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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, 2002
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
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. Yes [X] No [ ]
As of August 5, 2002, 10,178,264 shares of registrant's $.01 par value
Common Stock were outstanding.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
A.S.V., INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
JUNE 30, December 31,
2002 2001
----------- -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents ............................... $ 725,426 $ 5,221,591
Short-term investments .................................. 935,141 725,249
Accounts receivable, net ................................ 21,249,642 16,828,489
Inventories ............................................. 31,855,453 28,614,053
Prepaid expenses and other .............................. 930,440 1,756,844
----------- -----------
Total current assets ......................... 55,696,102 53,146,226
PROPERTY AND EQUIPMENT, net ................................ 4,685,536 4,794,578
----------- -----------
Total Assets ................................. $60,381,638 $57,940,804
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit .......................................... $ 455,000 $ --
Current portion of long-term liabilities ................ 106,992 106,008
Accounts payable ........................................ 4,503,802 2,449,144
Accrued liabilities
Compensation .......................................... 243,725 269,919
Warranty reimbursements ............................... 717,900 879,900
Warranties ............................................ 600,000 500,000
Other ................................................. 536,845 646,636
Income taxes payable .................................... 355,069 505,062
----------- -----------
Total current liabilities .................... 7,519,333 5,356,669
----------- -----------
LONG-TERM LIABILITIES, less current portion ................ 1,959,813 2,012,652
----------- -----------
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;
shares issued and outstanding - 10,178,559 in 2002
10,205,306 in 2001 .................................. 101,786 102,053
Additional paid-in capital .............................. 39,806,554 40,123,200
Retained earnings ....................................... 10,994,152 10,346,230
----------- -----------
50,902,492 50,571,483
----------- -----------
Total Liabilities and Shareholders' Equity ... $60,381,638 $57,940,804
=========== ===========
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,
------------------------------- -------------------------------
2002 2001 2002 2001
------------- -------------- ------------- --------------
Net sales................................... $ 14,713,936 $ 14,226,161 $ 20,891,764 $ 27,180,877
Cost of goods sold.......................... 11,241,963 12,177,934 15,995,103 22,925,832
------------- -------------- ------------- --------------
Gross profit....................... 3,471,973 2,048,227 4,896,661 4,255,045
Operating expenses:
Selling, general and administrative.... 1,252,804 1,442,801 2,584,836 2,873,537
Research and development............... 708,312 548,757 1,382,745 1,156,256
------------- -------------- ------------- --------------
Operating income................... 1,510,857 56,669 929,080 225,252
Other income (expense)
Interest expense....................... (32,550) (36,913) (63,697) (73,738)
Other, net............................. 46,196 113,018 112,539 289,230
------------- -------------- ------------- --------------
Income before income taxes......... 1,524,503 132,774 977,922 440,744
Provision for income taxes.................. 511,000 42,000 330,000 146,000
------------- -------------- ------------- --------------
NET EARNINGS....................... $ 1,013,503 $ 90,774 $ 647,922 $ 294,744
============= ============== ============= ==============
Net earnings per common share
Basic.................................. $ .10 $ .01 $ .06 $ .03
============= ============== ============= ==============
Diluted................................ $ .10 $ .01 $ .06 $ .03
============= ============== ============= ==============
Weighted average number of common shares outstanding
Basic.................................. 10,180,519 10,210,857 10,187,591 10,210,427
============= ============== ============= ==============
Diluted................................ 10,296,860 10,337,792 10,245,762 10,327,081
============= ============== ============= ==============
See notes to consolidated financial statements.
