ASV Inc. Reports Record Year
26 February 1999
ASV Inc. Reports Record Year; 1998 Sales Up 60 Percent; Earnings Up 45 Percent
GRAND RAPIDS, Minn., Feb. 26 -- ASV Inc. ,
which manufactures the Posi-Track(TM) all-purpose crawler, reported record
year-end results today. ASV's fiscal 1998 net sales increased 60 percent to
$39,018,904 from $24,315,591 for fiscal 1997. Net income for fiscal 1998
increased 45 percent to $3,366,055, or $.40 per share, from $2,323,557, or
$.28 per share, for 1997.
Fourth quarter 1998 net sales were $8,107,884, a 1 percent increase
compared with the same quarter in 1997. Fourth quarter 1998 net income
decreased to $524,720, or $.07 per share, compared with $1,002,090, or $.12
per share for fourth quarter 1997.
"ASV had a record year and enters 1999 favorably positioned to take
advantage of current positive economic conditions," says Gary Lemke, president
and founder of ASV, Inc. "We spent 1998 enhancing growth, establishing a
strategic partnership with Caterpillar Inc. , broadening
distribution channels and increasing brand awareness of the Posi-Track line."
The most notable event of the year and the fourth quarter, Lemke says, was
ASV's announcement of an ownership agreement with Caterpillar Inc., which
closed January 29, 1999. Under the agreement, Caterpillar purchased, for $18
million, one million shares of ASV's common stock and a warrant to purchase a
controlling interest in ASV. In connection with the transaction, ASV received
the opportunity to distribute its Posi-Track machines to Caterpillar's
worldwide dealer network. The agreement also provides ASV access to
Caterpillar's financial, management and engineering resources. In addition,
ASV and Caterpillar have agreed to form a joint venture to develop and
manufacture future products.
"ASV's fourth quarter results can be attributed to the transition in
distributing its Posi-Track machines primarily through an independent dealer
network to the Caterpillar dealer network," Lemke adds. "Because the
agreement was entered into during the latter part of the year, this transition
began when many Caterpillar dealers had already completed their annual
purchasing cycles. Considering this transitional situation and its effect on
ASV's fourth quarter, we are pleased with the Company's overall year-end
performance. We look forward to the coming year as more Caterpillar dealers
become familiar with the benefits of ASV products. We believe this
transitional effect will carry into 1999."
ASV is meeting with Caterpillar dealers throughout the United States and
Canada to provide the training and product knowledge essential to effectively
selling Posi-Track machines. Since the beginning of 1999, more than a dozen
Caterpillar dealers have agreed to carry Posi-Track machines.
Fiscal 1998 unit sales increased 47 percent over 1997 unit sales with two
Posi-Track products, the HD4500 and the MD2800, accounting for the majority of
ASV's 1998 sales. With some minor changes in product mix and a lesser
percentage of retail sales in 1998, gross profit decreased from 25.5 percent
in 1997 to 24.4 percent in 1998. However, selling, general and administrative
expenses decreased as a percent of sales from 9.2 percent in 1997 to 8.9
percent in 1998.
While net sales slightly increased in the fourth quarter of 1998 over the
fourth quarter 1997, gross profits decreased from 28.3 percent in 1997 to 23.5
percent in 1998. This decrease is due in part to a lesser percentage of
retail sales in the fourth quarter of 1998 and the initial start-up production
costs related to the introduction of ASV's newest model, the Posi-Track MD2800
Series.
During the fourth quarter of 1998, holders of ASV's $5 million convertible
debentures elected to exchange their debentures for shares of ASV common
stock, effectively giving up approximately three years of future interest
payments. "This exchange, coupled with the closing of the Caterpillar
transaction, significantly strengthens ASV's balance sheet," notes Lemke.
Other highlights for 1998, says Lemke, included the inclusion of the Posi-
Track MD2800 machine in Construction Equipment's 100 top products of 1998
(Dec. 1998) and ASV being ranked No. 14 on Forbes list of the 200 best small
companies in America (Nov. 2, 1998).
ASV designs, manufactures and sells all-season, track-driven vehicles and
related accessories and attachments. With its patent-pending Maximum Traction
and Support System(TM) undercarriage, ASV leads all rubber-tracked, all-
purpose crawlers in technology and innovation. ASV's primary product, the
Posi-Track, traverses nearly any terrain with minimal damage to the ground,
making it effective in industries such as construction, landscaping and
agriculture.
To learn more about ASV Inc. and the Posi-Track all-purpose crawler, visit
the company's web site at http://www.asvi.com . For additional financial
information about ASV Inc., visit http://www.nasdaq.com
Note: The statements regarding ASV Inc. contained in this release that
are not historical in nature, particularly those that utilize terminology such
as "may," "will," "expects," "anticipates," believes," "could," or "plans,"
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.
Political, economic, climatic, taxes, regulatory, technological, competitive
and other factors, such as ASV's ability to realize the anticipated benefits
from its relationship with Caterpillar and its dealers, could cause actual
results to differ materially from those anticipated in forward-looking
statements. Additional information regarding these risk factors and
uncertainties is detailed from time to time in the company's SEC filings,
including but not limited to, its report on Form 10-Q for the quarter ended
September 30, 1998.
Condensed financial statements are as follows:
A.S.V., INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended Year Ended
December 31, December 31,
1998 1997 1998 1997
Net sales $8,107,884 $8,027,779 $39,018,904 $24,315,591
Cost of goods sold 6,200,371 5,759,644 29,487,983 18,113,910
Gross profit 1,907,513 2,268,135 9,530,921 6,201,681
Operating expenses:
Selling, general
and administrative 896,051 609,629 3,479,911 2,230,399
Research and
development 38,375 53,403 319,324 216,888
934,426 663,032 3,799,235 2,447,287
Operating income 973,087 1,605,103 5,731,686 3,754,394
Other income (expense)
Interest expense (192,614) (119,620) (576,224) (398,589)
Other, net 19,247 36,607 190,593 297,752
Income before
income taxes 799,720 1,522,090 5,346,055 3,653,557
Provision for income
taxes 275,000 520,000 1,980,000 1,330,000
NET INCOME $524,720 $1,002,090 $3,366,055 $2,323,557
Net income per common
share -- Diluted** $.07 $.12 $.40 $.28
Diluted weighted
average shares 9,026,984 9,030,381 9,015,513 8,900,651
** Includes add-back of after-tax effect of interest expense for
convertible debentures.
A.S.V., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS December 31, December 31,
1998 1997
CURRENT ASSETS
Cash & short-term investments $551,600 $1,571,759
Accounts receivable, net 4,563,840 1,989,906
Inventories 18,776,758 11,674,027
Other current assets 1,076,446 342,896
Total current assets 24,968,644 15,578,588
PROPERTY AND EQUIPMENT, net 4,563,996 3,636,091
Total assets $29,532,640 $19,214,679
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit $3,535,000 $--
Current portion of long-term
liabilities 219,417 --
Accounts payable 2,913,526 1,474,701
Accrued expenses 885,072 560,597
Income taxes payable -- 201,674
Total current liabilities 7,553,015 2,236,972
LONG-TERM LIABILITIES,
less current portion 2,464,385 7,020,608
SHAREHOLDERS' EQUITY 19,515,240 9,957,099
Total liabilities & shareholders'
equity $29,532,640 $19,214,679