Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X]Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [Fee Required]
For the fiscal year ended February 28, 1998
or
[ ]Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [Fee Required]
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)
Registrant's telephone number, including area code:(319)277-0261
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange on
Title of each class which registered
Common Stock, no par value New York Stock Exchange
- -------------------------- -----------------------
Securities registered pursuant to Section 12(g) of the Act: None
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
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (229.405 of this chapter)
is not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
The aggregate market value of voting stock held by non-
affiliates of the registrant as of May 13, 1998, was approximately
$71,929,000 (based on the last reported sale price of $17.625 per
share on May 13, 1998, on the New York Stock Exchange).
As of May 13, 1998, 5,198,554 shares of the registrant's common
stock, no par value, were issued and outstanding. At that date,
there were 172 stockholders of record and approximately 3,100
stockholders for whom securities firms acted as nominees.
DOCUMENTS INCORPORATED BY REFERENCE
Herein the following documents are incorporated by reference:
Selected portions of the Registrant's Annual Report to
Stockholders for the year ended February 28, 1998, are
incorporated by reference into Part II.
Selected portions of the Registrant's Definitive Proxy Statement
for the annual shareholders' meeting to be held August 13, 1998,
are incorporated by reference into Part III.
PART I
ITEM 1. BUSINESS
General Development of Business
Ag Services of America, Inc. (the "Company") was incorporated
under the laws of the state of Iowa in 1985. The Company supplies
farm inputs, including seed, fertilizer, agricultural chemicals,
crop insurance and cash advances for rent, fuel and irrigation, to
farmers primarily in the central United States. The Company buys seed,
fertilizer, agricultural chemicals and other farm inputs from
numerous national and regional manufacturers, distributors and
suppliers of seed, fertilizer and agricultural chemicals. Farmers
have traditionally purchased farm inputs from one or more suppliers
using credit from commercial banks, the Farm Credit System, the
FmHA or other agricultural lenders. The Company extends credit and
provides farmers the convenience of purchasing and financing a wide
variety of farm inputs from a single source at competitive prices.
On August 1, 1991, the Company completed its initial public
offering of 1,060,000 shares of common stock (including 60,000
shares due to over-allotments completed August 30, 1991), of which 382,000
previously issued shares were sold by certain stockholders (32,000
shares as a result of over-allotments). For the 678,000 newly
issued shares sold by the Company (28,000 shares as a result of over-
allotments), net proceeds of approximately $4.7 million were
received by the Company.
On April 22, 1993, the Company completed a public offering of
$13,800,000 principal amount of 7% Convertible Subordinated
Debentures due 2003 (including $1,800,000 due to over-allotments).
The 7% convertible Subordinated Debentures were convertible into
Common Stock of the Company at $9.25 per share. The Company
received net proceeds of approximately $12.9 million.
On June 7, 1996, the Company called for redemption or conversion
all of its outstanding 7% Convertible Subordinated Debentures due
2003 (the "Debentures"). From June 7, 1996, through
July 10, 1996, the redemption date, the Company issued 1,487,669
shares of common stock upon conversion of $13,761,000 of Debentures
and redeemed $39,000 of Debentures as full settlement of all
$13,800,000 of the Debentures outstanding.
Financial Information about Industry Segments
The Company is engaged in one industry segment - the supplying
of a wide range of farm inputs at competitive prices along with the
credit to finance these farm inputs through the crop growing cycle.
-3-
Narrative Description of Business
General:
The Company supplies farm inputs, including seed, fertilizer,
agricultural chemicals, crop insurance and cash advances for rent,
fuel and irrigation, to farmers primarily in the central United
States. The Company's strategy has been to provide a single source
of farm inputs and the credit necessary to finance these inputs
through the growing cycle by taking a security interest in the crop
itself. This strategy is an attractive alternative to farmers who
had difficulty obtaining credit, who needed additional credit for
the expansion of existing operations and/or who wanted the convenience
of a single source of farm inputs, finance and product expertise.
The Company believes that its business strategy has been
responsible for its growth and has focused its efforts on the
following principles:
*Supplying and financing a complete line of quality farm inputs
from several suppliers at competitive prices with prompt
delivery.
*Providing customers with appropriate product selection and crop
production advice from the Company's product specialists.
