UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
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
As of August 2, 1999, 9,681,251 shares of registrant's $.01 par value
Common Stock were outstanding.
1
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
A.S.V., INC.
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
ASSETS 1999 1998
----------- -----------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents........................... $ 58,922 $ 308,565
Short-term investments.............................. 2,749,164 243,035
Accounts receivable, net............................ 6,653,235 4,563,840
Inventories......................................... 30,511,759 18,776,758
Prepaid expenses and other.......................... 921,881 1,076,446
----------- -----------
Total current assets.............................. 40,894,961 24,968,644
PROPERTY AND EQUIPMENT, net.......................... 4,699,693 4,563,996
----------- -----------
TOTAL ASSETS.................................. $45,594,654 $29,532,640
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
..................................................
Line of credit...................................... $ 95,000 $ 3,535,000
Current portion of long-term liabilities............ 256,567 219,417
Accounts payable.................................... 2,955,023 2,913,526
Accrued liabilities
Compensation....................................... 207,036 281,055
Warranties......................................... 400,000 400,000
Commission......................................... 238,000 --
Other.............................................. 228,705 204,017
Income taxes payable................................ 125,747 --
---------- ------------
Total current liabilities..................... 4,506,078 7,553,015
---------- ------------
LONG-TERM LIABILITIES, less current portion.......... 2,235,736 2,464,385
---------- ------------
COMMITMENTS AND CONTINGENCIES........................ -- --
SHAREHOLDERS' EQUITY
Capital stock, $.01 par value:
Preferred stock, 11,250,000 shares authorized;
no shares outstanding.............................. -- --
Common stock, 33,750,000 shares authorized;
9,673,539 shares issued and outstanding in 1999;
8,601,835 shares issued and outstanding in 1998... 96,735 86,018
Additional paid-in capital.......................... 30,690,863 12,701,622
Retained earnings................................... 8,065,242 6,727,600
---------- ----------
38,852,840 19,515,240
---------- ----------
Total Liabilities and Shareholders' Equity......... $45,594,654 $29,532,640
=========== ===========
See notes to consolidated financial statements.
2
A.S.V., INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- --------------------------
1999 1998 1999 1998
---------- ----------- ------------ ------------
Net sales..................... $9,064,173 $10,484,279 $17,526,818 $19,513,117
Cost of goods sold............ 6,645,345 7,923,015 12,870,863 14,694,010
---------- ----------- ----------- -----------
Gross profit............. 2,418,828 2,561,264 4,655,955 4,819,107
Operating expenses:
Selling, general and
administrative............. 1,252,499 942,703 2,365,658 1,750,898
Research and development... 155,176 105,088 263,384 203,537
--------- ------- --------- ---------
Operating income......... 1,011,153 1,513,473 2,026,913 2,864,672
Other income (expense)
Interest expense............ (60,229) (126,579) (126,132) (255,525)
Other, net.................. 62,771 105,185 146,861 139,770
--------- --------- --------- ---------
Income before income
taxes................... 1,013,695 1,492,079 2,047,642 2,748,917
Provision for income taxes.... 325,000 565,000 710,000 1,030,000
---------- ---------- ---------- ----------
NET INCOME.................. $ 688,695 $ 927,079 $1,337,642 $1,718,917
========== ========== ========== ==========
Net income per common share
Basic....................... $.07 $.12 $.14 $.23
==== ==== ==== ====
Diluted *................... $.07 $.11 $.14 $.20
==== ==== ==== ====
Weighted average number of
common shares outstanding
Basic....................... 9,662,264 7,538,225 9,488,210 7,533,479
========== ========= ========= =========
Diluted *................... 10,081,662 9,031,745 9,880,775 8,975,213
=========== ========= ========= =========
* Includes add back of after-tax effect of interest expense for convertible
debentures for 1998.
See notes to consolidated financial statements.
