UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
{X} Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934.
For the quarterly Period ended August 31, 1997
or
{ }Transition report under Section 13 or 15(d) of the Exchange Act.
For the transition period from to
Commission File Number: 0-10571
TOP AIR MANUFACTURING, INC.
(Name of Small Business Issuer in Its Charter)
Iowa 42-1155462
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
317 Savannah Park Road, Cedar Falls, Iowa 50613
(Address of Principal Executive Offices) (Zip Code)
(319) 268-0473
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal
Year, If Changed Since Last Report)
Check whether the issuer (1) 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 for the past 90 days.
Yes X No__
5,086,123 Common Shares were outstanding as of September 30, 1997.
TOP AIR MANUFACTURING, INC. AND SUBSIDIARY
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance sheets,
August 31, 1997 (unaudited)
and May 31, 1997 1
Unaudited Condensed Consolidated Statements of
Operations Three Months Ended
August 31, 1997 and 1996 2
Unaudited Condensed Consolidated Statements of
Cash Flows, Three Months Ended August 31, 1997
and 1996 3
Notes to Condensed Financial Statements
(unaudited) 4
Item 2. Management's Discussion and Analysis or
Plan of Operation 5
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports of Form 8-K 7
TOP AIR MANUFACTURING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
AUGUST 31, MAY 31,
1997 1997*
---- ----
CURRENT ASSETS
Cash and cash equivalents $ 5,053 $ 263,518
Trade receivables, net of allowance for
doubtful accounts August 31, 1997
$169,500; May 31, 1997 $165,000 2,933,660 3,344,742
Inventories (Note 2) 4,739,935 3,885,154
Income tax benefits 93,459 --
Other current assets 329,991 352,584
--------- ---------
Total Current Assets 8,102,098 7,845,998
--------- ---------
LONG TERM RECEIVABLES AND OTHER ASSETS
Notes receivable, net of current portion 145,903 149,132
Goodwill 1,119,327 1,138,081
Other assets 186,329 193,127
----------- -----------
1,451,559 1,480,340
----------- -----------
PROPERTY AND EQUIPMENT, at cost,
less accumulated depreciation August 31, 1997
$876,004; May 31, 1997 $782,912 2,027,489 2,059,140
--------- ---------
$11,581,146 $11,385,478
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt $ 2,362,718 $ 1,317,076
Other Liabilities and accrued items 815,381 1,388,333
------- ---------
Total Current Liabilities 3,178,099 2,705,409
--------- ---------
LONG-TERM DEBT 2,027,114 2,108,381
--------- -----------
STOCKHOLDERS' EQUITY
Common stock 322,923 322,798
Additional paid-in capital 2,892,782 2,898,636
Retained earnings 3,276,341 3,369,945
--------- ---------
6,492,046 6,591,379
Less cost of treasury stock 116,113 19,691
---------- -----------
6,375,933 6,571,688
--------- ---------
$11,581,146 $11,385,478
========== ==========
*Condensed from Audited Financial Statements.
See notes to Condensed Financial Statements.
TOP AIR MANUFACTURING, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months ended August 31, 1997 and 1996
1997 1996
---- ----
Net Sales $2,597,927 $1,890,119
--------- ---------
Costs and Expenses
Cost of goods sold 1,882,906 1,319,725
Selling and administrative expenses 691,038 546,610
Research and development expenses 109,306 97,005
Interest Expense 72,699 23,585
------ ------
2,755,949 1,986,925
(158,022) (96,806)
Other Income 11,803 39,627
------ ------
Income (loss) before Income Taxes (146,219) (57,179)
Income Taxes (credits) (52,615) (19,100)
Net Income (loss) $(93,604) $(38,079)
======== ========
Earnings (loss) per Common Share $ (.02) $ (.01)
Weighted Average Number of Shares 5,101,560 4,013,765
========= =========
See Notes to Condensed Financial Statements.
TOP AIR MANUFACTURING, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS Three Months Ended August 31, 1997 and
August 31, 1996
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash (used in) operating activities $(1,223,861) $(267,549)
------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of equipment -- 46,413
Purchase of property and equipment (76,950) (195,577)
Payments received on long-term
notes receivable 3,097 2,975
------------ -----------
Net cash (used in) investing
activities (73,853) (146,189)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings 2,130,000 --
Proceeds from long-term borrowings -- 1,337,000
Principal payments on short term borrowings (904,000) --
Principal payments on long-term borrowings (84,600) (920,610)
Net proceeds from issuance of common stock
August 31, 1997 2000 shares; August 31, 1996 none 1,771 --
Purchase of common stock for the treasury (96,422) --
Stock Registration Fees (7,500) --
------- ----
Net cash provided by financing activities 1,039,249 416,390
---------- -------
Increase (decrease) in Cash and
Cash Equivalents (258,465) 2,652
CASH AND CASH EQUIVALENTS
Beginning 263,518 517
----------- -------
Ending $ 5,053 $ 3,169
============ ===========
See notes to Condensed Financial Statements.