*Providing detailed monthly statements to simplify the customer's
bookkeeping for all farm inputs purchased from the Company
throughout each growing season.
*Offering multi-peril crop insurance through the Company as a
licensed insurance agency.
*Visiting customers' farms to view crops and discuss harvest
plans and marketing strategies.
*Providing professional and personalized service throughout the
entire growing season to encourage renewed business each year.
*Selecting credit worthy and experienced customers.
Principal Markets:
The Company's customers are currently located in 28 states. The
Company's principal target market is corn and soybean producers in
the states of Iowa, Minnesota, Nebraska, North Dakota, South
Dakota, Illinois, Ohio, Texas and Indiana.
-4-
Products and Suppliers:
The Company buys seed, fertilizer, agricultural chemicals and
other farm inputs from numerous manufacturers, distributors or
dealers. These suppliers generally deliver the farm inputs
directly to the Company's customers. The Company negotiates the purchase
price, discounts and trade credit annually with most of these
suppliers. In fiscal 1998, the percentage of net revenues
attributed to the sale of seed, fertilizer, agricultural chemicals, and other
farm inputs including, among others, cash rents, fuel, and
irrigation was 12.1%, 15.1%, 14.9% and 50.6%, respectively. The balance of
the Company's net revenues in fiscal 1998 were attributed to financing
income.
Seed. The Company currently buys seed from approximately 30
national and regional seed companies. Seed company representatives
as well as the Company's product specialists work directly with the
Company's customers to assist them in selecting specific hybrids
and varieties of seed. The Company sells seed at competitive prices
and achieves its margin based on standard industry discounts or
negotiated volume discounts, if available. Seed is delivered to
the Company's customers directly by the seed companies.
Fertilizer. The Company currently buys fertilizer from over 500
suppliers. The Company sells fertilizer at competitive prices and
achieves its margin based on dealer discounts, negotiated pricing
or opportunistic purchasing. The Company purchases fertilizer using
two alternative methods, depending on the customer's needs. For those
customers with storage facilities to handle bulk dry materials, bulk fluids
or anhydrous ammonia, the Company may purchase the materials through major
fertilizer distribution terminals or manufacturers. These bulk materials may
be direct-shipped in truckload quantities to the customer's farm. Customers
without storage facilities can have the materials supplied by the
Company which may enlist the delivery service of a local fertilizer
dealer.
Agricultural Chemicals. The Company currently buys agricultural
chemicals from several major distributors or suppliers. The
Company sells agricultural chemicals at competitive prices and achieves its
margin based on dealer discounts, negotiated pricing,
manufacturers' rebates and opportunistic purchasing. Agricultural chemicals
are generally delivered directly to the customer's farm by the
distributor or through a dealer.
Insurance, Cash Rents, Fuel, Irrigation and Custom Application.
The Company offers its customers multi-peril crop insurance as an
agent, although customers may also purchase multi-peril crop
insurance from other insurance agents. Through thirteen of its
-5-
employees, the Company is currently licensed as an insurance agent
in 26 states. When customers purchase the insurance through the
Company's agent, the Company receives a standard industry
commission based on the premium amount.
The Company also provides its customers with credit for cash
rents, fuel, irrigation and custom application costs. If a
customer's farm acreage is leased, the land owner may require
payment of the annual rent before planting. Based on its credit policy and
the customer's needs, the Company may assist its customers with the
advance payment of all or a portion of these cash rents. The
Company's customers generally arrange their own fuel, irrigation
and custom application needs and the Company may, based on its credit
policy, advance cash for a portion or all of these costs.
Government Programs:
The two principal government programs affecting the Company's
business are government underwritten multi-peril crop insurance and
the government's farm subsidy program payments.
Multi-Peril Crop Insurance. The Company requires that its
customers purchase multi-peril crop insurance and assign the
insurance coverage to the Company as collateral for the credit
extended by the Company to the customer. Multi-peril crop
insurance, while sold and administered in large part by private companies, is
currently underwritten by the Federal Crop Insurance Corporation
("FCIC"), an agency of the United States Government. Current
multi-peril crop insurance generally covers crop losses for hail, wind,
drought, flood and certain other covered events.
