-----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, Ht4BkWAasFDlg7CXBD0Xvkvk+VH3harUpm9Wq7mauEL3TgRwJ4DPR0gLbdv1E+zj NDLgejjnYWSWetzqT5RGpg== 0000007623-98-000004.txt : 19980416 0000007623-98-000004.hdr.sgml : 19980416 ACCESSION NUMBER: 0000007623-98-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980228 FILED AS OF DATE: 19980415 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: 98594107 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 Appendix A to ltem 601(c) of Regulation S-K Commercial and Industrial Companies Article 5 of Regulation S-X Quarter Ended February 28, 1998 Item Number Item Description Amount 5-02(l) cash and cash items 72,853 5-02(3)(a)(1) notes and accounts receivable-trade 4,741,460 5-02(4) allowances for doubtful accounts 34,000 5-02(6) inventory 9,601,341 5-02(9) total current assets 15,098,373 5-02(13) property, plant and equipment 10,404,771 5-02(14) accumulated depreciation 7,605,319 5-02(18) total assets 17,897,825 5-02(21) total current liabilities 9,362,297 5-02(30) common stock 13,408 5-02(31) other stockholders' equity 7,073,745 5-02(32) total liabilities and stockholders' equity 17,897,825 5-03(b)l(a) net sales of tangible products 4,788,022 5-03(b)l total revenues 4,788,022 5-03(b)2(a) cost of tangible goods sold 3,648,985 5-03(b)2 total costs and expenses applicable to sales and revenues 1,056,752 5-03(b)3 other costs and expenses 153,887 5-03(b)5 provision for doubtful accounts and notes 3,000 5-03(b)8 interest and amortization of debt discount 128,963 5-03(b)l0 income before taxes and other items - 5-03(b)l1 income tax expense - 5-03(b)14 loss continuing operations 46,541 5-03(b)19 net loss 46,541 5-03(b)20 earnings per share - basic - 5-03(b)20 earnings per share - diluted - 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 February 28, 1998 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 the number of shares outstanding of each of the issuers classes of common stock as of March 27, 1998: 1,245,931 Number of Shares ART'S-WAY MANUFACTURING CO., INC. CONDENSED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended February 28, February 28, 1998 1997 NET SALES $4,788,022 $4,565,202 COST OF GOODS SOLD 3,648,985 3,497,536 GROSS PROFIT 1,139,037 1,067,666 EXPENSES: Engineering 121,807 91,630 Selling 349,483 351,022 General and administrative 585,462 580,234 Total 1,056,752 1,022,886 INCOME FROM OPERATIONS 82,285 44,780 OTHER DEDUCTIONS: Interest expense (128,963) (71,066) Other (24,924) (9,387) Other deductions (153,887) (80,453) INCOME BEFORE INCOME TAXES (71,602) (35,673) INCOME TAX EXPENSE (25,061) (12,485) NET INCOME $ (46,540 $ (23,188) INCOME PER SHARE (NOTE 2): Basic $ (0.04) $ (0.02) Diluted $ (0.04) $ (0.02) COMMON SHARES AND EQUIVALENT OUTSTANDING: Basic 1,245,931 1,237,631 Diluted 1,245,931 1,237,631 See accompanying notes to financial statements. ART'S-WAY MANUFACTURING CO., INC. CONDENSED BALANCE SHEETS February 28, November 30, 1998 1997 (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 72,853 $ 8,692 Accounts receivable-customers, net of allowance for doubtful accounts of $34,000 and $31,000 in February and November, respectively 4,707,460 3,005,837 Inventories (Note 4) 9,601,341 8,754,469 Deferred income taxes 464,426 464,426 Income tax receivable 125,511 99,000 Other current assets 153,293 154,175 Total current assets 15,124,884 12,486,599 PROPERTY, PLANT AND EQUIPMENT, at cost 10,404,771 10,323,374 Less accumulated depreciation 7,605,319 7,488,142 Net property, plant and equipment 2,799,452 2,835,232 TOTAL $ 17,924,336 $15,321,831 See accompanying notes to consolidated financial statements. February 28, November 30, 1998 1997 (Unaudited) LIABILITIES AND STOCKHOLDERS'EQUITY CURRENT LIABILITIES: Notes payable to bank $4,408,117 $3,172,296 Current portion of long-term debt (Note 6) 483,157 483,157 Accounts payable 3,408,242 2,069,584 Customer deposits (Note 3) 427,473 106,793 Accrued expenses (Note 5) 661,819 789,384 Total current liabilities 9,388,808 6,621,214 LONG-TERM DEBT, excluding current portion (Note 6) 1,333,246 1,451,794 DEFERRED INCOME TAXES 115,129 115,129 STOCKHOLDERS'EQUITY: Common stock - $.Ol par value. Authorized 5,000,000 shares; issued 1,340,778 shares 13,408 13,408 Additional paid-in capital 1,618,453 1,618,453 Retained earnings 6,365,041 6,411,582 7,996,902 8,043,443 Less cost of common shares in treasury of 94,847 in February and November 909,749 909,749 Total stockholders' equity 7,087,153 7,133,694 TOTAL $ 17,924,336 $15,321,831 See accompanying notes to financial statements. ART'S-WAY MANUFACTURING CO., INC. CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) THREE MONTHS ENDED February 28, February 28, 1998 1997 CASH FLOW FROM OPERATIONS: Net Income $ (46,541) $ (23,188) Adjustment to reconcile net loss to net cash provided (used) by operations: Depreciation and amortization 117,177 203,509 Changes in assets and liabilities: (Increase) decrease in: Accounts receivable (1,701,623) (1,566,567) Inventories (846,872) (878,799) Sundry 882 (15,365) Increase (Decrease) in: Accounts payable 1,338,658 1,009,680 Customer deposits 320,680 544,632 Accrued expenses (127,565) (166,032) Income taxes, net (26,511) (13,420) Total adjustments (925,174) (882,362) Net cash used by operations (971,715) (905,550) CASH USED IN INVESTING ACTIVITIES - Purchases of property, plant