-----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, K2kyKq/Udtg1ZtuR7jo8MigUF+xCPSMXflvHwX01Fn5uCGPIB7Wbj6Dw/UncTMdi IgxR7FzhJlHYbIvud9eclA== 0000007623-97-000009.txt : 19970512 0000007623-97-000009.hdr.sgml : 19970512 ACCESSION NUMBER: 0000007623-97-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960831 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: 97598972 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 August 31, 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 September 11, 1996: 1,231,631 PART I -FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS ART'S-WAY MANUFACTURING CO., INC. STATEMENTS OF OPERATIONS QUARTERS ENDED AUGUST 31, 1996 AND AUGUST 31, 1995 (Unaudited) 1996 1995 NET SALES $3,955,730 $2,800,020 COST OF GOODS SOLD 2,978,084 2,159,862 GROSS PROFIT 977,646 640,158 EXPENSES: Engineering 64,103 81,588 Selling 321,306 392,796 General and administrative 457,181 503,591 Total 842,590 977,975 INCOME (LOSS) FROM OPERATIONS 135,056 (337,817) OTHER DEDUCTIONS: Interest expense (122,612) (150,925) Other (665) (69) Other deductions (123,277) (150,994) INCOME (LOSS) BEFORE INCOME TAXES 11,779 (488,811) INCOME TAX EXPENSE (BENEFIT) 4,123 (171,084) NET INCOME (LOSS) $ 7,656 $ (317,727) INCOME (LOSS) PER SHARE (NOTE 2) $0.01 $ ($0.30) See accompanying notes to financial statements. ART'S-WAY MANUFACTURING CO., INC. BALANCE SHEETS August 31, May 31, 1996 1996 (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $(115,899) $91,513 Accounts receivable-customers, net of allowance for doubtful accounts of $29,975 in August and $26,975 in May, respectively 2,342,657 2,464,241 Inventories (Note 4) 5,163,398 6,200,743 Deferred income taxes 734,522 734,522 Other current assets 107,215 87,475 Total current assets 8,231,893 9,578,494 PROPERTY, PLANT AND EQUIPMENT, at cost 9,099,545 9,091,255 Less accumulated depreciation 6,919,339 6,783,941 Net property, plant and equipment 2,180,206 2,307,314 TOTAL $10,412,099 $11,885,808 See accompanying notes to consolidated financial statements. August 31, May 31, 1996 1996 (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable to bank $1,346,391 $2,281,809 Current portion of long-term debt 426,000 426,000 (Note 6) Accounts payable 480,038 506,912 Customer deposits (Note 3) 38,353 371,801 Accrued expenses (Note 5) 928,201 1,007,326 Total current liabilities 3,218,983 4,593,848 LONG-TERM DEBT, excluding current 1,313,500 1,420,000 portion (Note 6) 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 2,295,089 2,295,089 Retained earnings 5,848,526 5,840,870 8,157,023 8,149,367 Less cost of common shares in treasury of 254,147 in August and 254,147 2,437,445 2,437,445 in May Total stockholders' equity 5,719,578 5,711,922 TOTAL $10,412,099 $11,885,808 See accompanying notes to financial statements. ART'S-WAY MANUFACTURING CO., INC. STATEMENTS OF CASH FLOWS QUARTERS ENDED AUGUST 31, 1996 AND AUGUST 31, 1995 (Unaudited) YEAR TO DATE 1996 1995 CASH FLOW FROM OPERATIONS: Net Income (loss) $7,656 $(317,727) Adjustment to reconcile net loss to net cash provided (used) by operations: Depreciation 135,398 144,231 Changes in assets and liabilities: (Increase) decrease in: Accounts receivable 121,584 1,156,197 Inventories 1,037,345 482,408 Sundry (7,797) (116,534) Increase (Decrease) in: Accounts payable (26,874) (832,207) Customer deposits (333,448) 21,630 Accrued expenses (79,125) (124,665) Income taxes, net (11,943) 473,258 Total adjustments 835,140 1,204,318 Net cash provided by operations 842,796 886,591 CASH USED IN INVESTING ACTIVITIES - Purchases of property, plant and equipment (8,290) 0 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock from treasury - 6,323 Increase (decrease) in short-term loan (935,418) (1,431,056) Increase (decrease) in long-term loan (106,500) 556,666 Net cash used by financing activities (1,041,918) (868,067) Net increase (decrease) in cash and temporary cash investments (207,412) 18,524 Cash and temporary cash investments at beginning of period 91,513 86,051 Cash and temporary cash investments at end of the period $(115,899) $104,575 Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $107,825 $38,388 Income taxes 16,066 1,184 See accompanying notes to consolidated financial statements. 