While various forms of federal multi-peril crop insurance have
been in existence since 1938, federal farm policies and funding are
subject to periodic change, and there can be no assurance that the
FCIC or any other federal agency will continue to underwrite multi-
peril crop insurance on an ongoing basis. If the Company's
customers were not able to obtain multi-peril crop insurance through some
combination of the FCIC or domestic or foreign private insurance
underwriters at a reasonable cost, the Company would be required to
seek alternative collateral from its customers, which could have a
material adverse affect on the Company's net revenues. There can
be no assurance that multi-peril crop insurance will continue to be
available to the Company's customers or, if available, for a
reasonable cost.
FSA "Production Flexibility Contract" Payments. The United
State Department of Agriculture, through its Farm Service Agency
("FSA"), guarantees participating farmers fixed payments on
"contract acreage base" for various crops over the next five years
-6-
under Federal Agriculture and Improvement Act ("1995 Farm Bill").
Corn, wheat and certain other crops are currently eligible under
the FSA farm program. If a customer of the Company participates in the
FSA farm program, the Company supplements its security by obtaining
an assignment of the customer's FSA "Production Flexibility
Contract" payments. While various forms of federal support programs have
been in existence since 1933, federal farm policies and funding,
including support payments under the 1995 Farm Bill, are subject to periodic
change, and there can be no assurance that the FSA or any other
federal agency will continue to provide support programs on an
ongoing basis.
Farm Input Pricing and Finance Charges
The Company structures its pricing of farm inputs so that the
net prices paid by its customers who take advantage of the
Company's payment discounts are generally competitive with farm inputs
purchased from another distributor or supplier. The Company
obtains volume discounts for certain farm inputs and may pass all or a
portion of those discounts to its customers. The Company charges
its customers for farm inputs when provided. Finance charges on credit
extended to a customer commence immediately for cash rents provided
by the Company and on the date shipped for other farm input
products sold by the Company to a customer. The Company establishes and
fixes its interest rates each year based on the Company's estimate of
anticipated interest costs over the year. For fiscal 1999, the
Company's customers will be charged interest at a variable rate
note at prime to 4.0% above prime based on the credit worthiness of the
customer. As of May 13, 1998, the current prime rate is 8.50% per
annum as published in the Midwest Edition of THE WALL STREET
JOURNAL.
Spring customer accounts, including all interest, are due by
January 15th for North accounts and January 31st for South
accounts. The Company currently assesses a 3.0% program fee based on the
customer's established credit limit, and the customer can earn back
all or part of the program fee based on the following repayment
dates for North Spring accounts: 3.0% for customer accounts paid off by
November 30, 2.0% for customer accounts paid off by December 20 and
1.0% for customer accounts paid off by January 15th. South Spring
accounts, 3.0% for customer accounts paid off by December 15, 2.0%
for customer accounts paid off by January 5 and 1.0% for customer
accounts paid off by January 31st. Fall customer accounts,
including interest, are due by September 15th. Fall customers can also earn
back the program fee based on the following repayment dates: 3.0%
for customer accounts paid off by July 31, 2.0% for customer
accounts paid off by August 20 and 1.0% for customer accounts paid off by
September 15th.
-7-
Customer Support:
The Company provides customers personalized service with his
farm input needs throughout the entire crop growing cycle. The
Company's product specialists provide information on the
availability and use of various chemicals, fertilizers and seed, while the
ultimate decision of product choice is made by the customer. The
Company's product specialists discuss with customers the efficient
use of farm inputs, cost-effective fertility and weed control
programs, product availability, pricing and delivery. When orders
are received, the Company coordinates the customer's needs and
delivery requirements with the appropriate suppliers. The Company
also generally schedules at least one or two visits to the customer
farms to inspect the growing crop and to discuss harvest plans and
any pertinent problems during the growing cycle. The Company
provides each customer a detailed monthly statement to simplify the
customer's bookkeeping for all farm inputs purchased from the
Company throughout each growing season.
Credit Policy and Customer Notes:
The Company has established a credit policy with procedures for
credit review and approval. Each new customer and customers from
prior years must provide financial and credit information to the
Company. If a customer is approved by the Company for credit, the
Company will generally extend credit of up to 85% of the insured
value of that customer's planned crop, based on his multi-peril
insurance coverage. The Company secures its position principally
by obtaining a lien on the crop and by receiving an assignment of the
farmer's multi-peril crop insurance and government farm program
payments, if available. For certain customers, the Company's lien
on the crop might be subordinate to one or more prior liens, which
would directly reduce the amount of credit available to that customer.
