-----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, EmvwmUuhxMrag44F/Uv7O4gT/7jpm1+dRkrq0RK+TMW8VXO1PPuxQ0lchcgz3Ma6 L94Fmqv3hUnu2iKT/F3jgw== 0000007623-03-000012.txt : 20031016 0000007623-03-000012.hdr.sgml : 20031016 20031016123810 ACCESSION NUMBER: 0000007623-03-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030831 FILED AS OF DATE: 20031016 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: 03943336 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 aug0310q.txt 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 August 31, 2003 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. Hwy 9 West, 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 filing requirements for the past 90 days. Yes X No __ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2). Yes __ No X Number of common shares outstanding as of September 24, 2003: 1,938,176 ART'S-WAY MANUFACTURING CO., INC CONSOLIDATED STATEMENTS OF OPERATIONS CONDENSED (Unaudited) Three Months Ended Year to Date August 31, August 31, August 31, August 31, 2003 2002 2003 2002 Net Sales $ 3,726,583 $ 3,226,991 $ 8,667,976 $ 8,121,504 Cost of goods sold 2,706,793 2,379,773 6,211,881 6,062,166 Gross Profit 1,019,790 847,218 2,456,095 2,059,338 Operating Expenses Engineering 95,600 19,203 129,779 49,840 Selling 219,263 186,594 499,497 438,030 General and administrative 325,301 306,899 1,005,131 1,114,262 Total expenses 640,164 512,696 1,634,407 1,602,132 Income from operations 379,626 334,522 821,688 457,206 Other expenses Interest expense 39,889 44,060 88,862 138,874 Other 16,542 24,995 32,389 70,902 Total other expenses 56,431 69,055 121,251 209,776 Income before income taxes 323,195 265,467 700,437 247,430 Income tax expense - - 2,031 - Net income $ 323,195 $ 265,467 $ 698,406 $ 247,430 Net income per share Basic $ 0.17 $ 0.14 $ 0.36 $ 0.14 Diluted $ 0.17 $ 0.14 $ 0.36 $ 0.14 Common shares and equivalent outstanding: Basic 1,938,176 1,938,176 1,938,176 1,765,330 Diluted 1,954,279 1,943,186 1,950,712 1,767,955 See accompanying notes to financial statements. ART'S-WAY MANUFACTURING CO., INC. CONSOLIDATED BALANCE SHEET CONDENSED (Unaudited) August 31, November 30, 2003 2002 ASSETS Current Assets Cash $ 402,913 $ 75,358 Accounts receivable-customers, net of allowance for doubtful accounts of $63,700 and $50,000 in August and November, respectively 1,275,250 592,945 Other Receivables 14,370 - Inventories 3,910,248 3,576,707 Other current assets 131,429 95,385 Total current assets 5,734,210 4,340,395 Property, plant and equipment, at cost 10,944,845 10,725,972 Less accumalated depreciation 9,962,870 9,751,260 Net property, plant and equipment 981,975 974,712 Inventories, noncurrent 430,509 430,509 Real Estate Loan Receivable 165,725 - Other Assets 234,565 175,849 Total Assets $ 7,546,984 $ 5,921,465 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Notes payable to bank $ - $ 319,222 Current portion of long-term debt 114,023 356,669 Accounts payable 429,698 523,492 Customer deposits 49,112 249,756 Accrued expenses 891,489 630,972 Total current liabilities 1,484,322 2,080,111 Long-term liabilities 159,777 187,204 Long-term debt, excluding current portion 2,071,159 520,830 Total liabilities 3,715,258 2,788,145 Stockholders' Equity Common stock - $.01 par value. Authorized 5,000,000 shares; issued 1,938,176 shares in August and in November 19,382 19,382 Additional paid-in capital 1,634,954 1,634,954 Retained earnings 2,177,390 1,478,984 Total stockholders' equity 3,831,726 3,133,320 Total liabilities and stockholders' equity $ 7,546,984 $ 5,921,465 See accompanying notes to financial statements. ART'S-WAY MANUFACTURING CO., INC. CONSOLIDATED STATEMENTS OF CASH FLOWS CONDENSED (Unaudited) Nine Months Ended August 31, August 31, 2003 2002 CASH FLOW FROM OPERATIONS: Net income $ 698,406 $ 247,430 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 211,610 182,862 Changes in working capital components: (Increase) decrease in: Accounts receivable (682,305) (81,410) Other receivables (14,370) - Inventories (83,190) 581,448 Other current assets (36,044) (121,994) Other (58,716) - Increase (decrease) in: Accounts payable (93,794) (471,432) Customer deposits (200,644) (21,488) Accrued expenses 260,517 104,109 Net cash provided by (used in) operating activities 1,470 419,525 CASH FLOW FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment (113,226) (31,184) Purchases of assets of Obeco, Inc. (521,723) - Net cash (used in) investing activities (634,949) (31,184) CASH FLOW FROM FINANCING ACTIVITIES: Proceeds from (payment of) notes payable to bank 2,538,789 (897,769) Principal payments on term debt and long-term liabilities (1,577,755) (267,633) Proceeds from issuance of common stock from treasury - 53,253 Proceeds from issuance of common stock - 746,747 Net cash provided by (used in) financing activities 961,034 (365,402) Net increase in cash 327,555 22,939 Cash at beginning of period 75,358 4,375 Cash at end of period $ 402,913 $ 27,314 Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ 88,862 $ 138,874 Income taxes 2,031 4,032 See accompanying notes to financial statements. ART'S-WAY MANUFACTURING CO., INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED (Unaudited) 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 year ended November 30, 2002. The results of operations for the third quarter and year to date ended August 31, 2003 are not necessarily indicative of the results for the fiscal year ending November 30, 2003. Acquisition On July 14, 2003 Art's-Way announced that it entered into an agreement to purchase from bankruptcy the assets of Obeco Incorporated, a manufacturer of steel truck bodies located in Cherokee, Iowa. The agreement includes the purchase of a real estate loan, all inventory, intellectual materials, machinery, tooling, fixtures and the company name. Art's-Way formed a new subsidiary called Cherokee Truck Bodies, Incorporated. The truck bodies will continue to be sold under the recognized name OBECO. The company will continue to be located in Cherokee, Iowa. The United States Bankruptcy Court approved the sale and the closing date for the acquisition was July 28, 2003. Operations of Cherokee Truck Bodies are included in the results of operations since that date. Total cost of acquisition includes all inventory, $250,351; machinery and equipment, $105,647; real estate loan, $165,725 for a total of $521,723. Securing long term financing allowed for the acquisition of Obeco. 2. INCOME PER SHARE Basic net income per common share is computed on the basis of weighted average number of common shares outstanding. Diluted net income per share has been computed on the basis of weighted average number of common shares outstanding plus equivalent shares assuming exercise of stock options. The difference in shares utilized in calculating basic and diluted net income per share represents the number of shares issued under the Company's stock option plans less shares assumed to be purchased with proceeds from the exercise of the stock options. The reconciling item between the shares used in the computation of basic and diluted earnings per share is 16,103; for the third quarter ended August 31,2003; 5,010 for the third quarter ended August 31, 2002; 12,536 for the year to date period ended August 31, 2003; and 2,625 for year to date period ended August 31, 2002 equivalent shares for the effect of dilutive stock options. 3.INVENTORIES Major classes of inventory are: August 31, 2003 November 30, 2002 Raw material $ 980,258 $ 1,065,166 Work-in-process 1,375,587 1,209,007 Finished goods 1,984,912 1,733,043 Total $ 4,340,757 $ 4,007,216 Less inventories classified as noncurrent 430,509 430,509 Inventories, current $ 3,910,248 $ 3,576,707 4. ACCRUED EXPENSES Major components of accrued expenses are: August 31, 2003 November 30, 2002 Salaries, wages and commissions $ 413,283 $ 294,220 Accrued warranty expense 97,111 60,232 Other 381,095 276,520 Total $ 891,489 $ 630,972 5. LOAN AND CREDIT AGREEMENTS On April 25, 2003 the Company obtained long-term financing through West Des Moines State Bank (West Bank), West Des Moines, Iowa. Credit facilities consist of two loan agreements totaling $5,500,000. Facility #1 is a revolving line of credit for $2,500,000 with advances funding the working capital, letter of credit and corporate credit card needs. It renews annually with a maturity date of February 28, 2004. The interest rate will be West Bank's prime interest rate plus 1% adjusted daily. Monthly interest only payments will be required and the unpaid principal due on the maturity date. In addition an annual fee of $12,500 will be paid for the use of this credit facility. Collateral consists of a first position on assets owned by the Company including, but not limited to inventories, accounts receivable, machinery and equipment. Facility #2 is long-term financing for up to $3,000,000 