and equipment (81,397) (17,402) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock from treasury - - Increase (decrease) in short-term loan 1,235,821 1,064,932 Increase (decrease) in long-term loan (118,548) (106,500) Net cash used by financing activities 1,117,273 958,432 Net decrease in cash and temporary cash investments 64,161 35,480 Cash and temporary cash investments at beginning of period 8,692 8,995 Cash and temporary cash investments at end of the period $72,853 $44,475 Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $128,963 $56,279 Income taxes 1,450 530 See accompanying notes to consolidated financial statements. ARTS-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 I O-K for the six months ended November 30, 1997. The results of operations for the first quarter ended February 28, 1998 are not necessarily Indicative of the results for the fiscal year ending November 30, 1998. 2. EARNINGS (LOSS) PER SHARE Earnings (Loss) per share of common stock have been computed on the basis of the weighted average number of shares of common stock outstanding after giving effect to equivalent common shares from dilutive stock options. In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 128 'Earnings Per Share', which revised the calculation and presentation provisions of Accounting Principals Board (APB) Opinion 15 and related interpretations. SFAS 128, which is effective for periods ending after December 15, 1997, requires companies to present, both currently and retroactively, basis earnings per share and diluted earnings per share instead of primary and fully-diluted earnings per share which was previously required under APB Opinion I S. Accordingly, earnings per share for all periods presented have been restated to apply the provisions of SFAS No. 128. The calculation after applying the provisions of SFAS No. 128 did not change the earnings (loss) per share when compared to earnings (loss) per share calculated under APB Opinion 15. 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: February 28, November 30, 1998 1997 Raw material $ 1,929,878 $ 1,593,469 Work-in-process 3,973,552 3,340,641 Finished goods 3,792,911 3,916,359 Inventory market write-down (95,000) (96,000) Total $9,601,341 $8,754,469 5. ACCRUED EXPENSES Major components of accrued expenses are: February 28, November 30, 1998 1997 Salaries, wages and commissions $ 304,304 $285,806 Provision for pending claims 9,555 9,555 Other 347,960 494,023 Total $ 661,819 $789,384 6. NOTES PAYABLE - LONG-TERM A summary of the Company's long-term debt at February 28, 1998 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 $ 1,100,500 State of Iowa Community Development Block Grant promissory notes at zero percent interest, maturity 2006 with quarterly principal payments to begin October 1997 477,778 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 238,125 Total long-term debt 1,816,403 Less current portion of long-term debt 483,157 Long-term debt, excluding current portion $1,333,246 Item 2 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (a) Liquidity and Capital Resources At February 28, 1998, the Company's working capital was $5.7 million compared to $5.9 million at November 28, 1997. For the comparable period last year, the Company's working capital was $5.3 million at February 28, 1997, as compared to $5.2 million at November 28, 1996. Short term bank borrowings are $2.8 million higher than a year ago. During the first two months of the quarter, production continued to be disrupted by start-up problems on new products and vendor supply problems. These problems, now corrected, caused unbalanced material flow into the plant which increased inventories, especially in raw materials and work-in-process, resulting in increased bank borrowings. As of February 28, 1998, 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 5% higher than a year ago, due to the contribution from two new OEM accounts; good sales of land maintenance equipment; and preseason sales of sugar beet harvesting machinery. The new OEM accounts helped balance manufacturing schedules. First quarter gross profits were up 7% from last year on the 5% higher sales. The ratio of costs of goods sold to net sales fell to 76.2% from 76.6% a year ago, due to improved manufacturing efficiencies and a higher margin product mix. Operating expenses were 3% higher, due mainly to a continuing increase in engineering expenditures (33% higher than last year), and costs incurred in restoring the Company's contribution to the employee 401 (k) pension plans. The operating expense ratio to sales was 22.1 % compared to 22.4% a year ago. Interest charges and other expenses were 91 % higher than last year on the increased borrowings needed to support the higher inventories. Part II - other Information ITEM 1. LEGAL PROCEEDINGS Various legal actions and claims are pending against the Company consisting of ordinary routine litigation incidental to the business. In the opinion of management and outside counsel, appropriate provisions have been made in the accompanying consolidated 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 April 13, 1998 /s/ J. David Pitt (J. David Pitt, President) Date April 13, 1998 /s/ William T. Green (William T. Green, Executive Vice President,Chief Financial Officer) -----END PRIVACY-ENHANCED MESSAGE-----