The Company obtains a current credit report or search to verify the
priority of the Company's lien. The Company also contacts customer
references and for larger accounts the Company may visit the
prospective customer's farm to review farm operations before
extending credit.
The Company's principal asset is its notes receivable from
customers who finance their purchase of farm inputs from the
Company throughout the crop growing cycle. At February 28, 1998 and 1997:
the total number of customer accounts were 1,235 and 1078,
respectively; the total outstanding customer notes receivable were
$89,075,176 and $55,571,572, respectively. For the years ended
February 28, 1998 and 1997, there were no individual customers
whose accounts were 5% or more of the Company's total customer notes
receivable at year end.
-8-
Each customer account is assigned to an employee of the Company
for monitoring the collection of customer accounts during harvest
season, under the supervision of the Company's collection managers.
The Company's employees generally contact their respective assigned
customers biweekly during the harvest season. Through this
process, the Company obtains information from customers concerning crop
yields, marketing strategy, number of acres harvested and the
location of the customers' stored crops. If a customer has a claim
under his multi-peril crop insurance, the Company will take steps
to assure that the claim has been properly and timely filed. Under
the Company's credit arrangements, when a customer sells his crop, the
customer is required to obtain the sale proceeds by check, payable
to both the customer and the Company, and forward the check to the
Company as endorsed by the customer. Upon receipt of the check,
the Company applies the proceeds as a payment on the customer's account
and forwards any overpayments to the customer. The Company does
not retain customer funds on deposit. If a customer is to receive all
or a portion of the value of his crop through a multi-peril crop
insurance claim or farm program payment, the collection of that
customer's account could be delayed pending receipt of those
payments.
Some customers may wish to store their crops for later sale, or
for other reasons may not pay their accounts in full when due. The
Company monitors and documents its collateral and collection
position on all accounts on an ongoing basis. The Company will informally
extend the payment of a customer's note receivable to accommodate
a customer's crop marketing requirements if the Company determines
that there continues to be sufficient collateral. Therefore, a
customer's note receivable that is past due may not be past due because of a
customer's inability to pay or collateral impairment. The amount
of customer notes receivable that were past due (including notes
extended by the Company) at February 28, 1998 and 1997, was
$38,494,351 and $29,880,411, respectively. The amount of past due
customer notes receivable increased slightly from 20.2% of net
revenues in fiscal 1997 to 20.7% of net revenues in fiscal 1998,
primarily as a result of the increased dollar amount of customer
notes receivable informally extended by the Company in Fiscal 1998.
The increase in the dollar amount of past due customer notes
receivable has not had a material adverse affect on the Company's
earnings, and management does not believe that this increase will
have a material adverse affect on earnings or the Company's ability
to supply and finance farm inputs in the future.
The Company also continually evaluates and classifies each
customer account based on collateral and expected timing of
collection in determining its allowance for doubtful notes. At
February 28, 1998 and 1997, the Company's allowance for doubtful
notes were $2,800,000 and $2,237,000, respectively.
-9-
Sales and Marketing:
The Company markets its program through advertising, including
direct mail and telemarketing, customer solicitation and referrals,
including cooperative marketing efforts with several major seed and
fertilizer suppliers which allow the Company to market its program
through their dealer networks. In addition, the Company employs
twenty-three full time salaried sales people and one independent
sales representative. The sales representatives identify
prospective customers and assist in obtaining customer information for the
Company's credit review and approval. After a customer has been
approved by the Company, the Company's employees begin to service
the customer's account generally without assistance from the sales
representatives.
In fiscal 1998 and 1997, the Company incurred approximately
$233,700 and $216,300, respectively, in advertising expenses. The
Company plans to spend approximately $350,000 on advertising in
fiscal 1999.
Seasonal Factors:
The sale of farm inputs is seasonal with approximately 76% of
revenues being generated from March 1 through August 31 of each
year.