that is supported by a guarantee issued by the United States Department of Agriculture (USDA) for 75% of the loan amount outstanding. The loan refinanced existing debt to UPS Capital (approximately $1,500,000), finance equipment (approximately $250,000), provide permanent working capital (approximately $500,000) and satisfy closing costs (approximately $50,000). Approximately $700,000 will be reserved for future acquisitions. Maturity date is March 31, 2023. The variable interest rate will be West Bank's prime interest rate plus 1.5% adjusted daily. Monthly principal and interest payments will be amortized over 20 years, at which time the loan will mature. A one-time origination fee of 1% was also required. Collateral for Facility #2 is primarily real estate with a second position on assets of Facility #1. The USDA subordinates collateral rights in all assets other than real estate in an amount equal to West Bank's other credit commitments. J. Ward McConnell, Jr. was required to personally guarantee Facility #1 and Facility #2 on an unlimited and unconditional basis. The guarantee of Facility #2 shall then be reduced after the first three years to a percentage representing his ownership of the Company. Mr. McConnell's guarantee shall be removed from Facility #2 in the event that his ownership interest in the Company is reduced to a level less than 20% after the first three years of the loan. The Company will compensate Mr. McConnell for his personal guarantee at an annual percentage rate of 2% of the outstanding balance to be paid monthly. Other terms and conditions are providing monthly internally prepared financial reports including accounts receivable aging schedules and borrowing base certificates and year-end audited financial statements. The borrowing bases shall limit advances from Facility #1 to 60% of accounts receivable less than 90 days, 60% of finished goods inventory, 50% of raw material inventory and 50% of work-in-process inventory plus 40% of appraisal value of machinery and equipment. Covenants include debt service coverage ratio, debt/tangible net worth ratio, current ratio, limit capital expenditures, and maintain a minimum tangible net worth. On April 25, 2003 the Company borrowed $2,000,000 against Facility #2. $1,528,775 was used to payoff UPS Capital with $110,000 being held in reserve for a letter of credit ($100,000) and any additional fees. The balance of $471,225 was used as working capital. As of August 31, 2003, the Company has not borrowed against Facility #1. A summary of the Company's term debt is as follows: August 31, November 30, 2003 2002 West Bank real estate loan payable in monthly Installments of $17,776 including interest at Bank's prime rate plus 1.5% (5.50%) $ 1,967,590 $ - Installment term debt payable in monthly Installments of $23,700, plus interest at four Percent over the bank's national money market rate due on demand, secured $ - $ 605,371 State of Iowa Community Development Block Grant promissory notes at zero percent interest, maturity 2006, with quarterly principal payments of $11,111 $ 133,333 $ 166,667 State of Iowa Community Development Block Grant local participation promissory notes at 4% interest, Maturity 2006, with quarterly payments of $7,007 $ 84,259 $ 105,461 Total term debt $ 2,185,182 $ 877,499 Less current portion of term debt $ 114,023 $ 356,669 Term debt, excluding current portion $ 2,071,159 $ 520,830 6. RELATED PARTY TRANSACTION In February 2002, the Company sold common stock to an existing shareholder, Mr. J. Ward McConnell, Jr., at estimated fair value. Proceeds from the sale of the stock were $800,000. Mr. McConnell has agreed that without prior approval of the Board of Directors, excluding himself and his son, he will not acquire as much as fifty percent (50%) of the Company's common stock and will not take the Company private. Immediately after the transaction, Mr. McConnell was elected as Chairman of the Board of Directors of the Company. His son, Marc McConnell, is also a Board Member. Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (a) Liquidity and Capital Resources On July 14, 2003 Art's-Way announced that it entered into an agreement to purchase from bankruptcy the assets of Obeco Incorporated, a manufacturer of steel truck bodies located in Cherokee, Iowa. The agreement includes the purchase of a real estate loan, all inventory, intellectual materials, machinery, tooling, fixtures and the company name. Art's-Way formed a new subsidiary called Cherokee Truck Bodies, Incorporated. The truck bodies will continue to be sold under the recognized name OBECO. The company will continue to be located in Cherokee, Iowa. The United States Bankruptcy Court approved the sale and the closing date for the acquisition was July 28, 2003. Operations of Cherokee Truck Bodies are included in the results of operations since that date. Total cost of acquisition includes all inventory, $250,351; machinery and equipment, $105,647; real estate loan, $165,725 for a total of $521,723. Securing long term financing allowed for the acquisition of Obeco. The Company's main source of funds for the nine months ended August 31, 2003 came by securing long-term financing (see footnote 5 of the notes to the consolidated financial statements) and net income. These sources were offset by increases of the accounts receivable, other receivables, inventories and other assets. The increase in accounts receivable results from the sales of truck bodies, sugar beet equipment, potato harvesters, and parts stock orders prior to the quarter end and within the normal terms of the Company. Other offsets include the reduction of accounts payable and customer deposits. The Company's capital expenditures are the acquisition of Obeco assets listed above and equipment overhauls during the quarter. (b) Results of Operations Fiscal year 2003 third quarter and year to date net sales were 15% and 7%, respectively, higher than for the comparable periods one-year ago. The increase in net sales for the third quarter and year to date resulted from the increase in sales of potato harvesters and Cherokee Truck Bodies sales of $153,646 in the third quarter. Gross profit, as a percent of sales, was 27% for the quarter ended August 31, 2003, as compared to 26% for the same period in 2002. Year to date through August 31, 2003, gross profit was 28% compared to 25% for the prior year. Increased labor efficiency and continued cost reduction programs throughout the year have resulted in the increase. As a percent of sales, operating expenses were 17% and 16%, respectively, for the three months ended August 31, 2003 and 2002. For the year to date period ended August 31, 2003 and 2002, operating expenses were 19% and 20%, respectively. Operating expenses for the quarter and year to date periods ended August 31, 2003 includes approximately $70,000 in research and development expenditures related to the development of a new sugar beet harvester. This machine is projected to increase productivity substantially as compared to current machines on the market. The Company anticipates that the prototype will have additional research and development expenditures in the fourth quarter and it will be ready in the fall of 2003 with production scheduled in 2004. Other expenses continue to decrease for the quarter and for the year to date when compared to the same periods of the previous year. Third quarter and nine months ended August 31, 2003 net income as a percent increased 22% and 182%, respectively, when compared to the same periods of the previous year. The order backlog at August 31, 2003 was $955,000 compared to $1,354,000 one year ago. August 31, 2002 backlog included an OEM plow order that was shipped in the fourth quarter. This year the shipment was in the third quarter that was the primary reason for the decrease. The Company reached a new exclusive licensing agrement with Case Corporation to produce and market moldboard plows and service parts. This will allow the Company to sell direct to dealers and should generate higher revenues in 2004. The previous arrangement generated $1,009,000 of OEM revenue in 2003. (c) Critical Accounting Policies The Company's critical accounting policies involving the more significant judgments and assumptions used in the preparation of the financial statements as of August 31, 2003 have remained unchanged from November 30, 2002. These policies involve revenue recognition, inventory valuation and income taxes. Disclosure of these critical accounting policies is incorporated by reference under Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operation" in the Company's Annual report on Form 10-K for the year ended November 30, 2002. Item 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS The Company does not have any additional market risk exposure other than what was outlined in the November 30, 