EX-99 2 c14850exv99.htm PRESS RELEASE exv99
 

Exhibit 99
For more information
Lisa Walsh
Investor Relations
(218) 327-5367
lwalsh@asvi.com
ASV ANNOUNCES 1st QUARTER 2007 RESULTS
 
Highlights for First Quarter 2007
•   In line with Company expectations, first quarter 2007 sales of $46.3 million and EPS of $.08 per diluted share were comparable to fourth quarter 2006 results, but were well below sales of $64.9 million and EPS of $.25 per diluted share for the first quarter of 2006.
•   Sales of ASV machines and Loegering Mfg. Inc. products increased over fourth quarter 2006 levels.
•   Strong cash flow from operations increased cash 39% to $23.8 million as compared to December 31, 2006.
•   Materials management efforts trimmed 8% or $6.0 million off of inventory levels as compared to December 31, 2006.
•   Scout SC-50 tracked utility vehicle began shipping.
Grand Rapids, MN (May 3, 2007) — ASV, Inc. (Nasdaq: ASVI) today reported results for its first quarter ended March 31, 2007. In line with Company expectations for a softer first half of the year, net sales for the first quarter of 2007 were $46.3 million compared to $46.1 million for the fourth quarter of 2006 and $64.9 million during the first quarter of 2006, when economic growth and construction spending were still very strong. Net earnings for the first quarter of 2007 were $2.1 million compared to $2.4 million for the fourth quarter of 2006 and $6.9 million for the first quarter of 2006. Earnings per diluted share were $.08 for the first quarter of 2007 compared to $.09 for the fourth quarter of 2006 and $.25 per diluted share in the first quarter of 2006.
“Despite ongoing softness in the U.S. marketplace, sales of ASV’s machines continue to perform favorably when compared to the compact loader industry,” said Dick Benson, ASV Chairman and CEO. “We remain focused on both our near term operating initiatives, such as inventory management and supplier development, and our longer-term growth drivers, including expanded international distribution, stronger equity in our brand and more resources devoted to new product development. In 2006 we made investments in human and physical capital to improve efficiency and support future growth. We believe these incremental investments will produce attractive returns once industry growth resumes.”
Income Statement
ASV machines generated first quarter sales of $27.1 million (58.5% of net sales), up 12% compared to $24.2 million for the fourth quarter of 2006 and down 14% compared to $31.4 million for the first quarter of 2006. The year-over-year decline, which compares favorably to the much larger contraction in the U.S. compact loader industry, is a function of a strong comparison quarter and a significantly weaker U.S. economic climate starting in the second half of 2006.
For the first quarter of 2007 ASV’s OEM undercarriage sales, which include sales to both Caterpillar and Vermeer were $8.1 million (17.6% of net sales) compared to $10.2 million for the fourth quarter of 2006 and $19.4 million for the first quarter of 2006. The reduction in OEM undercarriage sales for the first quarter of 2007 was primarily related to lower sales to Caterpillar as their production schedules were lowered considerably in anticipation of model changeovers.
Sales from ASV’s subsidiary Loegering Mfg. Inc. totaled $5.8 million (12.6% of net sales) in the first quarter of 2007 compared to $5.1 million in the fourth quarter of 2006 and $8.5 million for the first quarter of 2006. The year-over-year comparison reflects the precipitous decline in the U.S. skid steer loader market where Loegering’s bolt-on undercarriages replace tires.

 

 