Credit Facilities:
Due to the seasonality of the Company's revenues and the terms
of its customer notes receivable, the Company is required to
finance the carrying of its revenues as notes receivable for a majority of
its fiscal year.
The Company's business and its growth are dependent on adequate
credit to finance its sales of farm inputs to farmers. The Company
uses its capital, trade credit and bank line of credit to finance
farm input purchases. The terms of the Company's trade credit vary
for each supplier and type of farm input and may require a lien on
certain assets of the Company.
In March 1997, the Company negotiated an asset backed
securitized financing program with a maximum available amount of
$135 million. This five year facility replaces the $100 million line of
credit used in fiscal 1997. On March 9, 1998, the Company amended
the asset backed securitized financing program, which increased the
maximum available borrowing amount under the facility to $205
million and should provide the Company adequate financing
-10-
for fiscal 1999. If the Company were not able to maintain a
sufficient line of credit or other credit facility, the Company
would not be able to finance sufficient sales of farm inputs, which
would have a material adverse affect on the Company's business and
its growth. Management believes that the financial resources
available to it will be sufficient to finance the Company's
business.
Competition:
The Company faces competition from many types of suppliers of
farm inputs, including manufacturers' dealers, independent
distributors and suppliers, and farm cooperatives. Farm input
financing is competitive and, in recent years, several large
agricultural supply companies have provided financing for various
farm inputs. Many of the Company's competitors are considerably
larger and better capitalized, and there can be no assurance that
the Company will be able to compete effectively against such
competitors in the future. Within this competitive environment, the Company
competes principally on the basis of its competitive pricing, broad
range of farm inputs offered, and the convenience of its financing.
Major Customers:
The customer base is sufficiently broad that no customer
accounts for 10% or more of the Company's revenues.
Backlog Orders:
Although the Company had approximately $69,151,000 in
commitments to supply farm inputs, there was no material sales
backlog as of February 28, 1998.
Government Regulation:
Farm input financing and cash advances are subject to certain
state laws governing money brokers, federal and state truth-in-
lending regulations, and state usury laws limiting interest rates
for certain types of customers. Additional laws and regulations could
be implemented in the future governing the Company's financing
activities for the sale of farm inputs and cash advances or other
aspects of the Company's business. Compliance with these laws and
regulations may adversely affect the Company's operations and
costs.
-11-
The sale of certain farm inputs, including agricultural
chemicals and pesticides, is subject to certain federal and state
environmental rules and regulations. The Company holds licenses
necessary for the sale of these products. The Company also serves
as an agent for the sale of multi-peril crop insurance and has fifteen
employees with the required insurance agent's license.
Employees:
As of February 28, 1998, the company had 119 full time
employees, including seven executive positions, twenty-one in
product specialization and distribution, twenty-eight in credit review and
approval, four in multi-peril crop insurance sales, seventeen in
accounting and administration, six in information systems, one in
customer service, eleven in legal and collection, and twenty-four
in sales and marketing. None of the Company's employees are covered
by a collective bargaining agreement. The Company considers its
relations with its employees to be good.
ITEM 2. PROPERTIES
The Company's principal offices, aggregating approximately
25,000 square feet, are located in Cedar Falls, Iowa under a lease
which expires in 2001. The current annual rent is $188,329 plus
utilities, insurance premiums and interior maintenance expenses.
ITEM 3. LEGAL PROCEEDINGS
The Company is named in lawsuits in the ordinary course of its
business. Although it is not possible to predict the outcome of
such lawsuits, in the opinion of management the outcomes will not have
a material adverse effect on the financial condition of the Company.
The Company maintains insurance coverage that management believes
is reasonable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders
during the fourth quarter of the fiscal year covered by this
report.
EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning Executive Officers, set forth at Item 10
in Part III hereof, is incorporated in Part I of this report by
reference.
-12-
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Market Information
In December 1996, the Company moved the trading of its common
stock to the New York Stock Exchange ("NYSE"), under the symbol
ASV, from the National Association of Securities Dealers Automated
Quotation ("NASDAQ"). The market quotations provided by the NYSE
and the over-the-counter market quotations provided by the NASDAQ
appearing on page one of the Annual Report to Shareholders for the
year ended February 28, 1998 are incorporated herein by reference.