2002, 10-K filing. Item 4 DISCLOSURE CONTROLS AND PROCEDURES Within 90 days of the filing date of this quarterly report, the Company's Chief Executive Officer and Finance Manager have evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15(d)-14(c)) and, based on their evaluation, have concluded that the disclosure controls and procedures are effective. There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective action with regard to significant deficiencies and material weaknesses. Part II - Other Information ITEM 1. LITIGATION AND CONTINGENCIES Various legal actions and claims are pending against the Company. In the opinion of management, adequate provisions have been made in the accompanying financial statements for all pending legal actions and other claims. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 10.8 Agreement to purchase assets of Obeco, Inc. by Cherokee Truck Bodies, Inc., a wholly owned subsidiary of Art's-Way Manufacturing Co., Inc. effective July 28, 2003. 31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 made by John C. Breitung, Chief Executive Officer 31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 made by Seth F. LaBore, Finance Manager 32.1 Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 made by John C. Breitung, Chief Executive Officer 32.2 Certification pursuant to 18 U.S. C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 made by Seth F. LaBore, Finance Manager (b) Reports on Form 8-K: Form 8-K filed 7/18/03, Item # 5, announcing OBECO agreement. 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: October 15, 2003 By: /s/ John C. Breitung John C. Breitung President and Chief Executive Officer Date: October 15, 2003 By: /s/ Seth F. LaBore Seth F. LaBore Finance Manager Exhibit 31.1 CERTIFICATIONS I, John C. Breitung, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Art's-Way Manufacturing Co., Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: October 15, 2003 /s/ John C. Breitung President and Chief Executive Officer Exhibit 31.2 CERTIFICATIONS I, Seth F. LaBore, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Art's-Way Manufacturing Co., Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: October 15, 2003 /s/ Seth F. LaBore Finance Manager Exhibit 32.1 CERTIFICATION OF FINANCIAL STATEMENTS Pursuant to 18 U.S.C. 63 1350, the President/Chief Executive Officer of Art's-Way Manufacturing Co., Inc. (the "Company"),hereby certify that this Form 10-Q and the financial statements thereto fullycomply with the requirements of Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q and the financial statements thereto fairly present, in all material respects, the financial condition and results of operations of the Company. By: /s/ John C. Breitung Name: John C. Breitung President and Chief Executive Officer October 15, 2003 Exhibit 32.2 CERTIFICATION OF FINANCIAL STATEMENTS Pursuant to 18 U.S.C. 63 1350, the Finance Manager of Art's-Way Manufacturing Co., Inc. (the "Company"), hereby certify that this Form 10-Q and the financial statements thereto fully comply with the requirements of Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q and the financial statements thereto fairly present, in all material respects, the financial condition and results of operations of the Company. By: /s/ Seth F. LaBore Name: Seth F. LaBore Finance Manager October 15, 2003 EX-10 3 exht108a.txt Exhibit 10.8 SALE OF BUSINESS THIS AGREEMENT made and entered into as of this 13th day of June, 2003, by and between Obeco truck Equipment Co., Inc., (hereinafter referred to as "Seller") and Cherokee Truck Body, Inc. (collectively hereinafter referred to as "Buyer"). WHEREAS, Seller is the owner of certain assets generally described as inventory and equipment. WHEREAS, the Buyer is desirous of purchasing said assets. NOW, THEREFORE IN CONSIDERATION the parties agree as follows: 1. That the Seller shall obtain from the United States Bankruptcy Court the authority to sell assets free and clear of liens and encumbrances. II. Designation of Assets: Assets to be purchased generally described as follows: (a) All inventory. (b) All designs, plans, drawings, bills of material, specifications, diagrams, engineering development information, computer and electronic data useful in the manufacture of all Obeco, Inc. products. (c) All tooling dies, jigs, fixtures and patterns. (d) All vendor records. (e) All available credit information. (f) Customer