Document/ExhibitDescriptionPagesSize 1: 10-Q Quarterly Report HTML 145K
2: EX-11 Statement Re: Computation of Per Share Earnings HTML 12K
3: EX-31.1 Certification of the CEO Pursuant to Section 302 HTML 11K
4: EX-31.2 Certification of the CFO Pursuant to Section 302 HTML 11K
5: EX-32.1 Certification of the CEO Pursuant to Section 906 HTML 8K
6: EX-32.2 Certification of the CFO Pursuant to Section 906 HTML 8K
Not
Applicable
(Former name, former address and former fiscal year, if changed since last report)
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. þ Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated
filer” in Rule 12b-2 of the Exchange Act. (Check one)
Large accelerated filer o
Accelerated filer þ
Non-accelerated filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). o Yes þ No
As of April 28, 2006, 27,163,145 shares of the issuer’s Common Stock were issued and
outstanding.
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:
Principles of Consolidation
The consolidated financial statements include the accounts of A.S.V., Inc. (ASV or the
Company) and our wholly-owned subsidiaries. All intercompany accounts and transactions have been
eliminated in consolidation.
Revenue Recognition
ASV 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
reasonably assured. We consider delivery to have occurred at the time of shipment.
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.
Warranties
We provide a limited warranty to our customers. Provision for estimated warranty costs is
recorded when revenue is recognized based on estimated product failure rates, material usage and
service delivery costs incurred in correcting a product failure. Should actual failure rates,
material usage or service delivery costs differ from our estimates, revision to the warranty
liability may be required.
Certain 2005 balance sheet amounts have been reclassified to conform with the 2006 financial
statement presentation, with no effect on previously reported operating results.
At March 31, 2006, we had three stock-based compensation plans, all previously approved by our
shareholders. Stock options granted under these plans generally vest ratably over four years of
service, have a contractual life of 5-7 years and provide for accelerated vesting if there is a
change in control, as defined. At March 31, 2006, we have 3,611,000 shares available for future
grant under our three stock option plans.
On January 1, 2006, we adopted Statement of Financial Accounting Standard No. 123R, Share
Based Payment (SFAS 123R), which requires the fair value of all share-based payment transactions,
including stock options, be recognized in the income statement as an operating expense, based on
their fair value over the requisite service period. For the three months ended March 31, 2006, we
recorded compensation expense of $646,000 ($411,000 net of income taxes) related to the adoption of
SFAS 123R, which has been included in selling, general and administrative expenses. In addition,
our executive officers and certain members of management no longer receive stock options as part of
their compensation package, but instead will be eligible to receive a bonus in 2006 if certain
financial performance measures are attained. For the three months ended March 31, 2006, we accrued
$82,000 ($52,000 net of income taxes) towards these bonuses, which has been included in selling,
general and administrative expenses. Our total stock-based compensation related expense reduced
both basic and diluted earnings per share by $.02 for the three months ended March 31, 2006.
Prior to adopting SFAS 123R, we accounted for these plans under the recognition and
measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related
Interpretations. No stock-based employee compensation cost was reflected in net earnings, as all
options granted under those plans had an exercise price equal to the market value of the underlying
common stock on the date of grant.
Prior to adopting SFAS 123R, we presented all tax benefits resulting from the exercise of
stock options as operating cash flows in the Consolidated Statement of Cash Flows. SFAS 123R
requires that cash flows from the exercise of stock options resulting from tax benefits in excess
of recognized cumulative compensation cost (excess tax benefits) be classified as financing cash
flows. For the three months ended March 31, 2006, $464,000 of such excess tax benefits was
classified as financing cash flows. The total income tax benefit from the exercise of stock options
was $1,110,000 and $500,000 for the three months ended March 31, 2006 and 2005, respectively.
We have elected the modified prospective transition method in applying SFAS 123R.
Accordingly, periods prior to adoption have not been restated. Under this transition method, we
will apply the provisions of SFAS 123R to new awards and to awards modified, repurchased, or
cancelled after January 1, 2006. Additionally, we will recognize compensation cost for the portion
of awards for which the requisite service has not been rendered (unvested awards) that are
outstanding as of January 1, 2006, as the remaining service is rendered. The compensation cost
recorded for these awards will be based on their grant-date fair value as calculated for the pro
forma disclosures required by FAS 123. At March 31, 2006, we had $6,756,000 of unrecognized
compensation costs related to non-vested stock options that are expected to be recognized over a
weighted average period of 2.0 years.