These quotations reflect prices without retail markup, markdown or
commissions and may not represent actual transactions.
Stockholders
As of February 28, 1998, the Company had 172 stockholders of
record and approximately 3,100 stockholders for whom securities
firms acted as nominees.
Dividends
The holders of common shares are entitled to receive dividends
when and as declared by the Board of Directors. However, other
than dividends paid prior to September 1989 to its then parent
corporation, which was subsequently merged into the Company, the
Company has not paid a cash dividend on its common stock. The
Company does not anticipate payment of any cash dividends in the
foreseeable future. The Company presently intends to retain
earnings to finance growth. The Company's borrowing agreements contain
covenants that prohibit the declaration or payment of dividends.
ITEM 6. SELECTED FINANCIAL DATA
The "Selected Financial Data" for the Company appearing on pages
10 and 11 of the Annual Report to Stockholders for the year ended
February 28, 1998 is herein incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
-13-
The "Managements Discussion and Analysis of Financial Condition
and Results of Operations" appearing on pages 12 through 17 of the
Annual Report to Stockholders for the year ended February 28, 1998
is herein incorporated by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
The information for this item is not required until the year
ending February 28, 1999.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Schedules set forth in
Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements on accounting and financial
disclosure with the Company's independent public accountants.
-14-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Executive Officers
The name, age and office(s) held by each of the Registrant's
executive officers are shown below. Each of the executive officers
listed below serves at the pleasure of the Board of Directors,
except Messrs. Jungling, Miller and Schipper who have entered into
employment agreements with the Registrant effective through June
2000.
Name Age Position With the Company
Gaylen D. Miller (1) 49 Chairman of the Board
Henry C. Jungling Jr. (1) 51 President & Chief Executive Officer
Kevin D. Schipper (1) 38 Chief Operating Officer
Todd J. Ryan (1) 35 Vice President Sales and Marketing
Brad D. Schlotfeldt (1) 34 Vice President Finance and Treasurer
Eunice M. Schipper (1) 56 Vice President Credit
Neil H. Stadlman (1) 52 Vice President Credit Administration
(1) Each of Registrant's executive officers has been an employee of
the Company in varying capacities for more than the past five
years.
The balance of the information regarding directors and executive
officers of the Company is set forth in the Company's definitive
Proxy Statement for the Annual Meeting of Stockholders to be held
August 13, 1998 on pages 3 to 5, under the heading "Election of
Directors," and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item is set forth in the Company's
definitive Proxy Statement for the Annual Meeting of Stockholders
to be held August 13, 1998 on page 3, under the heading "Election of
Directors," on pages 5 and 6, under the heading "Election of
Directors - Compensation Committee Interlocks and Insider
Participation," and on pages 7 to 14, under the heading "Executive
Compensation and Other Related Information," and is incorporated
herein by reference. However, the "Board Report on Executive
Compensation" and the "Performance Graph," on pages 9 to 11 and
page 15, respectively, are specifically not incorporated by reference.
-15-
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Information required by this item is set forth in the Company's
definitive Proxy Statement for the Annual Meeting of Stockholders
to be held August 13, 1998 on page 6, under the heading "Security
Ownership of Certain Beneficial Owners and Management," and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is set forth in the Company's
definitive Proxy Statement for the Annual Meeting of Stockholders
to be held August 13, 1998 on pages 4 and 5, under the heading
"Election of Directors," and is incorporated herein by reference.
-16-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
Page
(a)(1)- Financial Statements 18
(a)(2)- Financial Statement Schedules 18
(a)(3)and(c)- Exhibits 18
(b) - Reports on Form 8-K
No reports on Form 8-K were filed in the last quarter of the period
covered by this Form 10-K.