3
A.S.V., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six months ended June 30, 1999 and 1998
1999 1998
------------ -------------
Cash flows from operating activities:
Net income............................................... $ 1,337,642 $ 1,718,917
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation........................................... 171,000 150,000
Interest accrued on capital lease obligation........... 24,144 23,028
Deferred income taxes.................................. (65,000) (100,000)
Effect of warrant earned............................... 75,600 75,600
Changes in assets and liabilities:
Accounts receivable.................................. (2,089,395) (777,376)
Inventories.......................................... (11,735,001) (2,076,960)
Prepaid expenses and other........................... 219,565 26,289
Accounts payable..................................... 41,497 1,285,669
Accrued expenses..................................... 188,669 238,226
Income taxes payable................................. 300,747 106,250
------------ ----------
Net cash provided by (used in) operating activities....... (11,530,532) 669,643
------------ ----------
Cash flows from investing activities:
Purchase of property and equipment....................... (306,697) (299,543)
Purchase of short-term investments....................... (3,509,129) --
Redemption of short-term investments..................... 1,003,000 764,583
---------- --------
Net cash provided by (used in) investing activities....... (2,812,826) 465,040
---------- --------
Cash flows from financing activities:
Principal payments on line of credit.................... (3,440,000) --
Principal payments on long-term liabilities.............. (215,643) (25,719)
Proceeds from sale of common stock and warrant, net of
offering costs........................................ 17,551,105 --
Proceeds from exercise of stock options.................. 547,321 57,165
Retirements of common stock.............................. (349,068) --
----------- ----------
Net cash provided by financing activities................. 14,093,715 31,446
----------- ----------
Net increase (decrease) in cash and cash equivalents...... (249,643) 1,166,129
Cash and cash equivalents at beginning of period.......... 308,565 316,599
----------- ----------
Cash and cash equivalents at end of period................ $ 58,922 $1,482,728
=========== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest................................... $ 139,445 $ 241,353
Cash paid for income taxes............................... 310,264 1,023,750
Supplemental disclosure of non-cash investing and
financing activity:
Tax benefit from exercise of stock options............... $ 175,000 $90,000
Assets acquired by incurring long-term liabilities....... -- 647,794
See notes to consolidated financial statements.
4
A.S.V., INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information
The accompanying unaudited, consolidated 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.
NOTE 2. LINE OF CREDIT
During the second quarter of 1999, the Company amended its line of
credit agreement with its primary bank. The amended line of credit provides for
borrowings up to $10,000,000 at an interest rate of prime minus 1/2% (7.25% at
June 30, 1999). All other major terms and conditions remain the same.
NOTE 3. CONTINGENCY
The Year 2000 issue relates to limitations in computer systems and
applications that may prevent proper recognition of the Year 2000. The
potential effect of the Year 2000 issue on the Company and its business partners
will not be fully determinable until the year 2000 and thereafter. If Year 2000
modifications are not properly completed either by the Company or entities with
whom the Company conducts business, the Company's financial condition and
results of operations could be adversely impacted.
5
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:
Three Months Ended June 30, Six Months Ended June 30,
1999 1998 1999 1998
------ ------ ------ ------
Net sales............................. 100.0% 100.0% 100.0% 100.0%
Cost of goods sold.................... 73.3 75.6 73.4 75.3
Gross profit.......................... 26.7 24.4 26.6 24.7
Selling, general and administrative... 13.8 9.0 13.5 9.0
Operating income...................... 11.2 14.4 11.6 14.7
Interest expense...................... .7 1.2 .7 1.3
Net income............................ 7.6 8.8 7.6 8.8
For the three months ended June 30, 1999 and 1998.
Net Sales. Net sales for the three months ended June 30, 1999 were
approximately $9,064,000, compared with approximately $10,484,000 for the same
period in 1998. The main factor for the decrease in sales is an approximate
18.7% decrease in Posi-Track related sales. This decrease was due primarily to
the continued transition of selling the Company's Posi-Track products to the
Caterpillar dealer network. As of July 30, 1999, 30 Caterpillar dealers,
representing over 200 locations, are selling and servicing the Posi-Track. It
is the Company's belief that some Caterpillar dealers are waiting to place
significant orders until they have received training from ASV factory personnel.