3
A.S.V., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
2002 2001
----------- -----------
Cash flows from operating activities:
Net earnings ........................................... $ 647,922 $ 294,744
Adjustments to reconcile net earnings to net
cash used in operating activities:
Depreciation ....................................... 201,509 213,694
Interest accrued on capital lease obligation ....... 24,144 24,144
Deferred income taxes .............................. 600,000 (50,000)
Warrant earned ..................................... -- 75,600
Changes in assets and liabilities:
Accounts receivable .............................. (4,421,153) (7,331,669)
Inventories ...................................... (3,241,400) (1,596,740)
Prepaid expenses and other ....................... 226,404 49,411
Accounts payable ................................. 2,054,658 3,332,119
Accrued liabilities .............................. (197,985) 153,764
Income taxes payable ............................. (149,993) (165,237)
----------- -----------
Net cash used in operating activities ..................... (4,255,894) (5,000,170)
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment ..................... (92,467) (139,804)
Purchase of short-term investments ..................... (935,141) (2,752,943)
Redemption of short-term investments ................... 725,249 2,237,014
----------- -----------
Net cash used in investing activities ..................... (302,359) (655,733)
----------- -----------
Cash flows from financing activities:
Advances on line of credit, net ........................ 455,000 --
Principal payments on long-term liabilities ............ (75,999) (64,075)
Proceeds from exercise of stock options, net of costs .. 18,750 (485)
Retirements of common stock ............................ (335,663) (1,517)
----------- -----------
Net cash provided by (used in) financing activities ....... 62,088 (66,077)
----------- -----------
Net decrease in cash and cash equivalents ................. (4,496,165) (5,721,980)
Cash and cash equivalents at beginning of period .......... 5,221,591 9,483,861
----------- -----------
Cash and cash equivalents at end of period ................ $ 725,426 $ 3,761,881
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest ................................. $ 122,701 $ 103,342
Cash paid for income taxes ............................. 479,993 361,237
See notes to consolidated financial statements.
4
A.S.V., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002
(UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied
in the preparation of the accompanying unaudited, consolidated financial
statements follows:
REVENUE RECOGNITION
The Company generally recognizes revenue on its product sales when
persuasive evidence of an arrangement exists, delivery has occurred, the price
is fixed or determinable and collectibility is reasonable assured. The Company
considers delivery to have occurred at the time of shipment.
WARRANTIES
Provision for estimated warranty costs is recorded at the time of sale
and periodically adjusted to reflect actual experience.
RESEARCH AND DEVELOPMENT
All research and development costs are expensed as incurred.
INTERIM FINANCIAL INFORMATION
The accompanying unaudited, consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America (US GAAP) for interim financial information.
Accordingly, they do not include all of the footnotes required by US GAAP 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. INVENTORIES
Inventories consist of the following:
JUNE 30, December 31,
2002 2001
------------------ -----------------
Raw materials, semi-finished and
work in process inventory $ 16,344,407 $ 16,438,019
Finished goods 10,606,832 7,723,738
Used equipment held for resale 4,904,214 4,452,296
------------------ -----------------
$ 31,855,453 $ 28,614,053
================== =================
NOTE 3. LINE OF CREDIT
During the second quarter of 2002, the Company amended its $10 million
line of credit agreement with its primary bank. The amended line of credit
provides for an expiration date of the earlier of demand or June 1, 2003. The
amended line of credit requires, among other items, certain levels of tangible
net worth be maintained at the end of each calendar quarter. All other major
terms and conditions remained the same. As of June 30, 2002, the Company was in
compliance with all requirements of the line of credit agreement.
5
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
CRITICAL ACCOUNTING POLICIES
The following discussion and analysis of the Company's financial
condition and results of operations is based upon its financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements
requires management to make estimates and judgments that affect the reported
amounts of assets, liabilities and expenses, and related disclosures. On an
on-going basis, management evaluates its estimates and judgments, including
those related to accounts receivable, inventories and warranty obligations. By
their nature, these estimates and judgments are subject to an inherent degree of
uncertainty. Management bases its estimates and judgments on historical
experience, observance of trends in the industry, information provided by
customers and other outside sources and on various other factors that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the amount of expenses and the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions.
Management believes the following critical accounting policies, among
others, affect its more significant judgments and estimates used in the
preparation of its consolidated financial statements.
Revenue Recognition and Accounts Receivable. Revenue is recognized when
persuasive evidence of an arrangement exists, delivery has occurred, the price
is fixed or determinable and collectibility is reasonably assured. The Company
generally obtains oral or written purchase authorizations from customers for a
specified amount of product at a specified price and considers delivery to have
occurred at the time of shipment. ASV maintains an allowance for doubtful
accounts for estimated losses resulting from the inability of its customers to
make required payments. If the financial condition of ASV's customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.
