##### 



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
 March 31, 2007
 0-25620
 A.S.V., Inc.
  Minnesota
    
    41-1459569(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)840 Lily LaneP.O. Box 5160Grand Rapids, MN 55744
    
    (218) 327-3434(Address of principal executive offices, 
including zip code)
    
    (Registrants telephone number,
including area code)Not Applicable(Former name, former address and former fiscal year, if changed since last report)
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
 o þ




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PART I  FINANCIAL INFORMATION
 ITEM 1  FINANCIAL STATEMENTS
 A.S.V., INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except share data)
 March 31,
    
    
    December 31,2007
    
    
    2006ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    23,830
    
    
    $
    17,090Short-term investments
    
    
    3,306
    
    
    
    220Accounts receivable, netTrade
    
    
    40,154
    
    
    
    39,777Caterpillar Inc.
    
    
    4,385
    
    
    
    4,407Inventories
    
    
    65,381
    
    
    
    71,384Deferred income taxes
    
    
    4,565
    
    
    
    4,840Other current assets
    
    
    861
    
    
    
    903Total current assets
    
    
    142,482
    
    
    
    138,621PROPERTY AND EQUIPMENT, net
    
    
    29,236
    
    
    
    29,342LONG-TERM INVESTMENTS
    
    
    11,060
    
    
    
    14,155OTHER NON-CURRENT ASSET
    
    
    245
    
    
    
    313INTANGIBLES, net
    
    
    7,746
    
    
    
    7,771GOODWILL
    
    
    8,386
    
    
    
    8,386$
    199,155
    
    
    $
    198,588LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESCurrent portion of long-term liabilities
    
    $
    31
    
    
    $
    37Accounts payableTrade
    
    
    10,013
    
    
    
    10,660Caterpillar
    
    
    24
    
    
    
    857Accrued liabilitiesWarranties
    
    
    5,758
    
    
    
    5,894Other
    
    
    2,889
    
    
    
    2,582Income taxes payable
    
    
    976
    
    
    
    686Total current liabilities
    
    
    19,691
    
    
    
    20,716LONG-TERM LIABILITIES, less current portion
    
    
    40
    
    
    
    40INCOME TAXES
PAYABLE
    
    
    1,8355
    
    
    
    DEFERRED INCOME TAXES
    
    
    1,745
    
    
    
    1,630COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    SHAREHOLDERS EQUITYCapital stock, $.01 par value:Preferred stock, 5,000,000 shares authorized;
no shares issued or outstanding
    
    
    
    
    
    
    Common stock, 70,000,000 shares authorized;
shares issued and outstanding -
26,640,770 in 2007; 26,716,420 in 2006
    
    
    266
    
    
    
    267Additional paid-in capital
    
    
    87,817
    
    
    
    88,398Retained earnings
    
    
    87,761
    
    
    
    87,537Total shareholders equity
    
    
    175,844
    
    
    
    176,202$
    199,155
    
    
    $
    198,588
  2




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A.S.V., INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited and in thousands, except share and earnings per share data)
 Three months ended March 31,
 2007
    
    
    2006Net salesTrade
    
    $
    34,079
    
    
    $
    42,136Caterpillar Inc.
    
    
    12,238
    
    
    
    22,741Total net sales
    
    
    46,317
    
    
    
    64,877Cost of goods sold
    
    
    36,761
    
    
    
    48,593Gross profit
    
    
    9,556
    
    
    
    16,284Operating expensesSelling, general and administrative
    
    
    6,160
    
    
    
    5,526Research and development
    
    
    526
    
    
    
    348Operating income
    
    
    2,870
    
    
    
    10,410Other incomeInterest income
    
    
    377
    
    
    
    465Other, net
    
    
    48
    
    
    
    16Income before income taxes
    
    
    3,295
    
    
    
    10,891Provision for income taxes
    
    
    1,236
    
    
    
    3,955NET EARNINGS
    
    $
    2,059
    
    
    $
    6,936Net earnings per common share:Basic
    
    $
    .08
    
    
    $
    .26Diluted
    
    $
    .08
    
    
    $
    .25Weighted average number of common shares outstanding:Basic
    
    
    26,716,095
    
    
    
    27,089,275Diluted
    
    
    27,187,212
    
    
    
