-----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, Q+VRE7bee1d1lFsNuCvWQzoPSZnp9+FkFKonI/a9QyQTiKddB34wOCQI1OVB06/1 8Q5vgxCUEm6iRsMTtQhqQA== 0000007623-97-000008.txt : 19970512 0000007623-97-000008.hdr.sgml : 19970512 ACCESSION NUMBER: 0000007623-97-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961130 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: 97598970 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 November 30, 1996 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. Employee 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 __ Number of shares of common stock outstanding on January 11, 1997: 1,237,631 PART I - FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS ART'S-WAY MANUFACTURING CO., INC. STATEMENTS OF OPERATIONS QUARTERS AND YEAR TO DATE NOVEMBER 30, 1996 AND NOVEMBER 30, 1995 (Unaudited) QUARTER YEAR TO DATE 1996 1995 1996 1995 NET SALES $3,319,955 $3,514,267 $7,275,685 $6,314,287 COST OF GOODS SOLD 2,555,952 2,684,581 5,534,036 4,844,443 GROSS PROFIT 764,003 829,686 1,741,649 1,469,844 EXPENSES: Engineering 73,175 79,277 137,278 160,865 Selling 299,238 372,205 620,544 765,001 General and 496,951 508,596 954,132 1,012,187 administrative Total 869,364 960,078 1,711,954 1,938,053 INCOME (LOSS) FROM (105,361) (130,392) 29,695 (468,209) OPERATIONS OTHER DEDUCTIONS: Interest expense (80,389) (109,201) (203,001) (260,126) Other (9,192) (20,725) (9,857) (20,794) Total other (deductions)(89,581) (129,926) (212,858) (280,920) LOSS BEFORE INCOME TAXES(194,942) (260,318) (183,163) (749,129) INCOME TAX BENEFIT (68,230) (91,111) (64,107) (262,195) NET LOSS (126,712) (169,207) (119,056) (486,934) LOSS PER SHARE(NOTE 2) ($0.10) ($0.15) ($0.10) ($0.45) See accompanying notes to consolidated financial statements. Memo: Earnings(loss) before interest, taxes, depreciation and amortization 37,447 (6,886) 307,236 (200,541) Earnings(loss) before interest and taxes (114,553) (151,117) 19,838 (489,003) 2 ART'S-WAY MANUFACTURING CO., INC. BALANCE SHEETS November 30, May 31, 1996 1996 (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $8,995 $91,513 Accounts receivable-customers, net of allowance for doubtful accounts of $31,359 in November and $26,975 in May, respectively 1,512,902 2,464,241 Inventories (Note 4) 4,888,759 6,200,743 Current recoverable income taxes 142,500 - Deferred income taxes 734,522 734,522 Other current assets 277,375 87,475 Total current assets 7,565,053 9,578,494 PROPERTY, PLANT AND EQUIPMENT, at cost 10,175,664 9,091,255 Less accumulated depreciation 7,071,339 6,783,941 Net property, plant and equipment 3,104,325 2,307,314 TOTAL $ 10,669,378 $ 11,885,808 See accompanying notes to consolidated financial statements. 3 November 30, May 31, 1996 1996 (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable to bank $521,423 $2,281,809 Current portion of long-term debt (Note 6) 426,000 426,000 Accounts payable 590,006 506,912 Customer deposits (Note 3) 96,070 371,801 Accrued expenses (Note 5) 681,929 1,007,326 Total current liabilities 2,315,428 4,593,848 LONG-TERM DEBT, excluding current portion (Note 6) 1,807,000 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 5,721,813 5,840,870 7,376,263 8,149,367 Less cost of common shares in treasury of 103,147 in November and 254,147 in May 989,351 2,437,445 Total stockholders' equity 6,386,912 5,711,922 TOTAL $10,669,378 $11,885,808 See accompanying notes to financial statements. 4 ART'S-WAY MANUFACTURING CO., INC. AND SUBSIDIARY STATEMENTS OF CASH FLOWS QUARTERS ENDED NOVEMBER 30, 1996 AND NOVEMBER 30, 1995 (Unaudited) YEAR TO DATE 1996 1995 CASH FLOW FROM OPERATIONS: Net loss $ (119,056) $(486,934) Adjustment to reconcile net loss to net cash provided (used) by operations: Depreciation 287,398 288,462 Changes in assets and liabilities: (Increase) decrease in: Accounts receivable 951,339 2,045,480 Inventories 1,311,984 1,387,424 Sundry (189,900) (67,994) Increase (decrease) in: Accounts payable 83,094 (1,347,836) Customer deposits (275,731) 64,218 Accrued expenses (325,397) (114,372) Income taxes, net (142,500) 379,186 Total adjustments 1,700,287 2,634,568 Net cash provided by operations 1,581,231 2,147,634 CASH USED IN INVESTING ACTIVITIES - Purchasesof property,plantandequipment (1,084,409) 0 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock from treasury 794,046 30,895 Increase (decrease) in short term loan (1,760,386) (2,578,399) Increase (decrease) in long-term loan 387,000 450,166 Net cash provided by financing activities (579,340) (2,097,338) Net increase (decrease) in cash and temporary cash investments (82,518) 50,296 Cash and temporary cash investments at beginning of period 91,513 86,051 Cash and temporary cash investments at end of the period $8,995 $136,347 Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $173,426 $311,046 Income taxes 20,339 6,327 See accompanying notes to consolidated financial statements. 