-17-
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
The following index is submitted in response to Item 14:
Page Reference
Annual Report
10-K to Stockholders
------------ ---------------
FINANCIAL STATEMENTS
Report of Independent Public
Accountants 18
Consolidated balance sheets,
February 28, 1998 and 1997 19
Consolidated statements of income,
years ended February 28, 1998,
and 1997 and February 29, 1996 20
Consolidated statements of stock-
holders' equity, years ended
February 28, 1998 and 1997 and
February 29, 1996 21
Consolidated statements of cash flows,
years ended February 28, 1998 and
1997 and February 29, 1996 22
Notes to consolidated financial statements 23 - 43
FINANCIAL STATEMENT SCHEDULES
Report of Independent Public
Accountants 19
Schedule II - Valuation and
Qualifying Accounts 20
EXHIBITS
See Index of Exhibits on pages 22, 23
and 24
The Financial Statements listed in the above index are included
in the Company's Annual Report to Stockholders for the year ended
February 28, 1998, are herein incorporated by reference. With the
exception of the pages listed in the above index and the
information incorporated by reference included in Items 5,6,7,10,11,12 and 13,
the Annual Report to Stockholders for the year ended February 28,
1998 is not deemed filed as a part of this report.
-18-
MCGLADREY & PULLEN, LLP RSM
Certified Public Accountants and Consultants International
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
Ag Services of America, Inc.
Cedar Falls, Iowa
Our audits were made for the purpose of forming an opinion on
the basic consolidated financial statements taken as a whole. The
supplemental schedule II is presented for purpose of complying with
the Securities and Exchange Commission's rules and is not a part of
the basic consolidated financial statements. This schedule has
been subjected to the auditing procedures applied in our audits of the
basic consolidated financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic
consolidated financial statements taken as a whole.
Waterloo, Iowa
May 14, 1998
201 Tower Park Drive, Suite 103
P. O. Box 2656
Waterloo, Iowa 50704-2656
(319) 235-7091 Fax (319) 235-7476
-19-
AG SERVICES OF AMERICA, INC.
Schedule II
VALUATION AND QUALIFYING ACCOUNTS
Column A Column B Column C Column D Column E
- --------------------------------- ------------------- --------------------------------- --------------- -------------------
Description Balance at Additions Deductions-- Balance at
Beginning (1) (2) Describe End of
of Period Charged to Charged to Period
Costs and Other
Expenses Accounts--
Describe
- --------------------------------- ------------------- ---------------------------------- ---------------- -------------------
Year ended February 28, 1998:
Reserves and allowances deducted
from asset accounts:
Allowance for doubtful notes $2,237,000 $2,962,647 $2,399,647 (1) $2,800,000
Reserve for discounts $528,000 $3,725,973 (2) $3,053,973 (3) $1,200,000
Year ended February 28, 1997:
Reserves and allowances deducted
from asset accounts:
Allowance for doubtful notes $2,146,000 $2,290,388 $2,199,388 (1) $2,237,000
Reserve for discounts $519,000 $2,471,888 (2) $2,462,888 (3) $528,000
Year ended February 29, 1996:
Reserves and allowances deducted
from asset accounts:
Allowance for doubtful notes $2,105,000 $1,862,726 $1,821,726 (1) $2,146,000
Reserve for discounts $458,000 $1,728,136 (2) $1,667,136 (3) $519,000
(1) Uncollectible customer notes receivable written off, net of recoveries.
(2) Provision for discounts as a reduction of revenues.
(3) Cash discounts taken.
-20-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
(Registrant) AG SERVICES OF AMERICA, INC.
By(Signature and Title) \s\ Henry C. Jungling, Jr.
Henry C. Jungling, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
\s\ Gaylen D. Miller
Gaylen D. Miller
Chairman
(Principal Financial & Accounting
Officer)
Date May 14, 1998
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated:
By:/s/Henry C. Jungling, Jr.
Henry C. Jungling, Jr.