Inventories. Inventories are stated at the lower of cost or market,
cost being determined on the first-in, first-out method. Adjustments to slow
moving and obsolete inventories to the lower of cost or market are provided
based on historical experience and current product demand. The Company evaluates
the adequacy of the inventories carrying value quarterly.
Warranties. ASV provides for the estimated cost of product warranties
at the time revenue is recognized. While ASV engages in extensive product
quality programs and processes, including actively monitoring and evaluating the
quality of its component suppliers, ASV's warranty obligation is affected by
product failure rates, material usage and service delivery costs incurred in
correcting a product failure. Should actual product failure rates, material
usage or service delivery costs differ from ASV's estimates, revisions to the
estimated warranty liability may be required.
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,
2002 2001 2002 2001
--------- ---------- ---------- ----------
Net sales ............................ 100.0% 100.0% 100.0% 100.0%
Gross profit ......................... 23.6 14.4 23.4 15.7
Selling, general and administrative .. 8.5 10.1 12.4 10.6
Research and development ............. 4.8 3.9 6.6 4.3
Operating income ..................... 10.3 .4 4.4 .8
Net earnings ......................... 6.9 .6 3.1 1.1
6
FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND 2001.
Net Sales. Net sales for the three months ended June 30, 2002 increased
3.4% to approximately $14,714,000, compared with approximately $14,226,000 for
the same period in 2001. The increase in sales was due to a change in the mix of
machines sold. First, the second quarter of 2002 was the first full quarter of
sales of the Company's RC-50 product. In addition, the companion product to the
RC-50, the R-50, began sales during the second quarter of 2002. These two
products accounted for approximately 42% of the Company's unit sales in the
second quarter of 2002. Also during the second quarter of 2002, the Company
resumed shipment of undercarriages to Caterpillar Inc. (Caterpillar) for the
jointly developed Multi-Terrain Loader (MTL) product line manufactured by
Caterpillar. Included in MTL undercarriage sales for the second quarter of 2002
were undercarriages that were not shipped in the first quarter of 2002 due to
production issues experienced by Caterpillar. In addition, the Company
experienced increased parts sales during the second quarter of 2002 as the
number of machines in the field continues to increase. Offsetting these
increases were decreases in the sale of the Company's model 4810 Posi-Track and
private label version of the RCo30 product, the ASL-300, to Polaris Industries
Inc. (Polaris) and returns from one of its dealers. The Company believes the
decrease in 4810 sales was attributable to the overall softening of the
construction equipment market and the introduction of the first two models in
the MTL product line. The Company had no ASL-300 sales under its alliance with
Polaris during 2002. The Company does not expect to ship any ASL-300 machines to
Polaris in 2002. Finally, the Company recorded sales returns of approximately
$1,058,000 in the second quarter of 2002. These returns relate to product sold
in prior periods which were returned to ASV from one of its dealers in 2002. The
Company does not anticipate further product returns from this dealer. The
Company does not generally allow returns of its products, but may do so to
satisfy outstanding amounts owed.
Gross Profit. Gross profit for the three months ended June 30, 2002
increased to approximately $3,472,000, or 23.6% of net sales, from approximately
$2,048,000, or 14.4% of net sales, for the same period in 2001. The gross profit
and gross profit percentage for the second quarter of 2002 increased due to
increased sales as well a change in the product mix. First, the Company
experienced increased sales of higher margin products such as the RC-50, the
R-50, MTL undercarriages and parts during the second quarter of 2002. Second,
the Company had no ASL-300 sales to Polaris during the second quarter of 2002.