5 ART'S-WAY MANUFACTURING CO., INC. NOTES TO 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 second quarterended November 30, 1996 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 1,228,708 for the quarter and 1,157,281 for the six months in 1996; and 1,077,288 for the quarter and 1,075,475 for the six months in 1995. 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: November 30, May 31, 1996 1996 Raw material $ 531,952 $ 631,354 Work-in-process 1,868,018 2,235,737 Finished goods 2,765,789 3,683,652 Inventory market write-down (277,000) (350,000) Total $4,888,759 $6,200,743 5. ACCRUED EXPENSES Major components of accrued expenses are: November 30, May 31, 1996 1996 Salaries, wages and commissions $ 163,824 $ 305,413 Provision for pending claims 135,000 160,000 Other 383,105 541,913 Total $ 681,929 $1,007,326 6. NOTES PAYABLE - LONG-TERM A summary of the Company's long-term debt at November 30, 1996 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. $1,633,000 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 2,233,000 Less current portion of long-term debt 426,000 Long-term debt, excluding current portion $1,807,000 7 Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (a) Liquidity and Capital Resources At November 30, 1996, the Company's liquidity had increased since fiscal year end, May 31, 1996. The quick ratio at November 30, 1996, was .65:1 as compared to .56:1 at May 31, 1996. The current ratio was 3.26:1 at November 30, 1996, as compared to 2.08:1 at May 31, 1996. This increase in liquidity is partially the result of a reduction in customer accounts receivable of $951,000 and inventories of $1,312,000, a decrease in short term borrowings of $1,760,000 and a decrease in customer deposits of $276,000. As of November 30, 1996, 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 were 6% lower than a year ago, reflecting management's intention to produce nearer the season of use, increase profitability, and to optimize working capital. Sales to our major OEM customer were down almost 50% as they adjusted dealer inventories. Our beet equipment sales were sharply lower than last year because our strong sales in the first quarter cleared out our available inventory for post season activity. Sales arising from our Logan acquisition were over $300,000 as we caught the tail-end of the 1996 harvest with our own manufacture of potato handling equipment and sold planting equipment for next year's crop. The majority of Logan sales will occur in the fourth quarter of the fiscal year. Business with our new OEM fiberglass customer continues to exceed earlier expectations. We were successful in reducing our inventory of aged wholegoods, and dramatically increased sales of our SupRaMix product over last year's levels. Sales arising from our acquisition of the DMI grain wagon line will occur in the fourth quarter. Second quarter gross profits were down 2% from last year on the 6% lower sales. The ratio of cost of goods sold to net sales declined to 77.0% from 77.8% a year ago as we continue to improve manufacturing efficiencies and product mix. Operating expenses were 4% lower and interest and financing costs were down 31% on much lower debt levels. The company achieved a $65,000 improvement at the pre-tax level, reducing the pre-tax loss from $260,000 to $195,000. In September, the Company consummated two product line acquisitions. The first is a line of potato farm equipment, including harvesters, windrowers, planters, bulk beds and associated service parts. The product line was previously owned by Logan Harvesters, Inc., based in Idaho Falls, Idaho. The second acquisition is a line of grain wagons and associated service parts previously owned by DMI, Inc., based in Goodfield Illinois. The acquisitions, which include inventory, were financed by the issuance of 145,000 shares of Art's-Way common stock, loans from the State of Iowa and local sources obtained through the State of Iowa Community Development Block Grant program and borrowings under the Company's short term line of credit. 8 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. 9 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___January 13, 1997_____ /s/J. David Pitt (J. David Pitt, President) Date__January 13, 1997_____ /s/ William T. Green (William T. Green, Executive Vice President, Chief Financial Officer) 10 -----END PRIVACY-ENHANCED MESSAGE-----