Sales of service parts and other items were $5.3 million (11.3% of net sales) in the first quarter of 2007, compared to $6.7 million in the fourth quarter of 2006 and $5.5 million in the first quarter of 2006. The decline in service parts sales reflects lower levels of machine usage.
Gross margin for the first quarter of 2007 was 20.6% compared to 20.9% for the fourth quarter of 2006 and 25.1% for the first quarter of 2006. The year-over-year decline in gross margin primarily was driven by lower production throughput levels. Also impacting the Company’s gross margin were ASV’s efforts to upgrade dealer capability which resulted in expenses related to returns and refunds, and the Company’s efforts to stimulate sales through increased use of finance incentives.
Selling, general and administrative expenses were $6.2 million (13.3% of sales) during the first quarter of 2007 compared to $5.5 million (11.9% of sales) for the fourth quarter of 2006 and $5.5 million (8.5% of sales) for the first quarter of 2006. The quarter-over-quarter increase reflects the typical seasonal pattern of our marketing and accounting fees, while the year-over-year increase in SG&A reflected personnel additions made during 2006 and 2007 to support the Company’s stated strategic priorities, including increased marketing support.
Research and development expenses for the first quarter of 2007 were $.5 million, compared to $.5 million for the fourth quarter of 2006 and $.3 million for the first quarter of 2006. The year-over-year increase in R&D expenses reflects the addition of engineering and product testing personnel to improve product quality and enhance new product development.
Balance Sheet
ASV finished the first quarter of 2007 with $23.8 million dollars of cash and equivalents, up $6.7 million from the December 31, 2006 figure of $17.1 million. This increase reflects strong cash flow from operations including a reduction in inventory, which more than offset activity under the Company’s share buyback program. During the first quarter of 2007 100,000 shares were purchased under the share buyback program at cost of $1.5 million.
Accounts receivable as of March 31, 2007 were relatively unchanged at $44.5 million compared to $44.2 million at December 31, 2006.
ASV’s overall inventory levels decreased 8% or $6.0 million during the first quarter of 2007 to $65.4 million compared to $71.4 million at December 31, 2006. The decrease in inventory during the quarter reflected the Company’s efforts to better align the incoming flow of materials with production levels that are in line with incoming orders. For the first quarter of 2007, raw materials declined 7% or $3.7 million to $49.7 million and finished goods decreased 13% or $2.2 million to $14.5 million.
Adoption of New Accounting Standard for Income Taxes
On January 1, 2007, the Company adopted the provisions of Financial Accounting Standards Board Interpretation 48, “Accounting for Uncertainty in Income Taxes” (FIN 48). As a result of the adoption of FIN 48, the Company recognized an increase of $1.8 million in income taxes payable, and a corresponding decrease in beginning retained earnings as required by FIN 48.
     
2007 Guidance Confirmed
  •   Sales for 2007 anticipated to be in the range of $230 to $260 million.
 
  •   Diluted earnings per share is expected to be in the range of $.68 to $.87 per share.
Commenting on the Company’s outlook for 2007, Benson stated, “We continue to pursue our vision of managing ASV to a $1 billion company, and current market conditions will not move us off our plans. There will be cyclical bumps in the road from time to time. But our financial strength permits us to weather these temporary storms as evidenced by our strong cash generation despite a top line reduction for the quarter. With the launch of the Caterpillar C-Series, our OEM undercarriage volumes are expected to increase for the balance of the year, which will help offset continued weakness in some of the markets we serve.”
Question and Answer
Q1:   How many dealers did ASV add during the first quarter of 2007?
 
A:   ASV ended the first quarter of 2007 with 357 dealer storefronts, compared to 281 dealer storefronts at March 31, 2006. ASV added 2 net new dealer storefronts during the first quarter of 2007. The pace of net additions during the quarter reflects the Company’s efforts to better align dealers with Company goals. Some dealers

 

 

    were replaced or discontinued during the period. While we are in the early stages of this process, we are pleased to be attracting larger, multiple-location dealers with greater financial and operating capacity.
Q2:   What is your current availability on machines?
 
A:   Depending on the model and configuration, our current machine availability ranges from 3 to 6 weeks.
 
Q3:   Please provide an update on ASV’s international sales activity.
 
A:   For the first quarter of 2007 sales to non-U.S. dealers were $3.7 million or 7.9% of total net sales compared to $4.3 million or 6.7% of total net sales in the first quarter of 2006. While we currently have a presence in Australia, Canada, Dubai, Kuwait and New Zealand, Europe now represents one of the most rapidly expanding markets for rubber track loaders and we are devoting considerable energy to establishing distribution capability in that area.
 
Q4:   Please explain the increase in the income tax rate in the first quarter of 2007.
 