list. (g) Parts books, literature, video and art work. (h) Name - "OBECO". (i) Patents, trademarks, etc. (j) Machinery, equipment, furniture and fixtures according to the list attached. III. Purchase Price: The purchase price shall be $103,459.50 for the assets set forth in Paragraph II above, except for inventory which shall be paid according to Paragraph IV. IV. Inventory: A physical inventory will be taken on the date of closing. Seller will be paid the value of the inventory based upon 90% of seller's historical method of cost accounting for inventory, except for obsolete inventory (not used in product currently made or likely to be made in the next 36 months) and excess inventory (amount in excess of inventory for which there is a reasonable likelihood of use within the next 36 months). V. Buyer agrees that it will take said property described herein without express or implied warranties. Seller will provide Buyer with a list of all current employees. Buyer reserves the right to retain all employees at their current benefits and rate of compensation. This Sale of Business is subject to the following: 1. Seller continuing to operate the OBECO business until the date of closing. 2. Buyer obtaining the right to occupy, either as tenant or owner, the present OBECO business premises on terms agreed between Buyer and Agri-Dynamics, Inc. 3. Tom French will be retained for an annual base salary of $55,000 plus commissions of 10% of the net pre-tax profits before deduction for depreciation and capital expenditures. Pam French will be retained for an annual base salary of $30,000.00. 4. That closing, payment of all sums due and transfer of all assets to be transferred shall occur on or before the close of the 10th day following approval of this sale in the United States Bankruptcy Court for the Northern District of Iowa. 5. Buyer intends to purchase all of the notes, mortgages and security agreements currently held by Cherokee State Bank which are the obligations of OBECO and Agri-Dynamics, Inc. The approximate loan balance on the bank's notes and security agreements as of May 30, 2003 was $504,494.80 without attorney fees. Such claims of Cherokee State Bank are evidenced by Claim Nos. #16 and #17 filed in the Bankruptcy. If Buyer purchases said notes prior to the closing of the sale, then the sale is subject to the Buyer being able to offset $284,275.00 of the purchase price at the time of the closing which will be applied to the notes as set forth herein in the Bankruptcy proof of claim; and upon such offset of $284,275.00 from the sale proceeds. Buyer, as assignee of bank's notes and security agreements against OBECO and Agri-Dynamics,Inc., will withdraw Bank's claims. 6. That such part of the proceeds from this sale shall be used to satisfy Equity Advisors, Inc. broker fees as is allowed by the Bankruptcy Court. 7. Non-Assumption of Liabilities. Buyer shall assume no liabilities whatsoever of Seller. 8. Warranties and Representations of Seller. Seller represents and warrants to and agrees with Buyer as follows: (a) This Agreement and all other agreements, documents and instruments executed by Seller pursuant hereto are and will be valid and bindings obligations of Seller, enforceable in accordance with their terms, as well as the execution, delivery and performance of this Agreement, and such other agreements, documents and instruments as are necessary for the performance of the transactions contemplated hereunder, all subject to approval of the bankruptcy court. (b) Seller is the lawful owner of and has, and will transfer to Buyer at Closing, good, clear and marketable title to, all of the Seller's Designated Assets, free and clear of all liens; encumbrances, security interests or charges of every kind, nature and description; subject to approval of the bankruptcy court. (c) Aside from the stated bankruptcy proceedings, there is no suit, action or legal, administrative, arbitration, or other proceeding of any nature pending, or to the knowledge of Seller threatened, against Seller or its property which affects in any material respect the Seller's Business or Seller's Assets, or which might materially and adversely affect the legality or validity of this Agreement, or the transactions contemplated hereby, and there is not any factual basis known to Seller for any such suit, action or proceeding. (d) The Seller is currently involved in a labor group for collective bargaining