A.S.V., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(UNAUDITED)
NOTE
3. STOCK-BASED COMPENSATION — continued
The following table illustrates the effect on net earnings and earnings per share had the fair
value based method been applied to the comparable period in the prior fiscal year.
Less total stock-based employee
compensation determined under
fair value methods for all awards,
net of income taxes
(401
)
Pro forma net earnings
$
5,142
Earnings per share:
Basic – as reported
$
.21
Basic – pro forma
$
.19
Diluted – as reported
$
.20
Diluted – pro forma
$
.19
We use the Black-Scholes option pricing model to determine the fair value of our options
granted. The weighted average fair values of the options granted during the three months ended
March 31, 2006 and 2005 were $10.18 and $8.47, respectively. The fair value of options at the date
of grant and the assumptions used to determine such values are indicated in the following table:
The expected term of the options is based on evaluations of historical and expected future
employee exercise behavior. The risk-free interest rate is based on the US Treasury rate as the
date of grant with maturity dates approximately equal to the expected life at the grant date.
Volatility is based on the historical volatility of our common stock. We have not historically
issued any dividends and do not expect to in the future. In 2006, we reduced the contractual life
of all newly granted stock options to our employees from 7 years to 5 years.
Option transactions under the plans during the three months ended March 31, 2006 are
summarized as follows:
A.S.V., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(UNAUDITED)
NOTE
3. STOCK-BASED COMPENSATION — continued
The following information applies to grants that were outstanding at March 31, 2006:
Options Outstanding
Weighted-
Number
average
Weighted-
Range of
outstanding
remaining
average
exercise
at
contractual
exercise
prices
period end
life
price
$
4.04-6.06
864,500
3.62
$
4.56
$
6.13-9.19
90,300
1.49
6.67
$
14.45-21.67
784,050
5.19
16.48
$
22.60-32.22
233,500
4.76
29.36
1,972,350
$
12.33
Options exercisable
Range of
Number
Weighted-
exercise
exercisable at
average
prices
period end
exercise price
$
4.04-6.06
625,761
$
4.62
$
6.13-9.19
90,300
6.67
$
14.45-21.67
251,800
16.41
$
22.60-32.22
9,000
22.60
976,861
$
8.02
NOTE 4. NEW ACCOUNTING PRONOUNCEMENT — SFAS 151, INVENTORY COSTS
On January 1, 2006, we adopted SFAS 151, Inventory Costs (SFAS 151). This statement requires
the accounting for idle facility expense, freight, handling costs and wasted material be recognized
as current period charges. SFAS 151 also requires that allocation of fixed production overheads to
the costs of conversion be based on the normal capacity of the production facilities. SFAS 151 was
effective for us beginning January 1, 2006. The adoption of SFAS 151 on January 1, 2006 had no
material effect on our financial statements.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
We design, manufacture and sell rubber-tracked, all-season vehicles and related accessories
and attachments. We also manufacture rubber-tracked undercarriages, which are a primary component
on Caterpillar Inc.’s Multi-Terrain Loaders (MTLs). Our products are able to traverse nearly any
terrain with minimal damage to the ground, making them useful in industries such as construction,
landscaping, forestry and agriculture. We distribute our products through an independent dealer
network in the United States, Canada, Australia and New Zealand. The undercarriages sold to
Caterpillar Inc. (Caterpillar) are incorporated by Caterpillar in its MTL products and sold
exclusively through the Caterpillar dealer network, primarily in North America.
We experienced increased sales for the three months ended March 31, 2006 due primarily to the
reasons as explained below:
•
We believe there is a greater acceptance of rubber track machines in the
marketplace as users experience the benefits that a rubber track machine can
provide over a standard wheeled machine.
•
The number of companies entering into the rubber track machine market has
increased in the last few years, thereby contributing to the increased awareness
and market acceptance of the products.
•
We have increased our number of product offerings over the past few years
thereby making it easier to attract prospective dealers to carry our Posi-Track
product line. In addition, the number of dealers selling our Posi-Track product
line has increased over the past few years.