President and Chief Executive Officer
and Director
Date: May 14, 1998
By:/s/Gaylen D. Miller
Gaylen D. Miller
Chairman and Director
Date: May 14, 1998
By:/s/Kevin D. Schipper
Kevin D. Schipper
Chief Operating Officer and Director
Date: May 14, 1998
By:/s/James D. Gerson
James D. Gerson
Director
Date: May 14, 1998
By:/s/Michael Lischin
Michael Lischin
Director
Date: May 14, 1998
By:/s/Ervin J. Mellema
Ervin J. Mellema
Director
Date: May 14, 1998
-21-
INDEX TO EXHIBITS
Exhibit
Number Exhibit
- ------- -------
3.1 Articles of Restatement of the Company (1)
3.2 Amended and Restated Bylaws of the Company (3)
3.3 Articles of Amendment (2)
4.1 Form of stock certificate evidencing common stock,
without par value, of the Company (2)
4.2 Form of Indenture between Ag Services of America,
Inc. and Norwest Bank Minnesota, N.A., as Trustee(4)
4.3 Form of 7% convertible Subordinated Debentures due
2003 (included in Exhibit 4.2) (4)
10.1 Loan Agreement dated April 15, 1996 (7)
10.2 Form of Employment Agreement effective July 1, 1991
between the Company and Henry C. Jungling, Jr. (1)
10.3 Form of Employment Agreement effective July 1, 1991
between the Company and Gaylen D. Miller (1)
10.4 Form of Employment Agreement effective July 1, 1991
between the Company and Kevin D. Schipper (1)
10.5 Lease dated August 1992 between the Company and 145
Associates, Ltd., as amended (4)
10.6 1991 Stock Option Plan and form of Stock Option
Agreement (1)
10.7 April 12, 1996 Amendment to lease agreement (Exhibit
10.5) (7)
10.8 1993 Stock Option Plan (4)
10.9 Form of Indemnification Agreement between the
Company and each officer and director (2)
10.10 Commercial Notes dated April 15, 1996 (7)
10.13 April 5, 1995 form of Amendment to Employment
Agreements (Exhibit 10.2, 10.3 and 10.4) (6)
-22-
10.14 Form of Amendment to 1993 Stock Option Plan (6)
10.15 Retirement and Savings Plan (4)
10.16 Amendment to Retirement and Savings Plan (6)
10.17 Form of 1995 Stock Purchase Plan (6)
10.18 Amended and Restated Loan Agreement dated March 12,
1997 (8)
10.19 Credit Agreement dated March 12, 1997 (8)
10.20 Purchase and Contribution Agreement dated March 12
1997 (8)
10.21 Amendment No. 1 to Third Amended and Restated Loan
Agreement (9)
10.22 Amendment No. 2 to Third Amended and Restated Loan
Agreement (9)
10.23 Amendment No. 3 to Third Amended and Restated Loan
Agreement (9)
10.24 Amendment No. 1 to Credit Agreement (9)
11.1 Statement re computation of per share earnings (9)
13.1 Form of Annual Report to Stockholders for the year
ended February 28, 1998 (9)
21.1 Subsidiaries of the Registrant (9)
27.1 Financial Data Schedule (9)
99.1 Fourth quarter and year end results press release (9)
(1) - Pursuant to Rule 12(b)-32, this exhibit is incorporated by
reference under the same exhibit number to the exhibits filed
with the Registration Statement on Form S-1 on May 31, 1991
as Commission File No. 33-40981.
(2) - Pursuant to Rule 12(b)-32, this exhibit is incorporated by
reference under the same exhibit number to the exhibits filed
with Pre-Effective Amendment No. 1 to the Registration
Statement on Form S-1 on July 12, 1991 as Commission File
No. 33-40981.
(3) - Pursuant to Rule 12(b)-32, this exhibit is incorporated by
reference under the same exhibit number to the exhibits filed
with Pre-Effective Amendment No. 2 to the Registration
Statement
-23-
on Form S-1 on July 24, 1991 as Commission File No. 33-40981.
(4) - Pursuant to Rule 12(b)-32, this exhibit is incorporated by
reference under the same exhibit number to the exhibits filed
with the Registration Statement on Form S-1 on March 31, 1993
as Commission File No. 33-60358.
(5) - Pursuant to Rule 12(b)-32, this exhibit is incorporated by
reference under the same exhibit number to the exhibits filed
with the Company's Form 10-K for the year ended February 28,
1994.
(6) - Pursuant to Rule 12(b)-32, this exhibit is incorporated by
reference under the same exhibit number to the exhibits filed
with the Company's Form 10-K for the year ended February 28,
1995.
(7) - Pursuant to Rule 12(b)-32, this exhibit is incorporated by
reference under the same exhibit number to the exhibits filed
with the Company's Form 10-K for the year ended February 29,
1996.
(8) - Pursuant to Rule 12(b)-32, this exhibit is incorporated by
reference under the same exhibit number to the exhibits filed
with the Company's Form 10-K for the year ended February 28,
1997.
(9) - Filed herewith
-24-