-----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, OtWa6dGLFLsXHbWTFVx/NdLUXtAHZlZscUvQaXHpQhGlZpakNAU5YYdG5F0pSeyr IXG7zJacHYcH9bEU77JG1w== 0000007623-97-000018.txt : 19971016 0000007623-97-000018.hdr.sgml : 19971016 ACCESSION NUMBER: 0000007623-97-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970831 FILED AS OF DATE: 19971015 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: SEC FILE NUMBER: 000-05131 FILM NUMBER: 97695642 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, 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. 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 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 September 23, 1997: 1,245,931 Number of Shares ART'S-WAY MANUFACTURING CO., INC. CONDENSED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended August 31, August 31, 1997 1996 NET SALES $5,590,236 $3,955,730 COST OF GOODS SOLD 3,743,072 2,978,084 GROSS PROFIT 1,847,164 977,646 EXPENSES: Engineering 112,313 64,103 Selling 417,892 321,306 General and administrative 543,497 457,181 Total 1,073,702 842,590 INCOME FROM OPERATIONS 773,462 135,056 OTHER DEDUCTIONS: Interest expense (144,111) (122,612) Other (56,375) (665) Other deductions (200,486) (123,277) INCOME BEFORE INCOME TAXES 572,976 11,779 INCOME TAX EXPENSE 200,543 4,123 NET INCOME $ 372,433 $ 7,656 INCOME PER SHARE (NOTE 2) $ $0.30 $ $0.01 See accompanying notes to financial statements. Memo: Earnings (loss) before interest, taxes, $ 874,323 $ 269,789 depreciation and amortization Earnings (loss) before interest and taxes $ 717,087 $ 134,391 ART'S-WAY MANUFACTURING CO., INC. CONDENSED BALANCE SHEETS August 31, May 31, 1997 1997 (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $3,375 $25,297 Accounts receivable-customers, net of allowance for doubtful accounts of $28,000 in August and $25,000 in May, respectively 4,016,325 2,943,404 Inventories (Note 4) 8,895,056 8,437,569 Deferred income taxes 644,053 644,053 Other current assets 252,013 160,669 Total current assets 13,810,822 12,210,992 PROPERTY, PLANT AND EQUIPMENT, at cost 10,365,057 10,340,107 Less accumulated depreciation 7,494,346 7,337,110 Net property, plant and equipment 2,870,711 3,002,997 TOTAL $16,681,533 $15,213,989 See accompanying notes to consolidated financial statements. August 31, May 31, 1997 1997 (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable to bank $4,150,125 $2,652,433 Current portion of long-term debt (Note 6) 462,146 462,146 Accounts payable 1,889,772 2,130,946 Customer deposits (Note 3) 268,500 810,780 Income Taxes Payable 200,450 - Accrued expenses (Note 5) 999,646 765,220 Total current liabilities 7,970,639 6,821,525 LONG-TERM DEBT, excluding current portion (Note 6) 1,601,354 1,707,854 DEFERRED INCOME TAXES 94,101 94,101 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 1,618,453 1,637,887 Retained earnings 6,293,326 5,920,893 7,925,187 7,572,188 Less cost of common shares in treasury of 94,847 in August and 102,347 in May 909,748 981,679 Total stockholders' equity 7,015,439 6,590,509 TOTAL $16,681,533 $15,213,989 See accompanying notes to financial statements. ART'S-WAY MANUFACTURING CO., INC. CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) THREE MONTHS ENDED August 31, August 31, 1997 1996 CASH FLOW FROM OPERATIONS: Net Income $ 372,433 $ 7,656 Adjustment to reconcile net loss to net cash provided (used) by operations: Depreciation and amortization 157,236 135,398 Changes in assets and liabilities: (Increase) decrease in: Accounts receivable (1,072,921) 121,584 Inventories (457,487) 1,037,345 Sundry (91,344) (7,797) Increase (Decrease) in: Accounts payable (241,174) (26,874) Customer deposits (542,280) (333,448) Accrued expenses 234,426 (79,125) Income taxes, net 200,450 (11,943) Total adjustments (1,813,094) 835,140 Net cash provided (used) by operations (1,440,661) 842,796 CASH USED IN INVESTING ACTIVITIES - Purchases of property, plant and equipment (24,950) (8,290) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock from treasury 52,497 - Increase (decrease) in short-term loan 1,497,692 (935,418) Increase (decrease) in long-term loan (106,500) (106,500) Net cash provided (used) by financing activities 1,443,689 (1,041,918) Net decrease in cash and temporary cash investments (21,922) (207,412) Cash and temporary cash investments at beginning of period 25,297 91,513 Cash and temporary cash investments at end of the period $3,375 $(115,899) Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $129,323 $107,825 Income taxes 92 16,066 See accompanying notes to consolidated financial statements. 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, 1997. The results of operations for the first quarter ended August 31, 1997 are not necessarily indicative of the results for the six months ending November 30, 1997. 