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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, 1999
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
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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 12, 1999, was approximately
$70,851,000 (based on the last reported sale price of $17.25 per
share on May 12, 1999, on the New York Stock Exchange).
As of May 12, 1999, 5,228,564 shares of the registrant's common
stock, no par value, were issued and outstanding. At that date,
there were 154 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, 1999, are
incorporated by reference into Part II.
Selected portions of the Registrant's Definitive Proxy Statement
for the annual shareholders' meeting to be held July 29, 1999,
are incorporated by reference into Part III.
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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.
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
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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 30 states. The
Company's principal target market is corn and soybean producers in the
states of Iowa, Minnesota, Nebraska, Illinois, Ohio, South Dakota,
North Dakota, Texas and Indiana.
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 1999, 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 13.0%,
13.2%, 14.7% and 50.4%, respectively. The balance of the Company's net
revenues in fiscal 1999 was 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
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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 eighteen of its employees, the Company
is currently licensed as an insurance agent in 30 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 landowner 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
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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 States
Department of Agriculture, through its Farm Service Agency ("FSA"),
guarantees participating farmers fixed payments on "contract acreage
base" for various crops over the next four years 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 2000, 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 18, 1999,
the current prime rate is 7.75% 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
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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.
Customer Support:
The Company provides customers personalized service with their 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, 1999 and 1998: the total
number of customer accounts was 1,358 and 1,235, respectively; the
total outstanding customer notes receivable were $129,304,958 and
$89,075,176, respectively. For the years ended February 28, 1999 and
1998, there were no individual customers whose accounts were 5% or more
of the Company's total customer notes receivable at year end.
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-
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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, 1999 and 1998 was $69,796,119 and $38,494,351,
respectively. The amount of past due customer notes receivable
increased from 20.7% of net revenues in fiscal 1998 to 31.0% of net
revenues in fiscal 1999, primarily as a result of the outstanding
dollar amount of customer notes receivable extended by the Company
originated under the new servicing and marketing agreement with a major
national agricultural supplier. The net revenues associated with this
agreement are primarily financing income as the Company serves as the
underwriter in providing financing for purchases and cash advances of
customers under the agreement. This financing agreement, along with
more of the Company's customers choosing to store their crops for later
sale as a result of low commodity prices, resulted in the increased
amount of past due accounts. The increased 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, 1999 and
1998, the Company's allowance for doubtful notes were $3,695,000 and
$2,800,000, respectively.
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-seven 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
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approval. After the Company has approved a customer, the Company's
employees begin to service the customer's account generally without
assistance from the sales representatives.
In fiscal 1999 and 1998, the Company incurred approximately $265,300
and $233,700, respectively, in advertising expenses. The Company plans
to spend approximately $470,000 on advertising in fiscal 2000.
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 and commercial paper borrowings 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 of 1997, the Company negotiated an asset backed securitized
financing program with a maximum available amount of $135 million,
which was increased to $205 million in March of 1998. Subsequent to
fiscal 1999 year end, the Company amended the asset backed securitized
financing program which extended the agreement through fiscal 2004 and
increased the maximum available borrowing amount under the facility to
$275 million. The Company also maintains two lines of credit with a
maximum borrowing capacity of $20.5 million, which combined with the
securitized financing program should provide the Company adequate
financing for fiscal 2000. 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.
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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 $84,002,000 in commitments to
supply farm inputs, there was no material sales backlog as of February
28, 1999.
Government Regulation:
Farm input financing and cash advances are subject to certain state
laws governing money brokers, federal and states 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.
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 eighteen employees with the required
insurance agent's license.
Employees:
As of February 28, 1999, the company had 145 full time employees,
including eight executive positions, twenty-two in product
specialization and distribution, thirty-eight in credit review and
approval, four in multi-peril crop insurance sales, sixteen in
accounting and administration, six in information systems, one in
customer service, thirteen in legal and collection, and thirty 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 30,000
square feet, are located in Cedar Falls, Iowa under a lease, which
expires in 2001. The current annual rent is approximately $243,500
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.
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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.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market Information
The Company's common stock is traded on the New York Stock Exchange
("NYSE"), under the symbol ASV. The market quotations provided by the
NYSE appearing on page four of the Annual Report to Shareholders for
the year ended February 28, 1999 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, 1999, the Company had 153 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 current
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 12
and 13 of the Annual Report to Stockholders for the year ended February
28, 1999 is herein incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing on pages 14 through 20 of the Annual
Report to Stockholders for the year ended February 28, 1999 is herein
incorporated by reference.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At February 28, 1999 the Company had $70.3 million outstanding in notes
payable at an average variable interest rate of 5.5%. A 10% increase
in the average variable interest rate would increase interest expense
by approximately 55 basis points. Assuming similar average outstanding
borrowings as fiscal 1999 of $122.3 million, this would increase the
Company's interest expense by approximately $673,000.