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 first quarter ended August 31, 1996 are not necessarily indicative of the results for the entire fiscal year ending May 31, 1997. 2. EARNINGS (LOSS) PER SHARE Earnings (loss) per common share are based on the weighted average number of shares outstanding of 1,086,631 at August 31, 1996 and 1,073,681 at August 31, 1995. Outstanding stock options have no material dilutive effect upon earnings (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: August 31, May 31, 1996 1996 Raw material $ 569,773 $ 631,354 Work-in-process 1,849,874 2,235,737 Finished goods 3,067,751 3,683,652 Inventory market write-down (324,000) (350,000) Total $5,163,398 $6,200,743 5. ACCRUED EXPENSES Major components of accrued expenses are: August 31, May 31, 1996 1996 Salaries, wages and commissions $289,820 $305,413 Provision for pending claims 150,000 160,000 Other 488,381 541,913 Total $ 928,201 $1,007,326 6. NOTES PAYABLE - LONG-TERM A summary of the Company's long-term debt at August 31, 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. $1,739,500 Total long-term debt 1,739,500 Less current portion of long-term debt 426,000 Long-term debt, excluding current portion $1,313,500 7. SUBSEQUENT EVENTS On September 4, 1996, the Company announced the acquisition of the Logan potato farm equipment line.The agreement provides for a $250,000 cash payment, 145,000 shares of common and future payments for raw materialand work-in-processinventories of approximately $400,000. On September 24, 1996, the Company announced the acquisition of the DMI grain wagon line. The agreement provides for a cash payment of $250,000 and certain royalty payments on future sales. Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (a) Liquidity and Capital Resources At August 31, 1996, the Company's liquidity had increased since fiscal year end, May 31, 1996. The quick ratio at August 31, 1996, was .69:1 as compared to .56:1 at May 31, 1996. The current ratio was 2.56:1 at August 31, 1996, as compared to 2.08:1 at May 31, 1996. This increase in liquidity is partially the result of a reduction in inventories of $1,037,000, a decrease in short term borrowings of $935,000 and a decrease in customer deposits of $333,000. As of August 31, 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 41% higher than a year ago. Sales of the Company's beet equipment were up sharply, reflecting management's intention to produce major product lines nearer the season of use. Sales of feed processing equipment continue to lag which o attributed to weaknesses in the hog cattle industry and the high price of animal feed. Sales of the Company's other products were significantly higher as management continues to drive down excess inventories. Gross profits were up 66% on the higher sales and stronger margins. The ratio of cost of goods sold to net sales declined to 75.3% from 78.9% a year ago as we achieved significantly higher manufacturing efficiencies. Operating expenses were 9% lower despite the higher volume activity as management continues to restructure the Company to operate profitably at lower sales levels. Interest and financing costs fell 19% as the Company continues to operate at planned lower inventory levels. 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. 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 10, 1996___ /s/ J. David Pitt (J. David Pitt, President) Date____________October 10, 1996___ /s/ William T. Green (William T. Green, Executive Vice President, Chief Financial Officer) -----END PRIVACY-ENHANCED MESSAGE-----