-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BuZ2VguFMUnJgspPx4Laay3x1YgPzLwd1XMr9hZNkpHDN2WJMAYWWjXs47x7mw8j g4pvAhE+sr5zIEH/p/gfUA== 0000007623-97-000010.txt : 19970512 0000007623-97-000010.hdr.sgml : 19970512 ACCESSION NUMBER: 0000007623-97-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970228 FILED AS OF DATE: 19970509 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARTS WAY MANUFACTURING CO INC CENTRAL INDEX KEY: 0000007623 STANDARD INDUSTRIAL CLASSIFICATION: FARM MACHINERY & EQUIPMENT [3523] IRS NUMBER: 420920725 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-05131 FILM NUMBER: 97598975 BUSINESS ADDRESS: STREET 1: P O BOX 288 CITY: ARMSTRONG STATE: IA ZIP: 50514 BUSINESS PHONE: 7128643131 MAIL ADDRESS: STREET 1: P O BOX 288 CITY: ARMSTRONG STATE: IA ZIP: 50514 10-Q 1 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 For the Quarter Ended February 28, 1997 Commission File No.0-5131 ART'S-WAY MANUFACTURING CO., INC. (Exact name of registrant as specified in its charter) DELAWARE 42-0920725 State of Incorporation I.R.S. Employer Identification No. Armstrong, Iowa 50514 Address of principal executive offices Zip Code Registrant's telephone number, including area code: (712) 864-3131 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, and (2) has been subject to such filling requirements for the past 90 days. Yes X No __ Indicate the number of shares outstanding of each of the issuer's classes of common stock as of March 18, 1997: 1,238,431 Number of Shares ART'S-WAY MANUFACTURING CO., INC. TABLE OF CONTENTS Page PART I - FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Condensed Statement of Earnings....................2 Condensed Balance Sheet.......................... 3,4 Condensed Statement of Cash Flows..................5 Notes to Condensed Financial Statements........... 6,7 Item 2. Management's Discussion and Analysis............. 8,9 PART II - Other Information Item 1. Legal Proceedings ................................ 10 ART'S-WAY MANUFACTURING CO., INC. CONDENSED STATEMENTS OF OPERATIONS (Unaudited) THREE MONTHS ENDED NINE MONTHS ENDED February 28, February 29, February 28,February 29, 1997 1996 1997 1996 NET SALES $4,565,202 $2,804,518 $11,840,887 $9,118,805 COST OF GOODS SOLD 3,497,536 2,001,869 9,031,572 6,846,311 GROSS PROFIT 1,067,666 802,649 2,809,315 2,272,494 EXPENSES: Engineering 91,630 65,320 228,908 226,185 Selling 351,022 322,429 971,566 1,091,720 General and 580,234 484,075 1,534,366 1,491,973 administrative Total 1,022,886 871,824 2,734,840 2,809,878 INCOME(LOSS)FROM OPERATIONS 44,780 (69,175) 74,475 (537,384) OTHER DEDUCTIONS: Interest expense (71,066) (97,233) (274,067) (357,359) Other (9,387) (4,152) (19,244) (24,946) Total other (deductions) (80,453) (101,385) (293,311) (382,305) LOSS BEFORE INCOME TAXES (35,673) (170,560) (218,836) (919,689) INCOME TAX BENEFIT (12,485) (59,695) (76,592) (321,890) NET LOSS (23,188) (110,865) (142,244) (597,799) LOSS PER SHARE (NOTE 2) ($0.02) ($0.10) ($0.12) ($0.56) See accompanying notes to consolidated financial statements. Memo: Earnings (loss) before interest, taxes, depreciation and amortization 238,902 68,494 546,138 (132,047) Earnings (loss) before interest and taxes 35,393 (73,327) 55,231 (562,330) 2 ART'S-WAY MANUFACTURING CO., INC. CONDENSED BALANCE SHEETS February 28, May 31, 1997 1996 (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $44,475 $91,513 Accounts receivable-customers, net of allowance for doubtful accounts of $33,614 in February and $26,975 in May, respectively 3,079,469 2,464,241 Inventories (Note 4) 5,767,558 6,200,743 Current recoverable income taxes 155,920 - Deferred income taxes 734,522 734,522 Other current assets 292,740 87,475 Total current assets 10,074,684 9,578,494 PROPERTY, PLANT AND EQUIPMENT, at cost 10,193,066 9,091,255 Less accumulated depreciation 7,274,848 6,783,941 Net property, plant and equipment 2,918,218 2,307,314 TOTAL $12,992,902 $11,885,808 See accompanying notes to consolidated financial statements. 3 February 28, May 31, 1997 1996 (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable to bank $1,586,355 $2,281,809 Current portion of long-term debt (Note 6) 426,000 426,000 Accounts payable 1,599,686 506,912 Customer deposits (Note 3) 640,702 371,801 Accrued expenses (Note 5) 515,896 1,007,326 Total current liabilities 4,768,639 4,593,848 LONG-TERM DEBT, excluding current portion (Note 6) 1,700,500 1,420,000 DEFERRED INCOME TAXES 160,038 160,038 STOCKHOLDERS' EQUITY: Common stock - $.01 par value. Authorized 5,000,000 shares; issued 1,340,778 shares 13,408 13,408 Additional paid-in capital 1,641,042 2,295,089 Retained earnings 5,698,626 5,840,870 7,353,076 8,149,367 Less cost of common shares in treasury of 103,147 in February and 254,147 in May 989,351 2,437,445 Total stockholders' equity 6,363,725 5,711,922 TOTAL $12,992,902 $11,885,808 See accompanying notes to financial statements. 