, many of which are outside the Company's control and,
accordingly, actual results may differ materially. Factors that might cause such
a difference include, but are not limited to, lack of market acceptance of
existing products, inability to attract new dealers for the Company's products,
unexpected delays in obtaining raw materials, the inability to secure debt or
equity financing if and when needed, unexpected additional expenses or operating
losses or the activities of competitors. Any forward-looking statements provided
from time-to-time by the Company represents only management's then-best current
estimate of future results or trends.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders of A.S.V., Inc. was held on June 8,
1996. Matters submitted at the meeting for vote by the shareholders
were as follows:
(a) Election of Directors.
The following directors were elected at the Annual Meeting, each
with 2,897,918 votes for and no votes against:
Philip C. Smaby Gary D. Lemke
Edgar E. Hetteen Hazel L. Harris
Jerome T. Miner Leland T. Lynch
Karlin S. Symons
(b) Ratification of Appointment of Independent Public Accountants.
Shareholders ratified the appointment of Grant Thornton LLP as the
Company's independent public accountants for the fiscal year
ending December 31, 1996, with a vote of 2,891,378 votes for, no
votes against and 8,040 shares abstaining.
ITEM 5. OTHER INFORMATION
None
8
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit
Number Description
------ -----------
3.1 Second Restated Articles of Incorporation of the Company (a)
3.2 Bylaws of the Company (a)
4.1 Specimen form of the Company's Common Stock Certificate (a)
4.2 1987 Stock Option Plan (a)
4.3 1994 Long-Term Incentive and Stock Option Plan (a)
4.4 Form of Warrant issued to Summit Investment Corporation (b)
10.1 Development Agreement dated July 14, 1994 among the Iron Range
Resources and Rehabilitation Board ("IRRRB"), the Grand Rapids
Economic Development Agency ("EDA") and the Company (b)
10.2 Lease and Option Agreement dated July 14, 1994 between the EDA
and the Company (b)
10.3 Option Agreement dated July 14, 1994 between the EDA and the
Company (b)
10.4 Grant Contract dated July 1, 1994 between the Company and the
IRRRB (b)
10.5 Letter Credit Agreement dated June 15, 1994 between the Security
State Bank of Hibbing and the Company (a)
10.9 Employment Agreement dated October 17, 1994 between the Company
and Thomas R. Karges (c)
16 Letter of Virden & Johnson, Ltd. regarding change in certifying
accountants (a)
22 List of Subsidiaries (a)
27 Financial Data Schedule
- - - --------------------------------------
(a) Incorporated by reference to the Company's Registration
Statement on Form SB-2 (File No. 33-61284C) filed July 7,
1994.
(b) Incorporated by reference to the Company's Post-Effective
Amendment No. 1 to Registration Statement on Form SB-2 (File
No. 33-61284C) filed August 3, 1994.
(c) Incorporated by reference to the Company's Quarterly Report
on Form 10-QSB for the quarter ended September 30, 1994 (File
No. 33-61284C) filed November 11, 1994.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended June 30, 1996.
9
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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.
A.S.V., INC.
Dated: August 2, 1996 By /s/ Gary Lemke
--------------------------------------
Gary Lemke
President
Dated: August 2, 1996 By /s/ Thomas R. Karges
--------------------------------------
Thomas R. Karges
Chief Financial Officer
(principal financial and accounting
officer)
10
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EXHIBIT INDEX
EXHIBIT METHOD OF FILING
- - - ------- ----------------
27 Financial Data Schedule................ Filed herewith electronically
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and statements of earnings found on pages 2 and 3 of
the Company's form 10-QSB for the year to date, and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,071,777
<SECURITIES> 50,000
<RECEIVABLES> 921,067
<ALLOWANCES> 30,000
<INVENTORY> 3,400,463
<CURRENT-ASSETS> 5,537,100
<PP&E> 1,894,332
<DEPRECIATION> 502,234
<TOTAL-ASSETS> 6,929,198
<CURRENT-LIABILITIES> 793,119
<BONDS> 672,530
<COMMON> 32,009
0
0
<OTHER-SE> 5,431,540
<TOTAL-LIABILITY-AND-EQUITY> 6,929,198
<SALES> 5,343,971
<TOTAL-REVENUES> 5,343,971
<CGS> 4,148,661
<TOTAL-COSTS> 4,148,661
<OTHER-EXPENSES> 664,993
<LOSS-PROVISION> 10,000
<INTEREST-EXPENSE> 23,749
<INCOME-PRETAX> 529,157
<INCOME-TAX> 201,100
<INCOME-CONTINUING> 328,057
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 328,057
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