The Company believes this training is a necessary process to enable the
Caterpillar dealers to learn the benefits and technical features that
distinguish the Posi-Track from its competition. Sales of parts, used equipment
and other items increased approximately 28.7% for the three month period ended
June 30, 1999 compared with the same period in 1998. This increase was
primarily due to parts sales increasing as the number of vehicles in the field
continues to increase.
Gross Profit. Gross profit for the three months ended June 30, 1999
was approximately $2,419,000, or 26.7% of net sales compared with approximately
$2,561,000, or 24.4% of net sales, in 1998. The decreased gross profit was
attributable to decreased sales volume in 1999. The increased gross profit
percentage was attributable to greater efficiencies in the Company's purchasing
processes, better inventory management and a change in the Company's discount
policy for its customers, with more sales made utilizing extended payment terms.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from approximately $943,000 for the second
quarter of 1998 to approximately $1,252,000 for the same period in 1999. As a
percentage of net sales, selling, general and administrative expenses increased
from 9.0% of net sales in second quarter 1998, to 13.8% of net sales in second
quarter 1999. The increased dollar volume was due to increased marketing costs
as well as increased compensation costs as sales and administrative personnel
have been added to support expanded sales and customer service roles. In
particular, the commission paid to Caterpillar Inc. for sales of products to
Caterpillar dealers accounted for over 75% of the increase in selling, general
administrative expenses. The increased percentage of selling, general and
administrative expenses was due to the Company having the necessary
infrastructure to support higher sales volumes.
Research and Development. Research and development expenses increased
from approximately $105,000 in second quarter 1998 to approximately $155,000 in
1999. The increase was due mainly to the development of the Company's new,
smaller concept vehicle and work on the development of a rubber tracked
agricultural tractor.
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 extensions of the
Company's current product lines and improvements of existing products.
6
Interest Expense. Interest expense decreased from approximately
$127,000 for the second quarter of 1998 to approximately $60,000 for the second
quarter of 1999. The decrease was due to the elimination of the interest expense
in 1999 for the Company's convertible debentures, which were exchanged for
common stock in the fourth quarter of 1998.
Net Income. Net income for the second quarter of 1999 was
approximately $689,000, compared with approximately $927,000 for the second
quarter of 1998. The decrease in 1999 resulted primarily from decreased sales
and increased operating expenses, offset in part by an increased gross profit
percentage and decreased interest expense. In addition, the Company also
recorded a $50,000 income tax benefit for amended income tax returns for prior
years.
For the six months ended June 30, 1999 and 1998.
Net Sales. Net sales for the six months ended June 30, 1999 decreased
10.2%, to approximately $17,527,000 compared with the same period in 1998. This
decrease was due primarily to the continued transition of selling the Company's
Posi-Track products to the Caterpillar dealer network as discussed above. Sales
of parts, used equipment and other items increased approximately 34% due
primarily to an increase in the sale of parts as a greater number of machines
are in service in 1999. Also, the Company recognized net sales of approximately
$665,000 in the first quarter of 1999 for the final subcontract work performed
on a military contract.
Gross Profit. Gross profit for the six months ended June 30, 1999 was
approximately $4,656,000, or 26.6% of net sales compared with approximately
$4,819,000, or 24.7% of net sales, for the six months ended June 30, 1998. The
decreased gross profit was due to decreased sales in 1999. The increased gross
profit percentage in 1999 was due to the increased efficiencies obtained from
the Company's increased production volume, greater efficiencies in the Company's
purchasing processes, better inventory management and a change in the Company's
discount policy for its customers, with more sales made utilizing extended
payment terms.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from approximately $1,751,000, or 9.0% of net
sales for the six months ended June 30, 1998, to approximately $2,366,000, or
13.5% of net sales, for the six months ended June 30, 1999. The increased dollar
volume was due to increased marketing costs as well as increased compensation
costs as sales and administrative personnel have been added to support expanded
sales and customer service roles. In particular, the commission paid to
Caterpillar Inc. accounted for approximately 70% of the increase in selling,
general administrative expenses. The increased percentage of selling, general
and administrative expenses was due to the Company having the necessary
infrastructure to support higher sales volumes.