purposes. Buyer shall not assume any union contracts nor shall be required to hire any of the Seller's current employees. (e) Following the anticipated approval of the bankruptcy court, the execution and delivery of this Agreement and the performance of the transactions contemplated hereby do not, and will not, constitute a violation of, and are not, and will not be, a default under or conflict with terms of any contract, lease, indenture, agreement, order, judgment or decree to which Seller is a party or by which it is bound or to which any of the Seller Assets are subject, and do not, and, to the best of Seller's knowledge will not, violate or constitute a default under any statute, rule, regulation, order or ordinance of any governmental, judicial or arbitral body. (f) The Seller Assets described herein, between the date hereof and the Closing, shall not be leased, pledged, encumbered or disposed of by Seller without the prior written consent of Buyer. (g) Seller has and will until the Closing have complied in all material respects with all applicable laws, rules and regulations relating to the employment of labor, including those relating to wages, hours, collective bargaining, and discrimination, and will pay or provide for all Social Security and other taxes. (h) All federal, state and local or municipal taxes attributable to the Seller's Business and/or the ownership, use or possession of the Seller Assets, have been fully paid or will be fully paid by Seller. Seller has timely filed, or caused to be timely filed and will in a timely fashion following Closing files, with appropriate governmental agencies all tax returns required to be filed with such agencies and all taxes, assessments, fees and other governmental charges shown to be due thereon have been paid, or will be paid in the case of filing after Closing. (i) That this requires the approval of the United States Bankruptcy Court for the Northern District of Iowa. (9) Buyer's Warranties and Representations. Buyer represents and warrants and agrees with Seller as follows: (a) Buyer has all requisite power to own his property and to carry on his business as presently conducted. Buyer has complete and unrestricted power to perform the transactions contemplated hereby. (b) This Agreement and all other agreements, documents and instruments executed by Buyer pursuant hereto are and will be the valid and binding obligations of Buyer enforceable in accordance with their terms and the execution, delivery and performance of this Agreement and such other agreements, documents and instruments and the performance of the transactions contemplated hereunder are valid. 10. Conditions to Buyer's Obligations. The obligations of Buyer to consummate this Agreement are subject to the satisfaction by Seller or waiver by Buyer on or prior to the Closing of each of the following conditions: (a) Representations and Warranties. All representations and warranties of Seller contained in this Agreement shall be true and correct, on and as of the Closing, in all respects as though made on and as of the Closing. (b) No adverse Change. Seller's Business and Seller Assets shall not have been materially or adversely affected in any way as a result of fire, explosion, earthquake, disaster, accident, labor trouble or dispute, any action by the United States or any other governmental, judicial or arbitral instrumentally, flood, drought, embargo, riot, civil disturbance, uprising, activity or armed forces or act of God or public enemy, or any other matter. (c) Compliance with Agreement. Seller shall have performed and complied with all of its obligations under this Agreement which are to be performed or complied with by it prior to or on the Closing and shall have delivered to Buyer sole and exclusive possession of all the Seller's Designated Assets and all the items referred to. (d) Proceedings and Instruments Satisfactory. All proceedings to be taken in connection with the transactions contemplated by this Agreement, and all documents incident thereto, shall be satisfactory in all respects to Buyer and his counsel. Seller shall have made available to Buyer for examination the originals or true and correct copies of all records and documents relating to the Seller's business which Buyer may reasonably request in connection with this transaction. Seller shall have complied with all statutory requirements fr the valid consummation by Seller or the transactions contemplated by this Agreement. 