TOP AIR MANUFACTURING, INC. AND SUBSIDIARY
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Condensed Financial Statements
The financial statements of Top Air Manufacturing, Inc. and its wholly owned
subsidiary (Ficklin Machine Co.) have been presented on a consolidated basis as
of August 31, 1997, May 31, 1997 and for the three months ended August 31, 1997.
The period ended August 31, 1996 only includes financial information of Top Air
as a result of the acquisition of Ficklin Machine on January 15, 1997. All
significant intercompany accounts and transactions have been eliminated.
The condensed consolidated balance sheet as of August 31, 1997 and the condensed
consolidated statements of operations and cash flows for the three months ended
August 31, 1997 and 1996 have been prepared by the Company without audit. In the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows at August 31, 1997 and for all periods presented have
been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principals
have been condensed or omitted. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's May 31, 1997 Annual Report to Shareholders.
The results of operations for the periods ended August 31, 1997 and 1996 are not
necessarily indicative of the operating results for the full year.
Note 2. Inventories
Inventories consist of the following:
August 31, 1997 May 31, 1996
Finished Goods $3,937,927 $3,421,222
Work in Process 308,845 257,099
Raw Materials and Supplies 493,163 206,833
---------- ----------
$4,739,935 $3,885,154
TOP AIR MANUFACTURING, INC. AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
Net Sales:
Top Air Manufacturing Inc.'s ("Top Air" or the "Company") net sales for the
first quarter of fiscal 1997 increased 37% to $2,597,927 compared to $1,890,119
for the same period last year. The increase was a result of incremental sales of
approximately $1,432,000 derived from the acquisition of Ficklin Machine Co.,
Inc. ("Ficklin Machine") offset by a decrease in sales of Top Air products of
approximately $725,000. The Top Air sales decrease was due to a decrease of
approximately $425,000 resulting from the sale of two product lines during the
second quarter of fiscal year end May 31, 1997. These product lines were in a
declining stage of their life cycle and their elimination will allow the company
to concentrate on the lines with the greatest sales potential. The remaining
$300,000 portion of the decrease was due to lower sales volume of spraying
equipment and parts resulting from a poor spraying season during the first
quarter of fiscal year end May 31, 1998, compared to the same quarter a year
ago.
Operating Costs & Expenses:
The Company's cost of goods sold for the quarter ended August 31, 1997 increased
to 72% of net sales compared to 70% for the first quarter of the previous year.
The increase, as a percentage of sales, was a result of the inclusion of sales
of Ficklin Machine products which have somewhat lower profit margins than Top
Air products.
Operating expenses increased 24% to $800,344 for the first quarter of fiscal
1997 compared to $643,615 for the previous year. The increase was primarily a
result of the incremental expenses incurred from the Ficklin Machine
acquisition.
Interest Expense:
Interest expense increased 208% to $72,699 compared to $23,585 for the first
quarter of last year. The increase was due to higher levels of short-term and
long-term debt outstanding during the period primarily as a result of the
acquisition of Ficklin Machine.
Income Taxes:
The income tax credits of $52,615 and $19,100 for the quarters ended August 31,
1997 and 1996, represent the benefit that would be received if the loss of the
quarter was carried back to reclaim income tax paid in prior years.
TOP AIR MANUFACTURING, INC. AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
Material Changes in Financial Position:
The Company's loss from operations of $96,604 combined with the purchase of
common stock for the treasury of approximately $97,000 resulted in a decrease in
working capital of approximately $217,000.
Liquidity and Capital Resources:
At August 31, 1997 the Company had working capital of $5,140,589 an increase of
$1,140,652 over a year ago and an increase of $216,590 since May 31, 1997. The
increase from a year ago is primarily a result of approximately $1,200,000 of
working capital picked up with the acquisition of Ficklin Machine on January 15,
1997. The increase since May 31, 1997 is described in the changes in financial
position above. The current ratio decreased to 2.55 from 2.90 at May 31, 1997.
The Companys capital expenditures for the second quarter of fiscal 1998 will
include the purchase of a Whitney 3700 ATC CNC fabrication machine for
approximately $750,000. This machine will provide many benefits such as
significant reductions in labor costs and piece part run times as well as
improved quality of finished products. The Whitney will replace six older
machines. The Company intends to finance this machine with long-term bank debt.
The Company believes it has access to sufficient working capital for its present
and foreseeable future.
TOP AIR MANUFACTURING, INC. AND SUBSIDIARY
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number
10(a) Employment Agreement between the Company and Steven R. Lind
adopted by the Board of Directors November 6, 1992.
10(b) First Amendment to Employment Agreement between the Company and
Steven R. Lind adopted by the Board of Directors October 19,
1994.
11 Statement re computation of earnings per common share
27 Financial Data Schedule
(b) There were no reports on Form 8-K filed for the quarter ended August 31,
1997.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TOP AIR MANUFACTURING, INC.
(Registrant)
Date: October 15, 1997 /s/ Steven R. Lind
--------------------------------
Steven R. Lind
President and Chief Executive Officer;
Principal Executive Officer
Date October 15, 1997 /s/ Steven F. Bahlmann
--------------------------------
Steven F. Bahlmann
Controller; Chief Accounting
Officer