Research and Development. Research and development expenses increased
from approximately $204,000 in 1998 to approximately $263,000 in 1999. The
increase was due mainly to the development of the Company's new, smaller concept
vehicle and work on the development of a rubber tracked agricultural tractor as
well as continuing improvements to the Company's existing models.
Interest Expense. Interest expense decreased from approximately
$256,000 for the six months ended June 30, 1998 to approximately $126,000 for
the same period in 1999. The decrease was the net effect of two factors. First,
the Company's convertible debentures were exchanged for common stock in the
fourth quarter of 1998, eliminating future interest expense on the debentures.
Second, the Company utilized its line of credit during 1999 to fund operations.
Net Income. Net income for the six months ended June 30, 1999
decreased to approximately $1,338,000 from approximately $1,719,000 for 1998.
The decrease resulted primarily from decreased sales and increased operating
expenses, offset in part by an increased gross profit percentage and decreased
interest expense. In addition, the Company also recorded a $50,000 income tax
benefit for amended income tax returns for prior years.
Liquidity and Capital Resources
At June 30, 1999, the Company had working capital of approximately
$36,389,000 compared with working capital of approximately $17,416,000 at
December 31, 1998, an increase of approximately $18,973,000. This increase was
due to the sale of common stock and a warrant to Caterpillar Inc. in January
1999 for $18 million. The Company used these proceeds primarily to pay off its
line of credit and fund current operations. During the transition to
Caterpillar dealers, the Company chose not to reduce its production levels, but
instead, increased its finished goods. This decision, along with the inventory
needed to begin producing a new model, the Posi-Track 4810, and the repurchase
of certain
7
inventory from current and former dealers, caused inventory levels to increase
62% compared with December 31, 1998. Accounts receivable increased as extended
terms have been offered to certain dealers.
On October 14, 1998, the Company entered into a Securities Purchase
Agreement (the Agreement) with Caterpillar Inc. (Caterpillar). The Agreement
was approved by the Company's shareholders on January 28, 1999 and closed
January 29, 1999. Under the terms of the Agreement, Caterpillar acquired, for an
aggregate purchase price of $18,000,000, one million newly issued shares of the
Company's common stock and a warrant to purchase an additional 10,267,127 newly-
issued shares of the Company's common stock at a price of $21.00 per share.
Also under the terms of the Agreement, the Company's board of directors was
increased from eight to ten with the additional two members appointed as
designated by Caterpillar.
In connection with entering into the Agreement, the Company and
Caterpillar have entered into several ancillary agreements. These agreements
provide the Company access to Caterpillar's dealer network and also make various
management, financial and engineering resources from Caterpillar available to
the Company following the closing. One of these agreements is a Marketing
Agreement which provides, among other things, that the Company will pay
Caterpillar a commission equal to 5% of the dealer net price for complete
machines and 3% for replacement parts and Company-branded attachments for all
sales made to Caterpillar dealers. Should the Company manufacture products that
are sold under the Caterpillar brand name, the Company will pay Caterpillar a
trademark license fee equal to 3% of the net sales of these products to
Caterpillar dealers.
It is the intent of the Company and Caterpillar to introduce the
Company's Posi-Track products to Caterpillar's North American dealers as soon as
practicable. With the signing and announcement of the Agreement with
Caterpillar, certain of the Company's existing, non-Caterpillar dealers have
been hesitant to place orders for the Company's products. Management believes
these dealers are uncertain of their future status as Posi-Track dealers.
