SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
___ 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: 0-25360
AG-CHEM EQUIPMENT CO., INC.
(Exact Name of Registrant as Specified in Its Charter)
Minnesota 41-0872842
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5720 Smetana Drive
Minnetonka, Minnesota 55343-9688
(Address of Principal Executive Offices)
(612)933-9006
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 of
the past 90 days.
__X__ Yes _____ No
As of January 31, 1996, there were outstanding, 9,695,768 shares of the
issuers' Common Stock, $.01 par value per share.
TABLE OF CONTENTS
Page
----
PART I
ITEM 1. FINANCIAL STATEMENTS.......................................... 2
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS............................................... 8
PART II
ITEM 1. LEGAL PROCEEDINGS............................................. 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.............................. 10
SIGNATURES .............................................................. 11
EXHIBITS .............................................................. 12
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
AG-CHEM EQUIPMENT CO., INC. AND SUBSIDIARIES
(Dollars in Thousands)
(UNAUDITED)
<TABLE>
December 31, September 30,
ASSETS 1996 1996
------ ------------------- ---------------
CURRENT ASSETS:
<S> <C> <C>
Accounts receivable, less allowance for
doubtful accounts of $455 and $393, respectively $ 24,697 $ 22,901
Notes receivable, current portion, and
accrued interest receivable 2,334 2,442
Inventories 117,325 102,311
Deferred income tax benefits 5,117 4,531
Prepaid expenses and other current assets 695 570
--------- --------
Total current assets 150,186 132,755
PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED
DEPRECIATION OF $25,006 AND $23,439, RESPECTIVELY 42,656 42,697
OTHER ASSETS:
Notes receivable, long-term portion 4,147 4,995
Bond funds held by trustees 735 744
Intangible and other assets, net of accumulated
amortization of $1,893 and $3,463, respectively 4,175 4,368
--------- --------
Total other assets 9,057 10,107
--------- --------
Total assets $ 201,881 $185,559
========= ========
</TABLE>
SEE ACCOMPANYING CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY December 31, September 30,
------------------------------------ 1996 1996
------------ -------------
CURRENT LIABILITIES:
<S> <C> <C>
Current installments of long-term debt $ 4,651 $ 5,165
Note payable to bank 40,000 40,000
Accounts payable 14,787 12,645
Checks outstanding in excess of cash balances 2,633 293
Customer prepayments 11,156 6,036
Accrued expenses (note 3) 11,245 18,186
Deferred income 703 389
Accrued income taxes 1,171 2,168
-------- --------
Total current liabilities 86,346 84,882
LONG-TERM DEBT, LESS CURRENT INSTALLMENTS 57,194 43,334
-------- --------
Total liabilities 145,540 128,216
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value
Authorized, 40,000,000 shares; issued and
outstanding, 9,695,768 shares 97 97
Additional paid in capital 2,699 2,699
Retained earnings 55,506 54,512
Foreign currency translation adjustment 39 35
-------- --------
Total stockholders' equity 58,341 57,343
-------- --------
Total liabilities and stockholders' equity $201,881 $185,559
======== ========
</TABLE>
SEE ACCOMPANYING CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENTS OF EARNINGS
AG-CHEM EQUIPMENT CO., INC. AND SUBSIDIARIES
(Dollars in Thousands Except Per Share Amounts)
(UNAUDITED)
Three Months Ended December 31,
-------------------------------
1996 1995
------------ ------------
Net sales $ 56,290 $ 44,951
Cost of sales 39,151 31,325
Gross profit 17,139 13,626
Selling, general and administrative expenses 14,637 12,362
----------- -----------
Operating income 2,502 1,264
Other income (expense):
Other income 863 530
Interest expense (1,731) (1,235)
----------- -----------
Earnings before income taxes 1,634 559
Income tax expense 640 200
----------- -----------
Net earnings $ 994 $ 359
=========== ===========
Earnings per share $ 0.10 $ 0.04
=========== ===========
Weighted average common shares
outstanding 9,695,768 9,600,164
=========== ===========
SEE ACCOMPANYING CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENTS OF CASH FLOWS
AG-CHEM EQUIPMENT CO. INC. AND SUBSIDIARIES
(Dollars In Thousands)
(UNAUDITED)
Three Months ended December 31,
-------------------------------
1996 1995
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 994 $ 359
ADJUSTMENTS TO RECONCILE NET EARNINGS TO NET CASH
USED IN OPERATING ACTIVITIES:
Depreciation and amortization 1,997 1,010
Loss (Gain) on sale of assets 14 (13)
Increase in deferred income tax benefits (586) (615)
Changes in operating assets and liabilities:
Accounts receivable (1,796) (1,951)
Operating notes receivable 956 2,812
Inventories (15,014) (29,987)
Other current assets (125) 2
Accounts payable 2,142 6,269
Customer prepayments and deferred income 5,434 15,243
Accrued expense (6,941) (4,814)
Income taxes (997) (1,201)
--------- ---------
Cash used in operating activities (13,922) (12,892)
CASH FLOWS FROM INVESTING ACTIVITIES:
Retirement of short-term investments
for industrial revenue bond 9 17
Purchase of property, plant and equipment (1,026) (4,251)
Increase in rental equipment (693) (452)
Proceeds from sale of equipment 2 13
Increase in other assets (60) (467)
--------- ----------
Cash used in investing activities (1,768) (5,140)
SEE ACCOMPANYING CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
Three months ended December 31,
-------------------------------
1996 1995
---------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in checks outstanding
in excess of cash balances 2,340 (1,509)
Proceeds from long-term borrowing 32,625 30,000
Repayments of long-term borrowing (19,279) (10,500)
------- -------
Cash provided by financing activities 15,686 17,991
Foreign currency translation adjustment 4 35
-------- --------
Net increase in cash -- --
Cash at beginning of period -- --
-------- --------
Cash at end of period -- $ --
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest 1,731 $ 1,305
Income taxes 2,255 $ 2,915
Supplemental disclosure of non-cash investing and financing activities:
On December 27, 1995, the Company acquired the minority interest in Soil Teq
Inc. for 100,000 shares of the Company's common stock valued at $2,700 and a
$480 promissory note. As a result, the Company owns 100% of Soil Teq Inc.
