-----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, MEWgwiU//wSvvwviJ7Tq46+5LUujOIAsY42tCEHNwvli/iSFIMSPf5hBEv7skK0c AE4QY76DPfIZhxlEDIHFhA== 0000007623-02-000008.txt : 20021202 0000007623-02-000008.hdr.sgml : 20021202 20021202113124 ACCESSION NUMBER: 0000007623-02-000008 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020531 FILED AS OF DATE: 20021202 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: 11-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-05131 FILM NUMBER: 02845438 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 11-K 1 may0111k.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 11-K ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended May 31, 2002 Commission file number 0-5131 Art's Way Manufacturing Co., Inc. 401(k) Savings Plan (Full title of the plan) Art's Way Manufacturing Co., Inc. (Issuer of securities) P.O. Box 288, Armstrong. IA 50514 (Address of principal executive office) Required Information Enclosed are the plan financial statements and schedules as of May 31, 2002 and 2001 and for the years then ended prepared in accordance with financial reporting requirements of ERISA. The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. 11/30/02 Art's-Way Manufacturing Co., Inc. 401 (k) Savings Plan (Date) (Name of Plan) /s/ John C. Breitung President ART'S-WAY MANUFACTURING CO., INC. 401(k) SAVINGS PLAN Financial Statements and Supplemental Schedule May 31, 2002 and 2001 (With Independent Auditors' Report Thereon) ART'S-WAY MANUFACTURING CO., INC. 401(K) SAVINGS PLAN Table of Contents Page Independent Auditors' Report 1 Statements of Net Assets Available for Plan Benefits 2 Statements of Changes in Net Assets Available for Plan Benefits 3 Notes to Financial Statements 4 Supplemental Schedule: Schedule H, line 4i - Schedule of Assets (Held at End of Year) 9 Independent Auditors' Report The Plan Administrator Art's-Way Manufacturing Co., Inc. Savings Plan: We have audited the accompanying statements of net assets available for plan benefits of Art's-Way Manufacturing Co., Inc. 401(k) Savings Plan (the Plan) as of May 31, 2002 and 2001, and the related statements of changes in net assets available for plan benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As discussed in Note 9 to the financial statements, the 2001 financial statements have been restated to properly reflect the cash surrender value of life insurance policies in the Plan's net assets as of May 31, 2001. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits of the Plan as of May 31, 2002 and 2001, and the changes in net assets available for plan benefits for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of Schedule H, line 4i - Schedule of Assets (Held at End of Year) is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. November 27, 2002 Omaha, Nebraska ART'S-WAY MANUFACTURING CO., INC. 401(K) SAVINGS PLAN Statements of Net Assets Available for Plan Benefits May 31, 2002 and 2001 2002 2001 Assets: Investments, at contract value $1,925,305 2,147,941 Investments, at fair value 5,009,952 4,397,655 Participant loans, at unpaid balances 129,752 166,587 7,065,009 6,712,183 Employee contributions receivable - 1,285 $7,065,009 6,713,468 See accoompanying notes to financial statements. ART'S-WAY MANUFACTURING CO., INC. 401(K) SAVINGS PLAN Statements of Changes in Net Assets Available for Plan Benefits Years ended May 31, 2002 and 2001 2002 2001 Additions to net assets attributed to: Investment income: Net appreciation in fair value of investments $ 451,746 462,821 Demutualization compensation 479,631 - Interest income 123,976 209,275 Net investment income 1,055,353 672,096 Contributions: Participants 129,542 154,189 Other 108 - Total contributions 129,650 154,189 Total additions 1,185,003 826,285 Deductions from net assets attributed to: Benefits paid to participants 822,454 1,328,379 Administrative expenses 11,008 14,655 Total deductions 833,462 1,343,034 Net increase (decrease) 351,541 (516,749) Net assets available for plan benefits: Beginning of year 6,713,468 7,138,589 Prior period adjustment to reflect cash surrender value of life insurance contracts - 91,628 Restated beginning of year balance 6,713,468 7,230,217 End of year $ 7,065,009 6,713,468 See accompanying notes to financial statements ART'S-WAY MANUFACTURING CO., INC. 401(K) SAVINGS PLAN Notes to Financial Statements May 31, 2002 and 2001 (1) Organization The Art's-Way Manufacturing Co., Inc. 401(k) Savings Plan (the Plan) is sponsored by Art's-Way Manufacturing Co., Inc. (the Company). The Company is a manufacturer of specialized farm machinery and equipment which it markets under its own and private labels. The Plan is a defined contribution retirement plan for eligible Company employees, established on May 31, 1971, and is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Management believes the Plan is in compliance with such provisions. Plan Description The following summary of the Plan provides only general information. Participants should refer to the Plan Agreement for a more complete description of the Plan's provisions. (a) Eligibility The Plan covers any employee who has completed six months of service, as defined. (b) Participant Contributions Upon enrollment in the Plan, a participant may direct employee contributions in any of the eight investment options. A participant may make deductible contributions of up to 15% under a salary deferral agreement. The Plan also provides for rollovers of lum-sum distributions by