Between the time of the announcement of the Caterpillar transaction and June
1999, approximately 43 dealer locations elected to no longer carry the Company's
products. These 43 locations are comprised of 14 dealers who will no longer
carry the Company's products and one dealer whose Posi-Track trade areas have
been reduced. The dealer whose trade area has been reduced was the Company's
largest customer for 1998. This dealer accounted for approximately 21% of the
Company's net sales in 1998. This dealer is a Caterpillar dealer and their Posi-
Track trade area was reduced as they were selling into the trade area of
approximately nine other Caterpillar dealers. During that same time period, the
number of Caterpillar dealers selling and servicing the Posi-Track product line
has increased from six to 30, representing dealers in the United States, Canada
and Australia with a total of over 200 locations.
The Company believes its sales since the signing of the Agreement
decreased due to the factors discussed above. In addition, several Caterpillar
dealers have chosen to wait until they have received training on the Posi-Track
from factory representatives before placing significant orders. During the
second quarter, the Company began a comprehensive training program to educate
the Caterpillar Dealers on the Posi-Track's unique undercarriage. In addition,
the Company believes certain Caterpillar dealers are waiting to place orders
until any other non-Caterpillar Posi-Track dealers are no longer carrying the
Company's products in that Caterpillar dealer's trade area. The Company is
working with these dealers to provide a smooth transition to the Caterpillar
dealer network. The Company believes the slow-down in sales is temporary and
expects the order level to increase as additional Caterpillar dealers receive
training and begin carrying the Posi-Track models. Although the Company has been
working closely with Caterpillar to introduce the Posi-Track products to North
American Caterpillar dealers as quickly as possible, the Company may experience
a decrease in its sales volume while the Company proceeds through this
transitional period with Caterpillar.
In connection with the election of certain of the Company's
independent dealers to no longer carry the Posi-Track product line, the Company
has made arrangements with certain of these dealers to repurchase their existing
inventory of Posi-Track products and transfer it to the new Caterpillar dealers.
In some instances, it has been necessary for the Company to take possession of
the inventory, rather than transferring it directly to the new Caterpillar
dealer. In these situations, the Company will be responsible for re-marketing
this inventory. The Company does not currently anticipate a material loss from
the re-marketing of this inventory.
As a result of the transaction, the Company's near term revenues,
profitability and other financial results are expected to be lower than if the
transaction were not entered into. The decline is related to a number of
factors, including (i) the commission to be paid to Caterpillar for sales made
to Caterpillar dealers, (ii) transition issues affecting orders from the
preexisting non-Caterpillar affiliated dealers, and (iii) certain other costs of
implementing the transaction and the ancillary agreements. Over the longer term,
however, management believes that the Company will be able to achieve improved
financial results due to the transaction, including the ancillary agreements.
8
During the second quarter of 1999, the Company amended its line of
credit with its primary bank. The amended line of credit provides for borrowings
up to $10,000,000 at an interest rate equal to prime minus 1/2% (7.25 percent at
June 30, 1999). All other major terms and conditions remain the same. The
Company believes its existing cash and marketable securities, together with cash
expected to be provided by operations and available credit lines, will satisfy
the Company's projected working capital needs and other cash requirements for at
least the next twelve months. However, should the Company find it necessary to
offer extended terms on the sale of a large percentage of its products, the
Company may need to finance the related accounts receivable from these sales.
The company believes it can obtain this financing, although it cannot be
guaranteed.
Impact of the Year 2000 Issue. The Company has established a team to
assess and address the possible exposures related to the Year 2000 ("Y2K")
issue. The areas under investigation include business computer systems,
production equipment, vendor readiness and contingency plans. The Company does
not use internally developed computer software and is therefore not anticipating
major reprogramming efforts. The Company's primary financial and operational
system has been assessed and is certified Y2K compliant. There are several
ancillary applications that may not currently be Y2K compliant, but the Company
expects it will be able to purchase Y2K compliant versions by late-calendar
1999, the cost of which is not expected to be material. The majority of the
Company's personal computers are currently Y2K compliant. Those computers that
may not currently be Y2K compliant are planned to be replaced as part of the
Company's technology update strategy. None of these replacements have been
accelerated in response to the Y2K issue and are not anticipated to have a
material effect on the Company's consolidated financial statements. Equipment
used for production or quality control does not use dates to control operations.