2. EARNINGS PER SHARE Earnings per common share are based on the weighted average number of shares outstanding of 1,243,322 at August 31, 1997 and 1,086,631 at August 31, 1996. Outstanding stock options have no material dilutive effect upon earnings 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, 1997 May 31,1997 Raw material $ 1,203,025 $ 1,691,733 Work-in-process 3,924,226 3,891,197 Finished goods 3,919,805 3,014,639 Inventory market write-down (152,000) (160,000) Total $ 8,895,056 $ 8,437,569 5. ACCRUED EXPENSES Major components of accrued expenses are: August 31,1997 May 31, 1997 Salaries, wages and commissions $ 370,121 $ 303,388 Provision for pending claims 40,000 40,000 Other 589,525 421,832 Total $ 999,646 $ 765,220 6. NOTES PAYABLE - LONG-TERM A summary of the Company's long-term debt at August 31, 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 at one and one-half percent over the bank's national money market rate, secured $ 1,313,500 State of Iowa Community Development Block Grant promissory notes at zero percent interest, maturity 2006 with quarterly principal payments to begin October 1997 500,000 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 1997 250,000 Total long-term debt 2,063,500 Less current portion of long-term debt 462,146 Long-term debt, excluding current portion $ 1,601,354 Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (a) Liquidity and Capital Resources At August 31, 1997, the Company's working capital was $5.8 million compared to $5.4 million at May 31, 1997. For the comparable period last year, the Company's working capital was $5.0 million at August 31, 1996, as compared to $5.0 million at May 31, 1996. Short term bank borrowings are $2.8 million higher than a year ago. The later (and ongoing) shipment of beet equipment has temporarily raised both receivables and inventories. Both assets will fall significantly in the next three months. Cash used by operations for the 3 month period ended August 31, 1997 was $1.4 million compared with cash provided by operations of $.8 million for the same period last year. This year's extremely low cash flow is a result of increases in receivables and inventory due to management's decision to manufacture beet equipment nearer the season of use. As of August 31, 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 were 41% higher than a year ago, due to very strong sales of sugar beet harvesting equipment. The increase in sugar beet sales was augmented by management's decision to produce beet equipment nearer the season of use in order to give more time for beet product development, make room in the production schedule for the recent product acquisitions, and to conserve working capital. Service parts sales were also significantly higher than last year as we delivered in-season beet parts to our dealers with the machines, and filled dealer service parts stock orders for our new Logan potato line ahead of the season. Other areas of strength included a meaningful contribution from our recent grain wagon acquisition and continuing recovery in our feed processing products - particularly grinder/mixers. Sales of the Eversman land maintenance products were lower than a year ago reflecting strong sales last year and our current lack of inventory to fill dealer orders. We will be in production of the in-demand land plane later this month, and will be producing other Eversman products in the subsequent quarter. Our existing OEM business was down sharply in both feed processing equipment and in component fabrication as our major OEM customer continues to balance its dealer inventories, and we turn away component fabrication business in favor of our own higher margin branded equipment. First quarter gross profits were up 89% from last year on the 41% higher sales. The ratio of costs of goods sold to net sales fell to 67.0% from 75.3% a year ago, due to significantly improved manufacturing efficiencies; a higher margin product mix; and ongoing purchased material cost controls. Operating expenses were 27% higher than a year ago, due to increased staffing in engineering and sales to support our new product lines, and additional resources added to our beet and feed processing business. The operating expense ratio to sales still fell to 19.2% from last year's 21.3%. Interest charges and other expenses increased 63% based on higher assets to support the increased volume. The Company achieved a $561,000 improvement at the pre-tax level, increasing the pre-tax profit from $12,000 to $573,000. 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. 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 14, 1997 /s/ J. David Pitt President Date October 14, 1997 /s/ William T. Green Executive Vice President, Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----