participants from certain individual retirement accounts or a qualified 401(k) plan. (c) Employer Contributions The Company may make matching contributions equal to a discretionary percent, to be determined by the Company and the Company may make a discretionary contribution out of its current or accumulated net profit. The Company did not make any matching or discretionary contributions during the Plan years ended May 31, 2002 or 2001. When the Company makes a matching contribution, it is added to the accounts of those participants who have made contributions for the year, as noted above. The matching contribution under the Plan shall be equal to a discretionary percentage of the participant's salary reductions as determined by the employer. The Company's discretionary contribution is shared by all plan members, whether or not they have made contributions, based on the member's compensation compared to all participants' combined compensation and years of service. (d) Participant Accounts Each participant's account is credited with the participant's contribution and an allocation of (a) the Company's contribution and (b) Plan earnings. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant's vested account. (e) Vesting Participants' contributions and earnings thereon are immediately vested. Vesting in the remainder of their accounts is based on credited years of service, as defined. A participant is 100% vested after six credited years of service. (f) Participant Loans The Plan allows participants to borrow a minimum of $1,000 and up to a maximum equal to the lesser of $50,000 or 50% of their vested account balance. The loans bear interest at rates that range from 5.75% to 10.50%, which were based on the rate of one percent over the Company's prime lending rate in effect on the date of the loan application. Loans are secured by the participant's account balance and are scheduled for repayment by payroll deduction from one to five years. (g) Payment of Benefits Upon retirement, death, disability, or termination, all vested amounts attributed to a participant's account may be withdrawn on the May 31, August 31, November 30 or February 28 coincident with or next following such event. The accumulated vested balances are generally distributed in the form of a lump-sum settlement unless an election for installment payments or an annuity has been made by the employee prior to retirement or death. During an employee's active career with the Company, part or all of a participant's contributions and earnings thereon may be withdrawn due to hardship and based on plan limitations. Such hardship withdrawals are permitted when conditions, as specified by the Plan, are met and are subject to limits allowed by law. (h) Forfeitures Nonvested employer matching and discretionary contributions and earnings thereon are forfeited and are used to reduce administrative expenses paid by the Company. For the Plan years ended May 31, 2002 and 2001, forfeitures were $2,711 and $487, respectively. (i) Administrative Expenses Substantially all of the administrative fees and expenses of the Plan are paid by the Company. (2) Summary of Significant Accounting Policies (a) Basis of Presentation The accompanying financial statements have been prepared on the accrual basis of accounting and present the net assets available for plan benefits and changes in those net assets in accordance with accounting principles generally accepted in the United States of America. (b) Investment Valuation and Income Recognition The Plan's investments are stated at fair value by reference to quoted market prices except for the Plan's investment in life insurance, which is valued at the cash surrender value and the Plan's investment in an investment contract, which is valued at contract value. Participant loans are valued at the unpaid balances, which approximates fair value. Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-divident date. (c) Payment of Benefits Benefits are recorded when paid. (d) Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management of the Plan to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. (e) Risks and Uncertainties The Plan provides for investment options in any combination of stocks, bonds, fixed income securities, and other investment securities. Investment securities are exposed to various risks, such as interest rates, market, and credit. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risk in the near term could materially affect participants' account balances and the amounts reported in the statements of net assets available for plan benefits and the statements of changes in net assets available for plan benefits. (f) Reclassifications Certain reclassifications have been made to prior year financials to conform with the current year's presentation. (3) Investment Contract with Insurance Company The Plan entered into a fully benefit-responsive investment contract with Principal Life Insurance Company (Principal Life), the Plan administrator. Principal Life maintains the contributions in a general account. The account is credited with earnings on the underlying investments and charged for participant withdrawals and administrative expenses. The contract is included in the financial statements at contract value as reported to the Plan by Principal Life. Contract value represents contributions made under the contract, plus earnings, less participant withdrawals and administrative expenses. Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value. There are no reserves against contract value for credit risk of the contract issuer or otherwise. The average yield and crediting interest rates were approximately 3.28% and 4.71% for 2002 and 2001, respectively. The crediting interest rate is based on a formula agreed upon with the issuer, with no guaranteed minimum crediting interest rate provided. Such interest rates are reviewed on a daily basis for resetting. (4) Investments The following table represents the fair value of individual investments which exceed 5% of the Plan's net assets: 2002 2001 Principal Stable Value Fund $ 3,295,491 - Principal Life Insurance Company Group Annuity Contract No. (3) 66219 1,925,305 2,147,941 Principal Financial Group Inc. Stock Separate Account 728,504 - Washington Mutual Investment Fund - 2,559,524 Income Fund of America - 1,236,792 During 2002 and 2001, the Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated in value by $451,746 and $462,821 respectively, as follows: 2002 2001 Investments, at fair value: Pooled separate accounts 291,766 7,350 Common and collective trusts 131,057 - Art's-Way Common Stock Fund 46,371 (39,550) Shares of registered investment companies (17,448) 495,021 Net change in fair value 451,746 462,821 (5) Related Party Transactions Certain plan investments are common stock of the Company. The Company is the Plan sponsor and, therefore, these transactions qualify as party-in- interest transactions. Other plan investments are pooled separate accounts and an investment contract managed by Principal Life and, therefore, these transactions qualify as party-in-interest transactions. Fees paid through the Plan for investment management services and loan transactions amounted to $11,008 and $14,655 for the years ended May 31, 2002 and 2001, respectively. (6) Tax Status The Internal Revenue Service has determined and informed the Company by a letter dated August 16, 1993, that the Plan is designed in accordance with applicable sections of the Internal Revenue Code (IRC). The Plan has been amended since receiving the determination letter,however, the Plan Administrator believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC. (7) Plan Termination Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of plan termination, participants will become 100% vested in their accounts. (8) Principal Demutualization During 2001, Principal Life changed its corporate form from a policyholder- owned company to a publicly traded stockholder-owned company. As part of this process known as demutualization, Principal Life distributed shares of its stock to the Principal Financial Group, Inc. Stock Separate Account for allocation to its policy and investment holders. On December 7, 2001, the Plan received units of the Principal Financial Group Inc. Stock Separate Account with a fair market value of $479,631. On that same date. these units were allocated among the participant accounts based on the respective percentage of all the Plan participant account balances as of October 26, 2001. Plan participants were given the option to keep the units they received or transfer the value of these units to another investment option in the Plan. Only those participants who had an account balance on October 26, 2001 received a pro rata share of the demutualization compensation. (9) Restatement of 2001 Financial Statements The 2001 financial statements were restated to properly reflect the cash surrender value of life insurance policies. The impact of the restatement was to increase previously reported net assets at May 31, 2001 by $91,628. The impact on the previously reported net decrease in the statement of changes in net assets available for plan benefits for the year ended May 31, 2001 was not significant. ART'S-WAY MANUFACTURING CO., INC. 401(K) SAVINGS PLAN Schedule H, line 4i - Schedule of Assets (Held at End of Year) May 31, 2002 (b) (c) Identity of issue, Description of borrower, lessor, investment including or similar party maturity date, rate of interest, collateral, (d) (e) (a) par, or maturity value Cost Current Value Gartmore Trust Company Principal Stable Value Fund ** $ 3,295,491 * Principal Life Insurance Company Group Annuity Contract No. (3) 66219 ** 1,925,305 * Principal Life Principal Financial Group,Inc. Insurance Company Stock Separate Account ** 728,504 * Art's-Way Manufacturing Common Stock ** 178,010 Company, Inc. * Principal Life Government Securities Insurance Company Separate Account ** 142,583 * Principal Life Janus Adv Capital Appreciation Insurance Company Separate Account ** 112,536 Lincoln Financial Group Life Insurance Cash Surrender Value ** 97,244 * Principal Life Large Cap Stock Index Insurance Company Separate Account ** 84,877 * Principal Life Fidelity Adv. Value Strategy Insurance Company Separate Account ** 81,911 * Principal Life Small Company Blend Insurance Company Separate Account ** 77,299 * Principal Life Medium Company Blend Insurance Company Separate Account ** 61,963 * Principal Life Large Co. Value Separate Insurance Company Account ** 54,714 * Principal Life Putnam Equity Income Insurance Company Separate Account ** 48,300 * Principal Life International Stock Insurance Company Separate Account ** 46,520 * Participant Loans 5.75% - 10.50% $ 0 129,752 $ 7,065,009 * Indicates party in interest. ** Historical cost information is omitted as it is no longer required for participant-directed accounts. See accompanying independent auditors' report. -----END PRIVACY-ENHANCED MESSAGE-----