The costs of this examination to date have been expensed as incurred and have
totaled less than $5,000.
The Company has mailed questionnaires to its significant vendors to
determine the extent to which the Company may be vulnerable to those third
parties' failure to remediate their own Y2K issues. The Company is currently
reviewing the responses to the returned questionnaires and will be developing a
contingency plan once it has completed its assessment of significant vendor
compliance. A contingency plan, if needed, will be developed during the second
half of 1999 to minimize the Company's exposure to work slowdowns or business
disruptions. In the event any vendors are not Y2K compliant, the Company may
seek new vendors to meet its production needs. Any costs that may be incurred by
the Company that are related to external systems Y2K issues are unknown at this
time (other than immaterial costs of the questionnaire itself). However,
management expects that after reviewing and evaluating the responses to the
survey, it will be able to complete an assessment of its Y2K exposure and
estimate the costs associated with resolving any Y2K issues.
The Company's most significant year 2000 risk relates to year 2000
compliance of the Company's suppliers and customers, particularly because the
Company is dependent on third party suppliers for certain components of its
products. The Company is in the process of identifying year 2000 issues of key
third parties which could impact it. There can be no assurance that the year
2000 issue will be properly addressed by customers, vendors and other third
parties. The efforts of third parties are not within the Company's control, and
their failure to remedy year 2000 issues successfully could result in business
disruption, loss of revenue and increased operating cost.
Although the Company does not at this time expect a significant impact
on its consolidated financial position, results of operations and cash flows,
the assessment has not been completed and there can be no assurance that the
systems of other companies will be converted on a timely basis and will not have
a corresponding adverse effect on the Company.
The statements set forth above under "Liquidity and Capital Resources"
in this Form 10-Q which are not historical facts are forward-looking statements
including the statements regarding the Company's expected revenue, profitability
and other financial results in 1999 and beyond, the Company's capital needs and
the impact of and the Company's plans with respect to the year 2000. These
forward-looking statements 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 new or existing products, inability to
attract new dealers for the Company's products, unexpected delays in obtaining
raw materials, unexpected delays in the manufacturing process, unexpected
additional expenses or operating losses, the activities of competitors or the
failure of the Company or third parties to adequately address issues relating to
the year 2000. Additional factors include the Company's ability to realize the
anticipated benefits from the relationship with Caterpillar and the factors set
forth in the Risk Factors filed as Exhibit 99 to this Current Report on Form 10-
Q. Any forward-looking statements provided from time-to-time by the Company
represent only management's then-best current estimate of future results or
trends.
9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has no history of, and does not anticipate in the future,
investing in derivative financial instruments, derivative commodity instruments
or other such financial instruments. Transactions with international customers
are entered into in US dollars, precluding the need for foreign currency hedges.
Additionally, the Company invests in money market funds and fixed rate U.S.
government and corporate obligations, which experience minimal volatility.
Thus, the exposure to market risk is not material.
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 4,
1999. 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 the following votes:
For Against
--------- -------
Philip C. Smaby 9,177,187 14,216
Gary D. Lemke 9,182,567 8,836
Edgar E. Hetteen 9,182,567 8,836
Jerome T. Miner 9,175,028 16,375
Karlin S. Symons 9,181,917 9,486
Leland T. Lynch 9,180,317 11,086
James H. Dahl 9,182,567 8,836
R. E. "Teddy" Turner, IV 9,180,317 11,086
Richard A. Benson 9,182,367 9,036
Richard A. Cooper 9,182,367 9,036
(d) 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, 1999, with a vote of 9,183,460 votes for,
5,550 votes against and 2,393 shares abstaining.