This product accounted for approximately 45% of unit sales for the second
quarter of 2001 and was sold on a cost plus basis, which carries a lower gross
profit than an ASV RC-30. Offsetting these increases were fewer sales of its
higher margin 4810 Posi-Track in 2002 compared with 2001 as discussed above.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased from approximately $1,443,000, or 10.1% of net
sales, in the second quarter of 2001, to approximately $1,253,000, or 8.5% of
net sales, in the second quarter of 2002. The decreases were due primarily to
the reversal of a portion of a remarketing reserve during the second quarter of
2002. The Company had previously established a remarketing reserve of $250,000
for any expected costs associated with remarketing existing machines at one
customer's locations, some of which were ultimately returned to Company. ASV had
originally anticipated these machines would be remarketed to other dealers, but
instead chose to have certain of these machines returned to ASV for use in its
new rental program which began in the second quarter. As these machines were
returned to ASV and reflected as sales returns with a corresponding decrease in
gross profit of approximately $148,000, a portion of the remarketing reserve was
no longer needed. The Company reversed the portion of the remarketing reserve
that related to the returned machines, which decreased selling, general and
administrative expenses by approximately $148,000. The remaining decrease in
selling, general and administrative expenses was primarily due to decreased
commissions paid to Caterpillar from the change in sales mix experienced in
2002. ASV pays no commission to Caterpillar on the sale of any MTL
undercarriages or any product in the R-Series product line.
Research and Development Expenses. Research and development expenses
increased from approximately $549,000 in the second quarter of 2001 to
approximately $708,000 in the second quarter of 2002. The increase was due to
the Company's alliance with Caterpillar for the continued development, testing
and integration of the undercarriages for the MTL product line. In addition, the
Company continues to work on extensions of the Company's current product lines
and improvements of existing products.
The Company anticipates research and development expenses will decrease
by approximately $500,000 in fiscal 2002 compared with fiscal 2001 as it expects
to complete the development of the MTL product line with Caterpillar in late
2002.
7
Other Income (Expense). Interest expense decreased from approximately
$37,000 for the second quarter of 2001 to approximately $33,000 for the second
quarter of 2002. The decrease was due to the Company refinancing approximately
$784,000 of its long-term debt from 9.0% to 6.5% for a five-year term in
December 2001. Other income decreased from approximately $113,000 in the second
quarter of 2001 to approximately $46,000 for the second quarter of 2002. This
decrease was due primarily to lower interest income from decreased short-term
investments as the Company used these investments to fund operations in 2002.
Net Earnings. Net earnings for the second quarter of 2002 were
approximately $1,014,000, compared with approximately $91,000 for the second
quarter of 2001. The increase was primarily a result of increased sales with
increased gross profit percentage and decreased selling, general and
administrative expenses, offset in part by increased research and development
expenses and decreased non-operating income.
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001.
Net Sales. Net sales for the six months ended June 30, 2002 decreased
23.1%, to approximately $20,892,000 compared with approximately $27,181,000 for
the same period in 2001. This decrease was the result of a shift in product
sales mix in 2002. First, the Company had no sales of the ASL-300 under its
alliance with Polaris during 2002. These machines accounted for approximately
38% of ASV's unit sales for the six months ended June 30, 2001. Second, sales of
the Company's RC-30 All Surface Loader decreased in 2002, due in part to the
introduction and popularity of the RC-50. Third, the Company experienced
decreased sales of its model 4810 Posi-Track in 2002. The Company believes this
decrease was attributable to the overall softening of the construction equipment
market and the introduction of the MTL products. Offsetting these decreases were
increases in 2002 in sales of the Company's shipment of MTL undercarriages to
Caterpillar, the RC-50 and R-50 and parts.
Gross Profit. Gross profit for the six months ended June 30, 2002 was
approximately $4,897,000, or 23.4% of net sales, compared with approximately
$4,255,000, or 15.7% of net sales, for the six months ended June 30, 2001. The
reasons for the increased gross profit and gross profit percentage for the six
month period ended June 30, 2002 were due to the change in mix of machines sold
as described more fully above.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased from approximately $2,874,000, or 10.6% of net
sales, for the six months ended June 30, 2001, to approximately $2,585,000, or
12.4% of net sales, for the six months ended June 30, 2002. This decrease in
expenses was due primarily to two factors. First, the reduction of the Company's
previously established sales return reserve as discussed above caused selling
general and administrative expenses to decrease approximately $148,000 in 2002.
Second, the Company had decreased commissions to Caterpillar of approximately
$152,000 as a result of the change in sales mix experienced during the first
half of 2002. The Company pays no commission to Caterpillar on the sale of any
MTL undercarriages or any R-Series product.
Research and Development Expenses. Research and development expenses
increased from approximately $1,156,000 for the six months ended June 30, 2001
to approximately $1,383,000 for the six months ended June 30, 2002. The increase
was due to the Company's alliance with Caterpillar for the continued development
and testing of undercarriages for the MTL product line, as well as work on
extensions of ASV's product line and improvements to its existing machines.
