Cedar Falls, Iowa-based Ag Services of America, a leading supplier of agricultural inputs, has announced record net revenue for fiscal 2002 primarily through further penetration of its AgriFlex Credit® program.
Net revenues increased 12% to US$387.4m for fiscal 2002 from US$345.7m in fiscal 2001. Net income was US$5.5m, or US$1/diluted share, compared to US$7.5m, or US$1.36/diluted share a year ago.
This was the company’s most challenging year since its inception. Fiscal 2002 earnings were significantly impacted by an unprecedented eleven cuts in the prime lending rate and adverse weather conditions in the company’s primary market area.
For the year, the average prime rate was approximately 300 basis points lower than the average prime rate in fiscal 2001. This significant decline in rates reduced earnings on the company’s invested capital and negatively affected the interest rate swap agreement associated with the US$30m term note. As a result, pre-tax earnings were reduced by about US$3.1m. In addition, the cool, wet weather last spring in many areas of North Dakota, South Dakota, Minnesota and portions of Iowa and Nebraska, caused many producers to switch to a less favorable mix of crops and to leave a portion of their acres unplanted.
This negatively impacted product sales by about US$10-12m. Also, related to the company’s year-end audit, an adjustment of US$500,000 was made to increase the reserve for doubtful notes. On the positive side, the company was able to reduce its operating expenses, as a percent of net revenues, from 3.7% to 3.3%.
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By GlobalDataQ4 net revenue increased 40% to US$87.8m in fiscal 2002 compared to US$62.7m year on year. Net income for the Q4 of fiscal 2002 was about US$320,000, or US$0.06/diluted share, compared to US$598,000, or US$0.11/diluted share, for the same period last year. The adjustment to the reserve for doubtful notes at year-end had a US$0.06/share effect on Q4 earnings.
Looking forward to fiscal 2003, AgriFlex Credit® applications and approvals are running over 20% ahead of last year’s record levels at this same time. Applications for the company’s seed and chemical financing programs, which it administers for various suppliers and distributors, has nearly doubled from last year’s record US$17m level. Despite the challenges of the past year, Ag Services management is optimistic about the opportunities to continue growing the company profitably. Based on current indicators, the company is expecting fiscal 2003 revenue and earnings to increase 18% to 23% over fiscal 2002 levels.