Critical Accounting Policies
The following discussion and analysis of our financial condition and results of operations is
based upon our consolidated financial statements, which have been prepared in accordance with US
GAAP. 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 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 our more
significant judgments and estimates used in the preparation of our 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. We have determined that the time of shipment is the most appropriate point
to recognize revenue as the risk of loss passes to the customer when placed with a carrier for
delivery (i.e., upon shipment). Any post-sale obligations on our part, consisting primarily of
warranty obligations, are estimated and accrued for at the time of shipment. We obtain verbal or
written purchase authorizations from customers for a specified amount of product at a specified
price and consider delivery to have occurred at the time of shipment. We maintain an allowance for
doubtful accounts for estimated losses resulting from the inability of our customers to make
required payments. If the financial condition of our 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. We do not believe our inventories are subject
to rapid obsolescence. We evaluate the adequacy of the inventories’ carrying value quarterly.
Warranties. We provide limited warranties to purchasers of our products which vary by product.
The warranties generally cover defects in materials and workmanship for one year from the delivery
date to the first end user. The rubber tracks used on our products carry a pro-rated warranty up to
1,500 hours of usage. While we engage in extensive product quality programs and processes,
including actively monitoring and evaluating the quality of our component suppliers, our 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 our estimates, revisions to the estimated warranty liability may be
required.
Income Taxes. We record income taxes using an asset and liability approach that requires the
recognition of deferred tax assets and liabilities for the expected future tax consequences of
events that have been recognized in our financial statements or tax returns. A valuation allowance
is established when management determines it is more likely than not that a deferred tax asset is
not realizable in the foreseeable future.
Stock-Based Compensation. On January 1, 2006, we adopted Statement of Financial Accounting
Standard No. 123R, Share Based Payment (SFAS 123R), which requires the fair value of all
share-based payment transactions, including stock options, be recognized in the income statement as
an operating expense, based on their fair value over the requisite service period. For the three
months ended March 31, 2006, we recorded compensation expense of $646,000 ($411,000 net of income
taxes) related to the adoption of SFAS 123R, which has been included in selling, general and
administrative expenses. In addition, our executive officers and certain members of management no
longer receive stock options as part of their compensation package, but instead will be eligible to
receive a bonus in 2006 if certain financial performance measures are attained. For the three
months ended March 31, 2006, we accrued $82,000 ($52,000 net of income taxes) towards these
bonuses, which has been included in selling, general and administrative expenses. Our total
stock-based compensation related expense reduced both basic and diluted earnings per share by $.02
for the three months ended March 31, 2006.
Results of Operations
The following table sets forth certain Statements of Earnings data as a percentage of net
sales:
Net Sales. For the three months ended March 31, 2006, net sales increased 22% to $64.9
million, compared with $53.2 million for the same period in 2005. This increase was primarily the
result of four factors. First, sales of our machines increased 45% due to a 25% increase in the
number of ASV dealers at March 31, 2006 as compared to March 31, 2005, the addition of the SR-80 to
the ASV product line in March 2006 and an increased concentration of higher-priced machines sold in
the first quarter of 2006 compared to the same period in 2005. Sales of ASV machines represented
48%, or $31.4 million, of our sales in the first quarter of 2006, compared with 41%, or $21.6
million, in the first quarter of 2005. Second, sales of Loegering Mfg. Inc.’s (Loegering) products
totaled $8.5 million for the first quarter of 2006, or 13% of net sales, compared with $6.4
million, or 12% of net sales, for the first quarter of 2005, due to increased product offerings and
greater acceptance of the Versatile Track System. Third, sales of original equipment manufacturer
(OEM) undercarriages increased 11% in the first quarter of 2006 compared with the same period in
2005. This increase was due primarily to increased production of Caterpillar’s MTLs, which utilize
our undercarriages. In addition, we began selling undercarriages to Vermeer Manufacturing Inc.
(Vermeer) for incorporation on their trenchers and horizontal directional drills in the first
quarter of 2006. Sales of OEM undercarriages represented 30%, or $19.4 million, of our sales in the
first quarter of 2006, compared with 33%, or $17.5 million, in the first quarter of 2005.
Offsetting these increases was a decrease in the sale of parts and other
items. For the three months ended March 31, 2006, parts and other items represented 8.5% of
net sales, or $5.5 million, compared with 14.5% of net sales, or $7.7 million, for the same period
in 2005. We believe this decrease was due to the uneven nature of OEM service parts orders we
experience. We anticipate our net sales for 2006 will be in the range of $300-320 million based on
our current and projected level of orders for our machines, OEM undercarriages, Loegering products
and projected future service parts demand.