4 ART'S-WAY MANUFACTURING CO., INC. CONDENSED STATEMENT OF CASH FLOWS (unaudited) NINE MONTHS ENDED February 28, February 29, 1997 1996 CASH FLOW FROM OPERATIONS: Net loss $(142,244) $(597,799) Adjustment to reconcile net loss to net cash provided (used) by operations: Depreciation 490,907 430,283 Changes in assets and liabilities: (Increase) decrease in: Accounts receivable (615,228) 1,617,774 Inventories 433,185 (61,437) Sundry (205,265) (61,507) Increase (decrease) in: Accounts payable 1,092,774 (807,742) Customer deposits 268,901 757,409 Accrued expenses (491,430) (59,947) Income taxes, net (155,920) 325,445 Total adjustments 817,924 2,140,278 Net cash provided by operations 675,680 1,542,479 CASH USED IN INVESTING ACTIVITIES - Purchases of property, plant and equipment (1,101,811) (16,314) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock from treasury 794,047 30,895 Decrease in short term loan (695,454) (2,002,077) Increase in long-term loan 280,500 343,666 Net cash provided (used) by financing activities 379,093 (1,627,516) Net decrease in cash and temporary cash investments (47,038) (101,351) Cash and temporary cash investments at beginning of period 91,513 86,051 Cash and temporary cash investments at end of the period $44,475 $(15,300) Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $229,705 $393,491 Income taxes 20,869 6,992 See accompanying notes to consolidated financial statements. 5 ART'S-WAY MANUFACTURING CO., INC. NOTES TO CONDENSED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Statement Presentation The financial statements are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods. The financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1996. The results of operations for the third quarter ended February 28, 1997 are not necessarily indicative of the results for the entire fiscal year ending May 31, 1997. 2. LOSS PER SHARE Loss per common share is based on the weighted average number of shares outstanding of 1,237,631 for the quarter and 1,183,770 for the nine months in 1997; and 1,078,631 for the quarter and 1,076,523 for the six months in 1996. Outstanding stock options have no material dilutive effect upon loss per share. 3. CUSTOMER DEPOSITS The Company receives customer deposits for equipment to be delivered at a later date.As equipment is invoiced and shipped, customer deposits are applied to accounts receivable created by these invoices. 4. INVENTORIES Major classes of inventory are: February 28, May 31, 1997 1996 Raw material $ 1,010,460 $ 631,354 Work-in-process 2,292,609 2,235,737 Finished goods 2,721,489 3,683,652 Inventory market write-down (257,000) (350,000) Total $5,767,558 $6,200,743 6 5. ACCRUED EXPENSES Major components of accrued expenses are: February 28 May 31, 1997 1996 Salaries, wages and commissions $ 149,283 $ 305,413 Provision for pending claims 1,666 160,000 Other 364,947 541,913 Total $ 515,896 $1,007,326 6. NOTES PAYABLE - LONG-TERM A summary of the Company's long-term debt at February 28, 1997 is as follows: Installment promissory note dated August 31, 1995, in the original principal sum of $2,130,000, payable in monthly installments of $35,500 plus interest for twenty-four months with the final payment due during the twenty-fourth month unless the revolving credit facility is renewed. In the event that the term of the revolving credit facility is subsequently extended, the term loan shall continue to amortize based upon the payment schedule outlined above. $1,526,500 State of Iowa Community Development Block Grant promissory notes at zero percent interest, maturity 2006 with quarterly principal payments to begin October, 1997. 350,000 State of Iowa Community Development Block Grant local participation promissory notes at 4% interest, maturity 2006. Interest is payable quarterly beginning in November 1996 and principal payments begin in November 1998. 