SEE ACCOMPANYING CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AG-CHEM EQUIPMENT CO., INC. AND SUBSIDIARIES
(In Thousands)
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions in Rule 10-01 of Regulation S-X.
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 accruals)
considered necessary for a fair presentation have been included. For further
information, refer to the consolidated financial statements and footnotes
thereto for the year ended September 30, 1996 included in the Company's annual
report on Form 10-K. Results of the interim periods are not necessarily
indicative of the results for an entire year.
(2) INVENTORIES
Inventories consist of the following:
December 31, September 30,
1996 1996
------------ -------------
Finished goods $ 62,524 $ 57,248
Resale parts 20,732 17,909
Work in process 13,106 11,195
Raw materials 24,636 21,147
--------- ---------
Total 120,998 107,499
Less LIFO reserve (11,843) (11,480)
--------- ---------
Total 109,155 96,019
Used equipment 8,170 6,292
--------- ---------
Total inventories $ 117,325 $ 102,311
========= ========
If the first in, first out (FIFO) method utilizing current costs had been
used for inventories valued using the LIFO method, inventories would have been
higher by $11,843 at December 31, 1996 and $11,480 at September 30, 1996.
(3) ACCRUED EXPENSES
Accrued expenses consist of the following:
December 31, September 30,
1996 1996
------------ -------------
Compensation $ 3,740 $10,839
Warranty 1,170 1,132
Taxes other than income 994 1,898
Health insurance 1,743 1,464
Interest 892 1,716
Other 2,706 1,137
--------- ---------
Total $11,245 $18,186
========= ========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
RESULTS OF OPERATIONS - THREE-MONTH PERIOD ENDED DECEMBER 31, 1996
COMPARED TO THREE-MONTH PERIOD ENDED DECEMBER 31, 1995
Consolidated net sales increased by $11,339 or 25.2 percent in the
three-month period ended December 31, 1996 from the three-month period ended
December 31, 1995 to $56,290. The increase was primarily the result of an
increase in RoGator and pre-emergence fertilization equipment sales due to
increased unit shipments. The increased unit shipments were largely due to
improved finished goods availability and faster configuration of custom orders.
Consolidated gross profit for the three-month period ended December 31,
1996 increased $3,513 or 25.8 percent as compared to the prior-year period.
Consolidated gross profit as a percent of net sales was 30.4 percent and 30.3
percent for the three-month periods ended December 31, 1996 and 1995,
respectively.
Consolidated sales, general and administrative ("S,G&A") expenses
increased $2,275 or 18.4 percent in the three-month period ended December 31,
1996 as compared to the prior-year period. This increase is largely attributed
to a 19.2 percent or $1,611 increase in compensation, employee benefits and
employee-related expenses resulting from an increase in the number of employees
to support the Company's sales growth and new product development. All other
S,G&A expenses increased by 16.7 percent or $664. S,G&A expenses as a percent of
net sales was 26.0 percent and 27.5 percent in the three-month periods ended
December 31, 1996 and 1995, respectively.
As a result of the above, operating income was $2,502 and $1,264 in the
three-month periods ended December 31, 1996 and 1995, respectively.
Other income increased 62.8 percent to $863 in the current three-month
period as compared to the prior year three-month period. The increase was due to
improved earnings from the Company's rental property.
Interest expense increased 40.2 percent to $1,731 in the current
three-month period ended as compared to the prior year period due to increased
borrowings to support the Company's working capital requirements and plant
expansions. Working capital requirements were higher due to lower customer
prepayments at December 31, 1996, compared to December 31, 1995.
The effective tax rate in the three-month periods ended December 31,
1996 and 1995 was 39.2 percent and 35.7 percent, respectively. The increase in
the effective tax rate was primarily the result of additional non-deductible
goodwill amortization related to the Soil Teq acquisition in December 1995.
As a result of the above, net earnings were $994 and $359 in the
three-month periods ended December 31, 1996 and 1995, respectively. Earnings per
share were $.10 and $.04 for the three-month periods ended December 31, 1996 and
1995, respectively.