Gross Profit. Gross profit for the three months ended March 31, 2006 increased to $16.3
million, compared with $12.8 million for the same period in 2005, and the gross profit percentage
increased to 25.1% in 2006 compared with 24.0% in 2005. The increase in gross profit was due
primarily to the increased sales experienced during the first quarter of 2006. The increase in
gross profit percentage was due to several offsetting factors. First, we believe the 3% list price
increase that was put in place for all ASV machines ordered after February 15, 2005 contributed to
the increase in gross profit percentage for 2006. Second, we believe a change in the sales mix of
machines sold in 2006 caused our gross profit percentage to increase. We experienced a greater
concentration of sales of higher priced machines in 2006 as compared to 2005. In addition, more of
these machines were sold with additional accessories, such as cabs and air conditioning, in 2006 as
compared to 2005. Both of these factors increased our gross profit percentage, as these machines
and accessories carry a greater than average gross profit percentage. Also contributing to the
increase in 2006 was the increase in Loegering’s sales as those products carry a higher gross
profit percentage, on average, when compared with our products. We also believe operational
efficiencies obtained from higher production volumes helped increase the gross profit percentage in
2006. Offsetting these increases were planned decreases in the selling price (and ultimately the
gross profit percentage) of one model undercarriage we sell to Caterpillar on January 1, 2006 and
service parts we sell to Caterpillar as of November 1, 2005. Finally, gross profit percentage was
also negatively affected by increased steel surcharges for the three months ended March 31, 2006,
compared with the same period in 2005. Based on our anticipated sales levels for 2006, we
anticipate our gross profit percentage for fiscal 2006 to be in the range of 24.0-24.5%.
Selling, General and Administrative. Selling, general and administrative expenses increased
from $3.8 million, or 7.1% of net sales, in the first quarter of 2005, to $5.5 million, or 8.5% of
net sales, in the first quarter of 2006. The increase was due primarily to the inclusion of
$728,000 of stock-based compensation related expenses due to the adoption of SFAS 123R on January1, 2006. In addition, we experienced increases in sales-related expenses, the addition of personnel
to facilitate our increased growth and an increased in the overall level of expenses due to higher
volume in 2006. We anticipate our selling, general and administrative expenses, including
stock-based compensation related expenses, will be in the range 7.4-7.8% of net sales for fiscal
2006.
Research and Development. Research and development expenses decreased from $428,000 in the
first quarter of 2005 to $348,000 in the first quarter of 2006. The decrease was due to the
completion of much of the development work related to our SR-70 and SR-80 products in late 2005.
The Company anticipates its future spending on research and development activities will focus on
additional product offerings and additional applications of its track technology and will
approximate 0.7% of net sales for fiscal 2006.
Other Income (Expense). For the three months ended March 31, 2006, other income was $481,000,
compared with $321,000 for the first quarter of 2005. This increase was due primarily to greater
interest income from increased short-term interest rates in 2006. In addition, we had no interest
expense in 2006 as we paid off all our interest-bearing debt in late 2005 and early 2006 with
available funds.
Net Earnings. For the first quarter of 2006, net earnings were $6.9 million, compared with
net earnings of $5.5 million for the first quarter of 2005. The increase was primarily a result of
increased sales with an increased gross profit percentage and increased non-operating income,
offset in part by increased operating expenses. Based on our anticipated sales, gross profit and
expense levels for 2006, we anticipate our diluted earnings per share will be in the range of
$1.10-$1.20. This estimate includes stock-based compensation related expenses of $.08 per diluted
share.
Liquidity and Capital Resources
For the quarter ended March 31, 2006, our cash and cash equivalents decreased $5.5 million,
compared with an increase of $9.1 million of cash and cash equivalents for the quarter ended March31, 2005. During the first quarter of 2006, we used $194,000 of cash and cash equivalents from
operations as increased profitability and
increased current liabilities were offset by increases in accounts receivable and inventories.
In 2006, we used $7.0 million of cash and cash equivalents when we purchased long-term investments
and increased our investment in property and equipment. This compares to generating $7.3 million of
cash and cash equivalents in 2005, as we chose to eliminate the use of auction-rate securities from
our investment portfolio, which were classified as short-term investments, and replaced them with
short-term tax-exempt investments, which are classified as cash equivalents. Financing activities
generated an additional $1.7 million in 2006, compared with $0.7 million in 2005, due primarily to
the exercise of employee and director stock options.