Other Income (Expense). Interest expense decreased from approximately
$74,000 for the first six months of 2001 to approximately $64,000 for the first
six months of 2002. The decrease was due to the Company refinancing
approximately $784,000 of its long-term debt from 9.0% to 6.5% for a five-year
term in December 2001. Other income decreased to approximately $113,000 in the
first six months of 2002 from approximately $289,000 for the first six months of
2001. This decrease was due primarily to lower interest income from decreased
short-term investments as the Company used these investments to fund operations
in 2002.
Net Earnings. Net earnings for the six months ended June 30, 2002
increased to approximately $648,000 from approximately $295,000 for the six
months ended June 30, 2001. The increase was primarily a result of increased
gross profit percentage and decreased selling, general and administrative
expenses, offset in part by increased research and development expenses and
decreased non-operating income.
8
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2002, the Company had working capital of approximately
$48,177,000 compared with approximately $47,790,000 at December 31, 2001. While
overall working capital remained relatively the same during the period, several
components changed. First, cash and short-term investments decreased
approximately $4,286,000 due primarily to funding operations during the first
six months of 2002. Second, accounts receivable increased approximately
$4,421,000 as more than half of the sales for the second quarter of 2002
occurred during the final month of the quarter. Third, inventories increased
approximately $3,241,000 from December 31, 2001. Included in this increase is an
increase in finished goods of approximately $2,883,000 due to lower than
anticipated sales in the first quarter of 2002. In addition, the Company elected
to produce the majority of the RCo30s and 2800 series Posi-Tracks it expects to
need for 2002 during the first quarter when it could not complete MTL
undercarriages. Also included in the overall inventory increase was an increase
in used equipment of approximately $452,000. This increase was due primarily to
the machines returned to ASV in the second quarter of 2002 as previously
discussed. Accounts payable increased approximately $2,055,000 at June 30, 2002
compared with December 31, 2001 due primarily to increased production levels and
the reimbursement to Caterpillar for their research and development costs for
the MTL project. The Company also had outstanding advances of $455,000 on its
line of credit at June 30, 2002. These advances were paid in full during July
2002.
In October 2000, the Company and Caterpillar Inc. (Caterpillar) entered
into an alliance agreement pursuant to which they plan to jointly develop and
manufacture a new product line of Caterpillar rubber track skid steer loaders
called Multi-Terrain Loaders (MTL). The product line, which is expected to
include five new models, will feature Caterpillar's patented skid steer loader
technology and ASV's patented Maximum Traction Support System rubber track
undercarriage. The machines are expected to complement existing models in both
ASV's and Caterpillar's current product lines. They are being sold through the
Caterpillar dealer network.
The Company recognizes as sales its cost for the undercarriage, as
defined in the agreement, plus a portion of the gross profit that Caterpillar
will recognize upon sale of the MTL to Caterpillar dealers, when the Company
ships undercarriages to Caterpillar. The MTLs are not a commissionable product
under the Company's Commercial Alliance Agreement with Caterpillar.
In December 2000, the Company made a sale to one customer totaling
approximately $4.0 million. Due to physical space limitations at the customer's
facilities, delivery of the product was made during 2001. The Company agreed to
provide interest-free terms for these products until July 2001. The customer
agreed to pay for any product sold prior to July 2001 by the tenth day of the
month following the month of sale and also agreed to pay for a minimum of 80
units by July 2001. For any product not paid by July 2001, the Company agreed to
provide floor plan financing at the rate of 10% per annum, such interest to be
payable monthly. All remaining unpaid amounts and any accrued interest were to
be paid by December 31, 2001.
During 2001, this customer did not make payments in accordance with the
terms of its agreement with the Company, including approximately $800,000 of
machines sold by the customer for which payment was not remitted to the Company.
The Company has been working closely with this customer to develop a
plan for the payment of the amounts owed. In January 2002, the Company and the
customer entered into a note agreement for the value of the machines that had
been previously sold by the customer for which payment was not remitted to the
Company. The amount of the note is $800,000 and is due in 48 monthly
installments plus interest at the prime rate plus 2%, beginning March 15, 2002.