A:   The increase in ASV’s effective tax rate from 36.3% for the first quarter of 2006 to 37.5% for the first quarter of 2007 was due to a combination of lower taxable income during the quarter and non-deductible expenses which occur evenly throughout the year.
Conference Call
ASV will conduct a live webcast at 9 a.m. Central time, Thursday, May 3rd to discuss its first quarter 2007 financial results. The call will be broadcast over the Internet and can be accessed at either ASV’s web site, www.asvi.com, in the investor relations section under the “About ASV” tab or at http://www.wsw.com/webcast/cc/asv6/. To listen to the call, go to either of the two web sites at least 15 minutes prior to the call to register, download and install any needed audio software. A replay of the call will be available over the Internet shortly after its conclusion, and available telephonically one hour after its conclusion. The telephonic replay will be available through Friday, May 4th, and can be accessed by dialing 877-660-6853 and entering account number 273 and conference ID number 240226. The Internet replay will be available for 30 days and can be accessed at www.asvi.com or http://www.wsw.com/webcast/cc/asv6/ in the same manner as discussed above.
About ASV
ASV designs, manufactures and sells rubber track machines and related components, accessories, and attachments. Its purpose-built chassis and patented rubber track undercarriage technology are unique and lead all rubber track loaders in innovation and performance. ASV’s products are able to traverse nearly any terrain with minimal damage to the ground, making them effective in markets such as construction, landscaping, forestry and agriculture. The Company’s rubber track undercarriages are a primary component on Caterpillar© Multi Terrain Loaders and certain models of the Vermeer Manufacturing Company’s trencher and horizontal directional drill products. ASV’s wholly-owned subsidiary Loegering Mfg. Inc. designs, manufactures and sells traction products and attachments for the skid-steer industry. For more information, visit ASV’s website at www.asvi.com or Loegering’s website at www.loegering.com.
Forward Looking Statements
Note: Some of the statements set forth above, including the statements regarding ASV’s future expected sales and earnings per share 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 the anticipated improvement in the U.S. construction markets, ASV’s ability to successfully manufacture the machines, unanticipated delays, costs or other difficulties in the manufacture of the machines, unanticipated problems or delays experienced by Caterpillar or Vermeer relating to the manufacturing or marketing of their machines utilizing ASV undercarriage systems, market acceptance of the machines, deterioration of the general market and economic conditions, ASV’s ability to successfully upgrade its dealer capability, corporate developments at ASV, Caterpillar or Vermeer and ASV’s ability to realize the anticipated benefits from its relationships with Caterpillar and Vermeer. 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 from time to time in the Company’s SEC filings, including but not limited to, its quarterly reports on Form 10-Q and annual reports on Form 10-K.
Condensed financial statements are as follows:

 

 

A.S.V., INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS)
Three months ended March 31, 2007 and 2006
(Unaudited and in thousands, except share data)
                 
    2007     2006  
Net sales
   $ 46,317     $ 64,877  
 
                
Cost of goods sold
     36,761       48,593  
 
            
 
                
Gross profit
     9,556       16,284  
 
                
Gross profit %
     20.6 %     25.1 %
 
                
Operating expenses
                
Selling, general and administrative
     6,160       5,526  
 
                
Research and development
     526       348  
 
            
 
                
Operating income
     2,870       10,410  
 
                
Other income
                
Interest income
     377       465  
 
                
Other, net
     48       16  
 
            
 
                
Income before income taxes
     3,295       10,891  
 
                
Provision for income taxes
     1,236       3,955  
 
            
 
                
NET EARNINGS
   $ 2,059     $ 6,936  
 
            
 
                
Net earnings per common share — Diluted
   $ .08     $ . 25  
 
            
 
                
Diluted weighted average shares outstanding
     27,187,212       27,875,219  
 
            
A.S.V., INC.
SALES BREAKDOWN
Three Months Ended March 31, 2007 and 2006
                 
    2007     2006  
ASV Machines
     58.5 %     48.4 %
 
                
OEM Undercarriages
     17.6 %     30.0 %
 
                
Loegering
     12.6 %     13.1 %
 
                
Parts and Other
     11.3 %     8.5 %
 
            
 