Customer Note Receivable
Included in accounts receivable and other non-current assets at March 31, 2006 is a note
receivable for $679,000 from a customer. The note bears interest at 6% and is due in monthly
installments through January 2009. As of April 28, 2006, the customer is current on the amount owed
us under this note.
Off-Balance Sheet Arrangements
We have guaranteed the repayment of a note made by a customer to a non-affiliated finance
company for payment of amounts owed to us by this customer. To determine the value of the
financing guarantee, the lending institution provided us with the cost of the financing both with
and without the guarantee. This differential was used to determine the amount of the financing
guarantee of $35,000. This amount was recorded as a reduction of net sales for the year ended
December 31, 2003, when the note and guarantee were entered into. A similar amount has been
included in other accrued liabilities since December 31, 2003. As of April 28, 2006, the customer
is current on the amount owed to the finance company under this note of approximately $246,000.
Relationship with Finance Companies
In October 2005, we announced we had entered into an agreement with CIT to form ASV Capital, a
private label finance program to offer wholesale and retail financing options on the sale of our
Posi-Track products. Representatives of ASV and CIT will make joint credit decisions, with CIT
retaining the risk of the credit portfolio. We have no ownership in ASV Capital and have no share
in the profit or loss of ASV Capital. We have also affiliated ourselves with one other finance
company that finances the sale of our products.
By using these finance companies, we receive payment for our products shortly after their
shipment. We pay a portion of the interest cost associated with financing these shipments that
would normally be paid by the customer, over a period generally ranging from three to twelve
months, depending on the amount of down payment made by the customer. We are also providing
twelve-month terms for one machine to be used for demonstration purposes for each qualifying
dealer. In addition, we offer, from time to time, extended term financing on the sale of certain
products to our dealers for periods ranging from 90 days to two years.
Facility Expansion
In March 2006, we announced plans to expand our Grand Rapids, Minnesota manufacturing
facility. Under the plan, we intend to approximately double the size of our current machine
production facility with a 120,000 square foot addition. Construction on the expansion is
expected to begin in the second quarter of 2006, with completion targeted for late 2006. The
estimated cost to construct and equip the facility addition is expected to be in the range of $5.0
to $5.5 million. We anticipate funding this expenditure with available cash.
Cash Requirements
We believe cash expected to be generated from operations and our existing cash, cash
equivalents and investments will satisfy our projected working capital needs and other cash
requirements for the next twelve months and the foreseeable future.
At March 31, 2006, we had three stock-based compensation plans, all previously approved by our
shareholders. Stock options granted under these plans generally vest ratably over four years of
service, have a contractual life of 5-7 years and provide for accelerated vesting if there is a
change in control, as defined. At March 31, 2006, we have 3,611,000 shares available for future
grant under our three stock option plans.
On January 1, 2006, we adopted Statement of Financial Accounting Standard No. 123R, Share
Based Payment (SFAS 123R), which requires the fair value of all share-based payment transactions,
including stock options, be recognized in the income statement as an operating expense, based on
their fair value over the requisite service period. For the three months ended March 31, 2006, we
recorded compensation expense of $646,000 ($411,000 net of income taxes) related to the adoption of
SFAS 123R, which has been included in selling, general and administrative expenses. In addition,
our executive officers and certain members of management no longer receive stock options as part of
their compensation package, but instead will be eligible to receive a bonus in 2006 if certain
financial performance measures are attained. For the three months ended March 31, 2006, we accrued
$82,000 ($52,000 net of income taxes) towards these bonuses, which has been included in selling,
general and administrative expenses. Our total stock-based compensation related expense reduced
both basic and diluted earnings per share by $.02 for the three months ended March 31, 2006.
Prior to adopting SFAS 123R, we accounted for these plans under the recognition and
measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related
Interpretations. No stock-based employee compensation cost was reflected in net earnings, as all
options granted under those plans had an exercise price equal to the market value of the underlying
common stock on the date of grant.