ITEM 5. OTHER INFORMATION
None
10
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)
3.1a Amendment to Second Restated Articles of Incorporation of the Company
filed January 6, 1997 (e)
3.1b Amendment to Second Restated Articles of Incorporation of the Company
filed May 4, 1998 (h)
3.2 Bylaws of the Company (a)
4.1 Specimen form of the Company's Common Stock Certificate (a)
4.3 * 1994 Long-Term Incentive and Stock Option Plan (a)
4.4 Warrant issued to Leo Partners, Inc. on December 1, 1996 (d)
4.5 * 1996 Incentive and Stock Option Plan (e)
4.6 * 1996 Incentive and Stock Option Plan, as amended (f)
4.7 * 1998 Non-Employee Director Stock Option Plan (f)
4.8 Securities Purchase Agreement dated October 14, 1998 between
Caterpillar Inc. and the Company (h)
4.9 Warrant issued to Caterpillar Inc. on January 29, 1999 (i)
4.10 Option Certificate dated as of October 14, 1998 between Caterpillar
Inc. and the Company (h)
4.11 Voting Agreement dated as of October 14, 1998 by certain shareholders
of the Company and Caterpillar Inc. (h)
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 Supplemental Lease Agreement dated April 18, 1997 between the EDA and
the Company (e)
10.5 Supplemental Development Agreement dated April 18, 1997 between the
EDA and the Company (e)
10.6 Line of Credit dated May 22, 1997 between Norwest Bank Minnesota
North, N.A. and the Company (e)
10.7 * Employment Agreement dated October 17, 1994 between the Company and
Thomas R. Karges (c)
10.8 Consulting Agreement between the Company and Leo Partners, Inc. dated
December 1, 1996 (d)
10.9 Extension of Lease Agreement dated May 13, 1998 between the EDA and
the Company (g)
10.10 First Amendment to Credit Agreement dated September 30, 1998 between
Norwest Bank Minnesota North, N.A. and the Company (g)
10.11 Commercial Alliance Agreement dated October 14, 1998 between
Caterpillar Inc. and the Company (h)
11
10.12 Management Services Agreement dated January 29, 1999 between
Caterpillar Inc. and the Company (j)
10.13 Marketing Agreement dated January 29, 1999 between Caterpillar Inc.
and the Company (j)
10.14 Third Amendment to Credit Agreement dated June 9, 1999 between Norwest
Bank Minnesota North, N.A. and the Company
11 Statement re: Computation of Per Share Earnings
22 List of Subsidiaries (a)
27 Financial Data Schedule for the six months ended June 30, 1999
99 Risk Factors
- -------------------------
(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.
(d) Incorporated by reference to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1996 (File No. 0-25620)
filed electronically March 28, 1997.
(e) Incorporated by reference to the Company's Quarterly Report on
Form 10-QSB for the quarter ended June 30, 1997 (File No. 0-
25620) filed electronically August 13, 1997.
(f) Incorporated by reference to the Company's Definitive Proxy
Statement for the year ended December 31, 1997 (File No. 0-25620)
filed electronically April 28, 1998.
(g) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998 (File No. 0-25620)
filed electronically August 12, 1998.
(h) Incorporated by reference to the Company's Current Report on Form
8-K (File No. 0-25620) filed electronically October 27, 1998.
(i) Incorporated by reference to the Company's Current Report on Form
8-K (File No. 0-25620) filed electronically February 11, 1999.
(j) Incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1998 (File No. 0-25620)
filed electronically March 26, 1999.
* Indicates management contract or compensation plan or
arrangement.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30, 1999.
12
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 9, 1999 By /s/ Gary Lemke
---------------------------
Gary Lemke
President
Dated: August 9, 1999 By /s/ Thomas R. Karges
---------------------------
Thomas R. Karges
Chief Financial Officer
(principal financial and accounting officer)
13
EXHIBIT INDEX
Exhibit Method of Filing
- ------- ---------------------
10.16 Third Amendment to Credit Agreement Filed herewith electronically
11 Statement re: Computation of Per Share Earnings Filed herewith electronically
27 Financial Data Schedule Filed herewith electronically
99 Risk Factors Filed herewith electronically
14