The customer has made payments on a timely basis under this note. Should the
customer be successful in raising a minimum of $2.5 million through a private
placement offering, the Company has agreed to convert $500,000 of the note
balance to shares of convertible preferred stock in the private placement. The
Company has also obtained a security interest in the machines that have not yet
been sold by the customer. In addition, the customer has agreed to remit payment
to the Company for any machines it sells, which the customer has been doing.
In the fourth quarter of 2001, the Company established a remarketing
reserve of $250,000 for any expected costs associated with remarketing existing
machines at this customer's locations. ASV had originally anticipated these
machines would be remarketed to other dealers, but instead chose to utilize
these machines in its new rental program which began in the second quarter.
Under this rental program, machines are being placed at rental facilities within
Minnesota, with ASV receiving a share of the rental proceeds. If the rental
facility wishes to purchase the machine, all rental proceeds previously paid to
ASV during the initial 90-day period are applied to the purchase price of the
machine.
9
On September 24, 2001, the Company announced the implementation of a
stock buy-back program whereby ASV may repurchase up to $5 million of its common
stock in the open market. The Company is funding the repurchases with available
funds. The repurchase program is expected to last not more than twelve months or
until such amount of stock is repurchased. As of August 5, 2002, the Company had
repurchased 57,480 shares of its common stock under this buy-back program at an
aggregate purchase price of approximately $614,000.
During 2001 and 2000, the Company provided extended term financing
programs, generally not exceeding 180 days, to its customers. This extended term
financing program contributed to the increase in the Company's accounts
receivable balance in 2001. The Company is not utilizing this type of program in
2002. Instead, the Company has affiliated itself with several finance companies
that will be financing the sale of the Company's products. By using these
finance companies, the Company will be receiving payment for its products
shortly after their shipment. The Company pays a portion of the interest cost
associated with financing these shipments that would normally be paid by the
customer, generally ranging from three to twelve months, depending on the amount
of down payment made by the customer. The Company is also providing twelve month
terms for one machine to be used for demonstration purposes for each qualifying
dealer.
The Company believes this change in how the Company expects to receive
payment for the sale of its products, its existing cash and marketable
securities, together with its available, unused $10 million credit line, will
satisfy the Company's projected working capital needs and other cash
requirements for the next twelve months and for the foreseeable future.
The statements set forth above under "Liquidity and Capital Resources"
and elsewhere in this Form 10-Q regarding ASV's plans to jointly develop and
manufacture rubber-tracked machines with Caterpillar, including the number of
models to be developed, the timing of their planned introduction, ASV's future
product mix and ASV's future profitability and expense levels are
forward-looking statements based on current expectations and assumptions, and
entail various risks and uncertainties that could cause actual results to differ
materially from those expressed in such forward-looking statements. Certain
factors may affect whether these anticipated events occur including ASV's
ability to successfully manufacture the machines, unanticipated delays, costs or
other difficulties in the development and manufacture of the machines, market
acceptance of the machines, general market conditions, corporate developments at
ASV, Polaris or Caterpillar and ASV's ability to realize the anticipated
benefits from its alliances with Polaris and Caterpillar. 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. Additional information
regarding these risk factors and uncertainties is detailed in the Risk Factors
filed as Exhibit 99 to this Current Report on Form 10-Q.
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
ASV is a party to certain claims arising in the ordinary course of
business. In the opinion of management, the outcome of such claims will not
materially affect ASV's current or future financial position or results of
operation.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders of A.S.V., Inc. was held on
May 31, 2002. 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
--- -------
Gary D. Lemke 9,289,409 74,129
Edgar E. Hetteen 9,289,409 74,129
Jerome T. Miner 9,349,800 13,738
Leland T. Lynch 9,353,020 10,518
James H. Dahl 9,352,605 10,933
R. E. "Teddy" Turner, IV 9,340,643 22,895
Richard A. Benson 9,284,759 78,779
Robert R. Macier 9,283,959 78,579
(b) Ratification of Appointment of Independent Public
Accountants.
Shareholders ratified the appointment of Grant
Thornton LLP as the Company's independent auditors
for the fiscal year ending December 31, 2002, with a
vote of 9,358,420 votes for, 2,393 votes against and
2,725 shares abstaining.