250,000 Total long-term debt 2,126,500 Less current portion of long-term debt 426,000 Long-term debt, excluding current portion $1,700,500 7 Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (a) Liquidity and Capital Resources At February 28, 1997, the Company's liquidity had increased since fiscal year end, May 31, 1996. The quick ratio at February 28, 1997, was .66:1 as compared to .56:1 at May 31, 1996. For the comparable periods last year,the Company's quick ratio was .35:1 at February 29, 1996, as compared to .48:1 at May 31, 1995.The current ratio was 2.11:1 at February 28, 1997, as compared to 2.08:1 at May 31, 1996. The Company's current ratio was 2.01:1 at February 29, 1996, as compared to 1.65:1 at May 31, 1995. As of February 28, 1997, the Company had no material commitments for capital expenditures. The Company anticipates that funds which may be required for future working capital requirements, capital expenditures and business acquisitions will be obtained from future operations, long-term and short-term debt and short-term lines of credit. (b) Results of Operations Overall sales for the quarter ended February 28, 1997 were 63% higher than a year ago, as the benefits from the Company's recent acquisitions began to contribute. For the nine months ended February 28, 1997, sales were $11,840,887 compared to $9,118,805 for the nine months ended February 29,1996. Sales of Logan potato equipment and service parts exceeded $1,400,000 for the third quarter and we continue to write orders for fourth quarter delivery. Our SupRaMix sales maintained the improvement noticed last quarter, particularly in the eastern half of the country, while we successfully demonstrated a new truck-mounted 710 cu. ft model for the Californian market. Sales of our portable grinder-mixers exhibited welcome strength after a protracted period of decline, and we also did better with our Eversman Land Planes and Preseeders. Our new OEM fibrebody customer account is continuing to grow very satisfactorily. Areas of sales shortfall from last year include our major OEM account -down 30% from a year ago; and sales of vegetation cutting and beet harvesting equipment -reflecting management's decision to produce nearer the season of use for both products. Orders for sugar beet equipment are exceeding management's expectations, but will not be shipped until the first quarter of our next fiscal year. Third quarter gross profits were up 33% from last year on the 63% higher sales. For the nine months ended February 28, 1997 gross profits were $2,809,315, an increase of 24%, mainly due to the higher sales. The ratio of costs of goods sold to net sales when compared to last year rose to 76.6% from 71.4% for the quarter and from 75.1% to 76.3% for the nine months, due primarily to slightly lower margins on the Logan products as we go through the learning process, and increased manufacturing costs. Manufacturing costs have been severely impacted by the protracted cold weather in Northwestern Iowa. Our propane costs were significantly higher than a year ago, and we were forced to close the plant three times during the quarter because of the weather conditions. Operating expenses were 17% higher than the quarter a year ago, reflecting amortization of our aquisition costs. For the nine months operating costs are 3% below last year. The operating expense ratio to sales for the quarter fell to 22.4% from last year's 31.1%. For the nine months the operating ratio to sales fell to 23.1% from 30.8%. Interest charges and other expenses were reduced 21% and 24% from the quarter and nine months a year ago on continued much lower debt levels. The Company achieved a $135,000 improvement at the pre-tax level, reducing the pre-tax loss from $171,000 to $36,000 for the quarter. For the nine months the Company has reduced the pre-tax loss from $920,000 in 1996 to $219,000 in 1997, an improvement of $701,000. No product line acquisitions were consummated last quarter, but the Company entered into an exciting marketing venture with Easy Systems of Trimont, MN, in which Easy Systems takes over the marketing and distribution of the Art's-Way stationary feed processing line in return for Art's-Way gaining the manufacturing contract for the Easy System range of feed processing products. We already have orders in excess of $200,000 of additional business. 9 Part II - Other Information ITEM 1. LEGAL PROCEEDINGS Various legal actions and claims are pending against the Company. In the opinion of management, appropriate provisions have been made in the accompanying financial statements for all pending legal actions and other claims. 10 SIGNATURES 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. ART'S-WAY MANUFACTURING CO., INC. Date_____April 14, 1997_____ /s/ J. David Pitt (J. David Pitt, President) Date_____April 14, 1997____ /s/ William T. Green (William T. Green, Executive Vice President, Chief Financial Officer) 11 -----END PRIVACY-ENHANCED MESSAGE-----