The above sensitivity analysis is to provide information about the
Company's potential market risks as they pertain to an adverse change
in interest rates. The above analysis excludes the positive impact
that increased interest rates would have on financing income as 95% of
the Company's notes receivable are variable rate notes.
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.
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) 50 President and Chief Executive Officer
Henry C. Jungling, Jr. (1) 52 Chairman of the Board
Kevin D. Schipper (1) 39 Chief Operating Officer
Todd J. Ryan (1) 36 Vice President Sales and Marketing
Brad D. Schlotfeldt (1) 35 Vice President Finance and Treasurer
Eunice M. Schipper (1) 57 Vice President Credit
Neil H. Stadlman (1) 53 Vice President Credit Administration
Terry L. Gibson (2) 37 Secretary
(1) These executive officers of the Registrant have been an employee of
the Company in varying capacities for more than the past five years.
(2) Mr. Gibson has been employed by the Company in varying capacities
since April 1998. Before joining the Company, Mr. Gibson was a
partner in the law firm of Wandro & Gibson from July 1996 through
April 1998, an associate with the law firm Brown, Winnick, Graves
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from May through June 1996, self-employed as a sole practitioner
from April 1995 through May 1996 and prior to that Mr. Gibson was
employed by the U.S. Office of Trustee with the U.S. Department of
Justice.
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 July 29,
1999 on pages 5 and 6, 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 July 29, 1999 on page 5, under the heading "Election of
Directors," on page 7, under the heading "Election of Directors -
Compensation Committee Interlocks and Insider Participation," and on
pages 8 to 16, 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 11 to 13 and page 16, respectively, are
specifically not incorporated by reference.
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 July 29, 1999 on page 8, 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 July 29, 1999 on pages 5 and 6, under the heading "Election of
Directors," and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
Page
(a)(1) - Financial Statements 14
(a)(2) - Financial Statement Schedules 14
(a)(3) and (c) - Exhibits 14
(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.
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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 22
Consolidated balance sheets, February 28,
28, 1999 and 1998 23
Consolidated statements of income, years
ended February 28, 1999, 1998 and 1997 24
Consolidated statements of stockholders'
equity, years ended February 28, 1999,
1998 and 1997 25
Consolidated statements of cash flows, years
ended February 28, 1999, 1998 and 1997 26
Notes to consolidated financial statements 27 - 44
FINANCIAL STATEMENT SCHEDULES
Report of Independent Public Accountants 15
Schedule II - Valuation and Qualifying
Accounts 16
EXHIBITS
See Index of Exhibits on pages 18, 19 and 20.
The Financial Statements listed in the above index are included in the
Company's Annual Report to Stockholders for the year ended February 28,
1999, 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, 1999 is not
deemed filed as a part of this report.
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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.
/s/ McGladrey & Pullen, LLP
McGladrey & Pullen, LLP
Waterloo, Iowa
April 23, 1999
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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, 1999:
Reserves and allowances deducted
from asset accounts:
Allowance for doubtful notes $2,800,000 $4,035,259 $3,140,259 (1) $3,695,000
Reserve for discounts $1,200,000 $4,983,674 (2) $3,683,674 (3) $2,500,000
Year ended February 28, 1998:
Reserves and allowances deducted
from asset accounts:
Allowance for doubtful notes $2,146,000 $2,290,388 $2,399,647 (1) $2,800,000
Reserve for discounts $519,000 $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 $2,105,000 $1,862,726 $2,199,388 (1) $2,237,000
Reserve for discounts $458,000 $2,471,888 (2) $2,462,888 (3) $528,000
(1) Uncollectible customer notes receivable written off, net of recoveries.
(2) Provision for discounts as a reduction of revenues.
(3) Cash discounts taken.
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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 26, 1999
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 26, 1999
By:/s/ Gaylen D. Miller
Gaylen D. Miller
Chairman and Director
Date: May 26, 1999
By:/s/ Kevin D. Schipper
Kevin D. Schipper
Chief Operating Officer and Director
Date: May 26, 1999
By:/s/ James D. Gerson
James D. Gerson
Director
Date: May 26, 1999
By:/s/ Michael Lischin
Michael Lischin
Director
Date: May 26, 1999
By:/s/ Ervin J. Mellema
Ervin J. Mellema
Director
Date: May 26, 1999
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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)
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)
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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)
10.25 Master Trust Indenture and Security Agreement (10)
11.1 Statement re computation of per share earnings (10)
13.1 Form of Annual Report to Stockholders for the year
ended February 28, 1999 (10)
21.1 Subsidiaries of the Registrant (10)
27.1 Financial Data Schedule (10)
99.1 Fourth quarter and year end results press release (10)
(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 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.
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(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.
(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, 1998.
(10) - Filed herewith
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