11. Use of Name. Seller consents to the Buyer's use of the name OBECO or any variation thereof. 12. Conditions to Seller's Obligations. The obligations of Seller to consummate this Agreement are subject to the satisfaction of Buyer or waiver by Seller on or prior to the Closing of each of the following conditions: (a) Representations and Warranties. All representations and warranties of Buyer set forth in this Agreement shall be true and correct on and as of the Closing, in all respects as though made on and as of the Closing. (b) Compliance with Agreement, Buyer shall have performed and complied with all of its obligations under this Agreement which are to be performed or complied with by it on or prior to the Closing. (c) Lease. The Buyer shall have entered into an agrement with Agri- Dynamics, Inc., owner of the premises where the OBECO operations and offices are located, for the Buyer's continued occupancy of the real estate located at 1130 Riverview Drive, Cherokee, IA 51012. 13. Deliveries by Buyer and Seller at Closing. At the closing Seller shall execute all documents necessary to relinquish all of its right, title and interest to the inventory and equipment. 14. Survival of Representations, Warranties, Covenants and Indemnification. All representations, warranties, agreements, covenants and indemnification's made by any party in this Agreement or pursuant hereto shall survive Closing for a period of two years. 15. Miscellaneous Provisions. (a) The customer list being transferred shall include the names of all relevant persons associated with the businesses and addresses. Also, Seller shall provide a list of all suppliers with contract information for each. (b) Seller shall provide a list of all permits held by Obeco Truck Equipment Co., Inc. at closing. (c) Expenses. Each party shall be responsible for its own fees and expenses in connection with the execution and delivery of this Agreement and the performance of its obligations hereunder. (d) Benefit. This Agreement shall be binding upon and inure to the benefit to the parties hereto, and their respective successors, permitted assigns, personal representatives, heirs and executors. (e) Notice. All necessary notices, payments, demands and requests shall be in writing and shall be deemed duly given if mailed by certified mail, postage prepaid, return receipt requested, and addressed as follows: IF TO SELLER Obeco, Inc. 1130 Riverview Drive Cherokee, IA 51012 AND TO: IF TO BUYER: Cherokee Truck Body, Inc. P.O. Box 288 Armstrong, IA 50514-0288 Either party may change its address for notice by giving notice of changes of address in the manner set forth above. (f) Headings. The heading of the paragraphs of this Agreement are for convenience of reference only and do not form a part hereof and in no way modify, interpret or construe the meanings of the parties. (g) Reliance. The parties hereto agree that, notwithstanding any right of any party to this Agreement to investigate the affairs of any other party to this Agreement, the party having such right to investigate shall have the right to rely fully upon the representations and warranties of the other party only expressly contained herein. (h) Entire Agreement. This Agreement, together with the Schedules and Exhibits, set forth the entire agreement and understanding between the parties as to the subject matter hereof and merge and supersede all prior discussions, agreements and understandings with respect hereto. This Agreement, and said Exhibits and Schedules, may not be amended, changed or modified except by a written instrument duly executed by the parties hereto. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Iowa. (i) Further Assurances. Each of the parties agrees that it will, without further consideration, from time to time hereafter, and at their own expense, execute and deliver such other documents, and take such other action, as may reasonably be requested in order to more effectively consummate the transactions contemplated hereby. The provisions hereof shall survive the Closing perpetuity. (j) Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. (k) Time of the Essence. Time is of the essence of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. SELLER: BUYER: /s/ Tom C. French, President /s/J.Ward McConnell, Jr., Chairman Obeco Truck Equipment Co., Inc. Cherokee Truck Body, Inc. -----END PRIVACY-ENHANCED MESSAGE-----