                
TOTAL
     100.0 %     100.0 %
 
            

 

 

A.S.V., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands)
                 
ASSETS   March 31,     December 31,  
    2007     2006  
CURRENT ASSETS
                
Cash & cash equivalents
   $ 23,830     $ 17,090  
 
                
Short-term investments
     3,306       220  
 
                
Accounts receivable, net
     44,539       44,184  
 
                
Inventories
     65,381       71,384  
 
                
Deferred income taxes
     4,565       4,840  
 
                
Other current assets
     861       903  
 
            
 
                
Total current assets
     142,482       138,621  
 
                
PROPERTY AND EQUIPMENT, net
     29,236       29,342  
 
                
LONG-TERM INVESTMENTS
     11,060       14,155  
 
                
OTHER NON-CURRENT ASSETS
     245       313  
 
                
INTANGIBLES, net
     7,746       7,771  
 
                
GOODWILL
     8,386       8,386  
 
            
 
                
Total assets
   $ 199,155     $ 198,588  
 
            
 
                
LIABILITIES & SHAREHOLDERS’ EQUITY
                
 
                
CURRENT LIABILITIES
                
Current portion of long-term liabilities
  $ 31     $ 37  
 
                
Accounts payable
    10,037       11,517  
 
                
Accrued liabilities — Warranties
    5,758       5,894  
 
                
Accrued liabilities — Other
    2,889       2,582  
 
                
Income taxes payable
    2,811       686  
 
            
 
                
Total current liabilities
     21,526       20,716  
 
                
LONG-TERM LIABILITIES, less current portion
    40       40  
 
                
DEFERRED INCOME TAXES
    1,745       1,630  
 
                
SHAREHOLDERS’ EQUITY
    175,844       176,202  
 
            
 
                
Total liabilities & shareholders’ equity
   $ 199,155     $ 198,588  
 
            

 

 

A.S.V., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, 2007 and 2006
(Unaudited and in thousands)
                 
    2007     2006  
Cash flows from operating activities:
                
Net earnings
  $ 2,059     $ 6,936  
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
                
Depreciation
    787       651  
Amortization
    25       25  
Deferred income taxes
    390       (330 )
Stock-based compensation expense
    682       646  
Tax benefit from stock option exercises
     80       646  
Changes in assets and liabilities
                
Accounts receivable
    (355 )     (7,268 )
Inventories
    6,003       (8,842 )
Other assets
    110       369  
Accounts payable
    (1,480 )     3,517  
Accrued liabilities
    171       852  
Income taxes payable
    290       2,604  
 
            
 
                
Net cash provided by (used in) operating activities
     8,762       (194 )
 
            
 
                
Cash flows from investing activities:
                
Purchase of property and equipment
    (681 )     (1,789 )
Purchase of short-term investments
    (117 )     (112 )
Redemption of short-term investments
    112       1,120  
Redemption (purchase) of long-term investments
    14       (6,204 )
 
            
 
                
Net cash used in investing activities
    (672 )     (6,985 )
 
            
 
                
Cash flows provided by financing activities:
                
Principal payments on long-term liabilities
    (6 )     (103 )
Proceeds from exercise of stock options, net
    144       1,388  
Excess tax benefit from stock option exercises
    —       464  
Retirement of common stock and warrant
    (1,488 )     (53 )
 
            
 
                
Net cash provided by (used in) financing activities
     (1,350 )     1,696  
 
            
 
                
Net increase (decrease) in cash and cash equivalents
     6,740       (5,483 )
 
                
Cash and cash equivalents at beginning of period
    17,090       35,517  
 
            
 
                
Cash and cash equivalents at end of period
  $ 23,830     $ 30,034  
 
            
 
                
Supplemental disclosure of cash flow information:
                
 
                
Cash paid for income taxes
  $ 476     $ 571  
 
                
Transfer of investment from long-term to short-term
  $ 3,081     $ —  
 
                
Adoption of FASB Interpretation 48
  $ 1,835     $ —