ITEM 5. OTHER INFORMATION
None
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 (d)
3.1b Amendment to Second Restated Articles of Incorporation of the
Company filed May 4, 1998 (g)
3.2 Bylaws of the Company (a)
3.3 Amendment to Bylaws of the Company adopted April 13, 1999 (l)
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* Amendment to 1998 Non-Employee Director Stock Option Plan (m)
11
4.9 Securities Purchase Agreement dated October 14, 1998 between
Caterpillar Inc. and the Company (h)
4.10 Warrant issued to Caterpillar Inc. on January 29, 1999 (i)
4.11 Securities Purchase Agreement dated October 31, 2000 between
Caterpillar Inc. and the Company (n)
4.12 Replacement Warrant issued to Caterpillar Inc. on October 31,
2000 (n)
10.1 Development Agreement dated July 14, 1994 among the Iron Range
Resources and Rehabilitation Board, the Grand Rapids Economic
Development Authority ("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 June 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)
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 (k)
10.15 Fourth Amendment to Credit Agreement dated June 1, 2000
between Norwest Bank Minnesota North, N.A. and the Company (m)
10.16** Multi-Terrain Rubber-Tracked Loader Alliance Agreement dated
October 31, 2000 between Caterpillar Inc. and the Company (n)
10.17** Manufacturing and Distribution Agreement dated January 2, 2001
between Polaris Industries Inc. and the Company (o)
10.18 Fifth Amendment to Credit Agreement dated June 1, 20021
between Wells Fargo Bank Minnesota, N.A. and the Company (p)
10.19 Sixth Amendment to Credit Agreement dated June 1, 2002 between
Wells Fargo Bank Minnesota, N.A. and the Company
11 Statement re: Computation of Per Share Earnings
22 List of Subsidiaries (a)
12
99.1 Risk Factors
99.2 Certification of the Chief Executive Officer
99.3 Certification of the Chief Financial Officer
(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.
(k) Incorporated by reference to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999
(File No. 0-25620) filed electronically August 9, 1999.
(l) Incorporated by reference to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1999 (File No. 0-25620) filed electronically November 12,
1999.
(m) Incorporated by reference to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2000
(File No. 0-25620) filed electronically August 10, 2000.
(n) Incorporated by reference to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30,
2000 (File No. 0-25620) filed electronically November 13,
2000.
(o) Incorporated by reference to the Company's Annual Report
on Form 10-K for the year ended December 31, 2000 (File
No. 0-25620) filed electronically March 30, 2001.
(p) Incorporated by reference to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2001
(File No. 0-25620) filed electronically August 13, 2001.
* Indicates management contract or compensation plan or
arrangement.
** Certain information contained in this document has been
omitted and filed separately accompanied by a confidential
request pursuant to Rule 24b-2 of the Securities Exchange
Act of 1934.
13
(b) REPORTS ON FORM 8-K
The following current Report on Form 8-K was filed by the Company
during the quarter ended June 30, 2002:
Current Report on Form 8-K dated April 25, 2002 reporting under Item 9.
"Regulation FD Disclosure" that on April 25, 2002, ASV issued a press release
disclosing its financial results for the three months ended March 31, 2002. In
addition, the press release contained information regarding a conference call
held April 25, 2002 during which ASV discussed its financial results for the
three months ended March 31, 2002 and its outlook for the year ending December
31, 2002.
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 14, 2002 By /s/ Gary Lemke
--------------------------------------
Gary Lemke
President
Dated: August 14, 2002 By /s/ Thomas R. Karges
--------------------------------------
Thomas R. Karges
Chief Financial Officer
(principal financial and accounting
officer)
14
EXHIBIT INDEX
EXHIBIT METHOD OF FILING
- ------- ----------------
10.19 Sixth Amendment to Credit Agreement............................... Filed herewith electronically
11 Statement re: Computation of Per Share Earnings................... Filed herewith electronically
99.1 Risk Factors...................................................... Filed herewith electronically
99.2 Certification of the Chief Executive Officer...................... Filed herewith electronically
99.3 Certification of the Chief Financial Officer...................... Filed herewith electronically
15