Prior to adopting SFAS 123R, we presented all tax benefits resulting from the exercise of
stock options as operating cash flows in the Consolidated Statement of Cash Flows. SFAS 123R
requires that cash flows from the exercise of stock options resulting from tax benefits in excess
of recognized cumulative compensation cost (excess tax benefits) be classified as financing cash
flows. For the three months ended March 31, 2006, $464,000 of such excess tax benefits was
classified as financing cash flows. The total income tax benefit from the exercise of stock options
was $1,110,000 and $500,000 for the three months ended March 31, 2006 and 2005, respectively.
We have elected the modified prospective transition method in applying SFAS 123R.
Accordingly, periods prior to adoption have not been restated. Under this transition method, we
will apply the provisions of SFAS 123R to new awards and to awards modified, repurchased, or
cancelled after January 1, 2006. Additionally, we will recognize compensation cost for the portion
of awards for which the requisite service has not been rendered (unvested awards) that are
outstanding as of January 1, 2006, as the remaining service is rendered. The compensation cost
recorded for these awards will be based on their grant-date fair value as calculated for the pro
forma disclosures required by FAS 123. At March 31, 2006, we had $6,756,000 of unrecognized
compensation costs related to non-vested stock options that are expected to be recognized over a
weighted average period of 2.0 years.
New Accounting Pronouncement
On January 1, 2006, we adopted SFAS 151, Inventory Costs (SFAS 151). This statement requires
the accounting for idle facility expense, freight, handling costs and wasted material be recognized
as current period charges. SFAS 151 also requires that allocation of fixed production overheads to
the costs of conversion be based on the normal capacity of the production facilities. SFAS 151 was
effective for us beginning January 1, 2006. The adoption of SFAS 151 on January 1, 2006 had no
material effect on our financial statements.
Forward-Looking Statements
The statements set forth above under “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and elsewhere in this report regarding the effect of new
accounting pronouncements, our future sales levels, gross profit percentage, earnings per share,
expense levels, liquidity and our facility expansion 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 our ability to
successfully manufacture our machines and undercarriages, unanticipated delays, costs or other
difficulties in the manufacture of the machines and
undercarriages, unanticipated problems or delays experienced by Caterpillar or Vermeer
relating to the manufacturing or marketing of their machines, market acceptance of the machines,
deterioration of the general market and economic conditions, corporate developments at ASV,
Caterpillar or Vermeer, our ability to realize the anticipated benefits from our relationships with
Caterpillar and Vermeer and the other factors discussed in Part I, Item 1A of our Annual Report on
Form 10-K for the year ended December 31, 2005. Any forward-looking statements provided from
time-to-time by us represent only management’s then-best current estimate of future results or
trends.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have no history of investing in derivative financial instruments, derivative commodity
instruments or other such financial instruments, and do not anticipate making such investments in
the future. Transactions with international customers are entered into in U.S. dollars, precluding
the need for foreign currency hedges. Additionally, we invest 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.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures. Under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief Financial Officer,
we evaluated the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the
Exchange Act)). Based upon that evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that, as of the end of the period covered by this report, our disclosure controls
and procedures were effective.
Changes in Internal Controls. There were no changes in our internal control over financial
reporting (as defined in Rule 13(a)-15(f) under the Exchange Act) during the first fiscal quarter
of 2006, that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report and our other SEC filings, you
should carefully consider the factors discussed in Part I, Item 1A of our Annual Report on Form
10-K for the year ended December 31, 2005, which could have a material impact on our business,
financial condition or results of operations. The risks described in our Annual Report on Form
10-K are not the only risks we face. Additional risks and uncertainties not presently known to us
or that we currently believe to be immaterial may also adversely affect our business, financial
condition or results of operations.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table provides information about repurchases by us of our Common Stock during the
quarter ended March 31, 2006.
Total Number of
Approximate Dollar
Shares Purchased
Value of Shares that
Total Number
as Part of Publicly
May Yet Be Purchased
of Shares
Average Price Paid
Announced Plans
Under the Plans or
Period
Purchased (1)
per Share
or Programs (2)
Programs
1/1/06 – 1/31/06
1,849
$
28.56
—
—
2/1/06 – 2/28/06
—
—
—
—
3/1/06 – 3/31/06
—
—
—
—
Total
1,849
$
28.56
—
—
(1)
The total number of shares purchased represents previously owned shares of our Common Stock
tendered by an optionholder in payment of the exercise price of an option.
(2)
We do not currently have a repurchase program.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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.