    27,875,219
  3




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A.S.V., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
Three months ended March 31,
 2007
    
    
    2006Cash flows from operating activities:Net earnings
    
    $
    2,059
    
    
    $
    6,936Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:Depreciation
    
    
    787
    
    
    
    651Amortization
    
    
    25
    
    
    
    25Deferred income taxes
    
    
    390
    
    
    
    (330
    )Stock-based compensation expense
    
    
    682
    
    
    
    646Tax benefit from stock option exercises
    
    
    80
    
    
    
    646Changes in assets and liabilitiesAccounts receivable
    
    
    (355
    )
    
    
    (7,268
    )Inventories
    
    
    6,003
    
    
    
    (8,842
    )Other assets
    
    
    110
    
    
    
    369Accounts payable
    
    
    (1,480
    )
    
    
    3,517Accrued liabilities
    
    
    171
    
    
    
    852Income taxes payable
    
    
    290
    
    
    
    2,604Net 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
    
    
    
    1,120Redemption (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
    
    
    
    1,388Excess tax benefit from stock option exercises .
    
    
    
    
    
    
    464Retirement of common stock and warrant
    
    
    (1,488
    )
    
    
    (53
    )Net cash provided by (used in) financing
activities
    
    
    (1,350
    )
    
    
    1,696Net increase (decrease) in cash and cash
equivalents
    
    
    6,740
    
    
    
    (5,483
    )Cash and cash equivalents at beginning of period
    
    
    17,090
    
    
    
    35,517Cash and cash equivalents at end of period
    
    $
    23,830
    
    
    $
    30,034Supplemental disclosure of cash flow information:Cash paid for income taxes
    
    $
    476
    
    
    $
    571Adoption of FASB Interpretation No. 48
    
    $
    1,835
    
    
    $
    
  4




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A.S.V., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 March 31, 2007
 NOTE 1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Principles of Consolidation
  Revenue Recognition
  Research and Development
  Interim Financial Information
  Warranties
   March 31,2007
    
    
    
    
    
    
    2006Balance, beginning of period
    
    $
    5,894,000
    
    
    
    
    
    
    $
    5,077,000Expense for new warranties issued
    
    
    942,000
    
    
    
    
    
    
    
    1,475,000Warranty claims
    
    
    (1,078,000
    )
    
    
    
    
    
    
    (1,121,000
    )Balance, end of period
    
    $
    5,758,000
    
    
    
    
    
    
    $
    5,431,000
 5




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A.S.V., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(UNAUDITED)
 NOTE 1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  Continued
 Stock-Based Compensation
 Share-Based Payment Accounting for Stock-Based Compensation .
  Net Earnings per Common Share
   Three Months Ended March 31,2007
    
    
    2006Dilutive common stock equivalents
    
    
    471,117
    
    
    
    785,944Anti-dilutive options
    
    
    894,763
    
    
    
    149,500
 NOTE 2.       INVENTORIES
  March 31,
    
    
    December 31,2007
    
    
    2006Raw materials, service parts
and work-in-process
    
    $
    49,705,000
    
    
    $
    53,390,000Finished goods
    
    
    14,466,000
    
    
    
    16,682,000Used equipment held for resale
    
    
    1,210,000
    
    
    
    1,312,000$
    65,381,000
    
    
    $
    71,384,000
 6




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A.S.V., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(UNAUDITED)
 NOTE 3.       STOCK-BASED COMPENSATION
   Three months ended March 31,2007
    
    
    2006Risk-free interest rate
    
    
    4.56
    %
    
    
    4.69
    %Expected volatility
    
    
    33.97
    %
    
    
    35.03
    %Expected term (in years)
    
    
    3.75
    
    
    
    3.75Dividend yield
    
    
    
    
    
    
    
    WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Life (Years)
    
    
    ValueOutstanding at December 31, 2006
    
    
    1,974,813
    
    
    $
    13.15Granted
    
    
    213,500
    
    
    
    15.43Exercised
    
    
    (24,350
    )
    
    
    5.93Canceled
    
    
    (2,500
    )
    
    
    24.30Outstanding at March 31, 2007
    
    
    2,161,463
    
    
    $
    13.45
    
    
    