LIQUIDITY AND FINANCIAL POSITION - THREE MONTH PERIOD ENDED DECEMBER 31, 1996
COMPARED TO THREE-MONTH PERIOD ENDED DECEMBER 31, 1995
Net cash used in operating activities increased to $13,922 in the
three-month period ended December 31, 1996, compared to $12,892 in the
three-month period ended December 31, 1995. The major reason for this change was
an increase in cash used in operating assets and liabilities to $16,344 from
$13,627 in the three-month period ended December 31, 1996 and 1995,
respectively. Inventories, net of increased accounts payable balances used cash
of $12,872 compared to $23,718 during the three months ended December 31, 1996
and 1995, respectively, as inventories increased to $117,325 at December 31,
1996 as compared to $102,311 at September 30, 1996. This increase was the result
of increased RoGator production in the first and second quarters of fiscal 1996
to meet growing product demand. The Company normally experiences the highest
sales levels in the second quarter of the fiscal year. In addition accounts
receivable increased $1,796 during the three months ended December 31, 1996,
compared to an increase of $1,951 during the prior year period. This increased
use of funds was partially offset by an increase in customer prepayments of
$5,434 in the three months ended December 31, 1996 compared to an increase of
$15,243 in the three months ended December 31, 1995. The lower increase in
prepayments was primarily the result of increased unit shipments. The increase
in shipments was due to improved finished goods availability and faster
configuration of custom orders. Normally customer prepayments increase in the
first quarter of each fiscal year.
Cash used in investing activities in the three-month period ended
December 31, 1996 was $1,768 compared to $5,140 in the prior-year period. This
decreased use of cash was primarily due to prior-year investments in property,
plant and equipment to support the Company's growth. In the three-month period
ended December 31, 1996 property, plant and equipment increased by $1,026
compared to an increase of $4,251 in the three-month period ended December 31,
1995.
Cash provided by financing activities was $15,686 in the three-month
period ended December 31, 1996, compared to $17,991 in the prior period. The
decrease in cash provided from financing activities was primarily the result of
the net proceeds from long term borrowings of $13,346 compared to $19,500 during
the three month periods ended December 31, 1996 and 1995, respectively. This
decrease in net proceeds is primarily due to decreased working capital
requirements that resulted from reduced inventory production during the second
quarter of fiscal 1996 through the first quarter of fiscal 1997, and completion
of the of the Company's plant expansions in Jackson and Benson, Minnesota.
Working capital at December 31, 1996 was $63.8 million. As of December
31, 1996 the Company had $5.1 million of unused credit line available. The
Company periodically receives prepayments from customers to secure either more
favorable pricing or a desired delivery date. If the Company did not receive
customer prepayments, it believes its line of credit provides sufficient
liquidity to meet working capital requirements.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference made to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1996 on file with the Securities and Exchange
Commission. During the quarter ended December 31, 1996, the Company was not a
party to any newly initiated legal proceedings and there have been no material
developments during such period to existing legal proceedings.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
See the index to exhibits immediately preceding the exhibits filed with
this report.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for which
this report was filed.
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-CHEM EQUIPMENT CO., INC.
Date: February 10, 1997 By: /s/ Alvin E. McQuinn
--------------------
Alvin E. McQuinn
Its: Chief Executive Officer
Date: February 10, 1997 By: /s/ John C. Retherford
----------------------
John C. Retherford
Its: Chief Financial Officer
INDEX TO EXHIBITS
Exhibit No. Title Page
----------- ----- ----
11.1 Statement Regarding Computation of Per Share Earnings 13
27 Financial Data Schedule 14
Exhibit 11.1
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
AG-CHEM EQUIPMENT CO., INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
The per share computation are based on the weighted average number of common
shares outstanding during the periods.
<TABLE>
Three Months Ended December 31,
-----------------------------------------------
1996 1995
----
----------------------- ---------------------
<S> <C> <C>
Shares outstanding at beginning of period 9,695,768 9,595,768
Issuance of common stock --- 100,000
--------- ---------
Shares outstanding at end of period 9,695,768 9,695,768
========= =========
Weighted average shares outstanding 9,695,768 9,600,164
========= =========
Net earnings $ 994 $ 359
========= =========
Earnings per common share $0.10 $0.04
========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 24,697
<ALLOWANCES> (455)
<INVENTORY> 117,325
<CURRENT-ASSETS> 150,186
<PP&E> 42,656
<DEPRECIATION> (25,006)
<TOTAL-ASSETS> 201,881
<CURRENT-LIABILITIES> 86,346
<BONDS> 0
0
0
<COMMON> 9,695,768
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 201,881
<SALES> 56,290
<TOTAL-REVENUES> 56,290
<CGS> 39,151
<TOTAL-COSTS> 39,151
<OTHER-EXPENSES> 14,637
<LOSS-PROVISION> 61
<INTEREST-EXPENSE> 1,731
<INCOME-PRETAX> 1,634
<INCOME-TAX> 640
<INCOME-CONTINUING> 994
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 994
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