    3.56
    
    
    $
    9,440,000Exercisable at March 31, 2007
    
    
    1,387,848
    
    
    $
    9.62
    
    
    
    3.10
    
    
    $
    9,351,000
  7




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A.S.V., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(UNAUDITED)
 NOTE 4  STOCK BUYBACK PLAN
   NOTE 5.       ADOPTION OF NEW ACCOUNTING STANDARD
 Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109
  NOTE 6.       NEW ACCOUNTING PRONOUNCEMENTS
 Fair Value Measurement
 The
Fair Value Option for Financial Assets and Financial Liabilities
 8




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ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
   Critical Accounting Policies
   Revenue Recognition and Accounts Receivable. i.e.
 Inventories.
 9




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Intangible Assets.
  Goodwill.
 Warranties.
 Income Taxes
  Stock-Based Compensation. . .
 10




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Results of Operations
  Three Months Ended March 31,2007
    
    
    2006Net sales
    
    
    100.0
    %
    
    
    100.0
    %Gross profit
    
    
    20.6
    
    
    
    25.1Selling, general and administrative
    
    
    13.3
    
    
    
    8.5Research and development
    
    
    1.1
    
    
    
    0.5Operating income
    
    
    6.2
    
    
    
    16.0Net earnings
    
    
    4.4
    
    
    
    10.7
 Net Sales.
 Gross Profit.
 Selling, General and Administrative.
 11




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Research and Development.
 Other Income.
 Income Taxes.
 Net Earnings.
 Liquidity and Capital Resources
    Customer Note Receivable
  Relationship with Finance Companies
  12




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Adoption of New Accounting Standard
 Accounting for Uncertainty in Income Taxes Accounting for Uncertainty in Income Taxesan interpretation of FASB
Statement No. 109
 New Accounting Pronouncements
  Cash Requirements
  Forward-Looking Statements
 ,
 ITEM 3.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  13




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ITEM 4.       CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
 Changes in Internal Controls
 PART II  OTHER INFORMATION
 ITEM 1.       LEGAL PROCEEDINGS
  ITEM 1A.       RISK FACTORS
  ITEM 2.       UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  Total Number of
    
    
    Approximate DollarShares Purchased as
    
    
    Value of SharesPart of Publicly
    
    
    that May Yet BeTotal Number of
    
    
    Average Price Paid
    
    
    Announced Plans or
    
    
    Purchased Under thePeriod
    
    Shares Purchased
    
    
    per Share
    
    
    
    Programs
    
    
    Plans or Programs1/1/07  1/31/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2/1/07  2/28/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3/1/07  3/31/07
    
    
    100,000
    
    
    
    
    $
    14.88
    
    
    
    
    
    100,000
    
    
    $
    48,512,000Total
    
    
    100,000
    
    
        


    $
    14.88
    
    
    
    
    
    100,000
    
    
    $
    48,512,000
  ITEM 3.       DEFAULTS UPON SENIOR SECURITIES
  ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  14




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ITEM 5.       OTHER INFORMATION
  ITEM 6.       EXHIBITS
 ExhibitNumber
    
    Description3.1
    
    Third Restated Articles of Incorporation of the Company (a)3.2
    
    Bylaws of the Company (b)3.3
    
    Amendment to Bylaws of the Company adopted April 13, 1999 (c)4.1
    
    Specimen form of the Companys Common Stock Certificate (b)11
    
    Statement re: Computation of Per Share Earnings31.1
    
    Certification of the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2
    
    Certification of the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1
    
    Certification of the Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 200232.2
    
    Certification of the Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
 
 (a)
    
    Incorporated by reference to Exhibit 3.1 to the Companys
Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 (File No.
0-25620) filed electronically August 9, 2006.(b)
    
    Incorporated by reference to Exhibit 3.2 to the Companys
Registration Statement on Form SB-2 (File No. 33-61284C) filed July 7, 1994.(c)
    
    Incorporated by reference to Exhibit 3.3 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. 
 15




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SIGNATURES
  A.S.V., Inc.Dated:  May 10, 2007
    By     /s/ Richard A. BensonRichard A. BensonChief Executive Officer
(duly authorized officer) Dated:  May 10, 2007
    By    /s/ Thomas R. KargesThomas R. KargesChief Financial Officer
(principal financial and accounting officer) 16