SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 1996
Commission file number 0-5131
Art's-Way Manufacturing Co., Inc. 401 (k) Savings Plan
(Full title of the plan)
Art's-Way Manufacturing Co., Inc.
(Issuer of securities)
P.O. Box 288, Armstrong, IA 50514
(Address of principal executive office)
Required Information
Enclosed are the plan financial statements and schedules as of
May 1, 1996 and 1995 and for each of the years in the three year
period ended May 31, 1996 prepared in accordance with financial
reporting requirements of ERISA.
The Plan. Pursuant to the requirements of the Securities Exchange
Act of 1934, the trustees(or other persons who administer the
employee benefit plan) have duly caused this annual report to be
signed on its behalf by the undersigned hereunto duly authorized.
Art's-Way Manufacturing Co., Inc. 401(k) Savings Plan
(Date) (Name of Plan)
William T. Green, Executive Vice President
ART'S-WAY MANUFACTURING CO., INC.
SAVINGS PLAN
Financial Statements and Supplemental Schedules
May 31, 1996 and 1995
(With Independent Auditors' Report Thereon)
ART'S-WAY MANUFACTURING CO., INC.
SAVINGS PLAN
INDEX
Page
Independent Auditors' Report 1
Financial Statements
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for
Benefits with Fund Information 3
Notes to Financial Statements
1. Significant Accounting Policies 6
2. Plan Description 7
3. Plan Termination 10
4. Investments 10
5. Net Assets Available for Benefits 11
Supplemental Schedules
1- Item 27a - Assets Held for Investment Purposes 12
2- Item 27d - Reportable Transactions 13
KPMG Peat Marwick LLP
Two Central Park Plaza
Suite 1501
Omaha. NE 68102
233 South 13th Street, Suite 1600
Lincoln, NE 68508-2041
INDEPENDENT AUDITORS' REPORT
Plan Administrator of Art's-Way
Manufacturing Co., Inc. Savings Plan:
We have audited the financial statements of Art's-Way
Manufacturing Co., Inc. Savings Plan as of May 31, 1996
and 1995, and for each of the years in the three-year period
ended May 31, 1996, as listed in the accompanying index.
These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.
An audit includes ex@ning, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the net assets
available for benefits of Art's-Way Manufacturing Co., Inc.
Savings Plan as of May 31, 1996 and 1995, and the changes in
net assets available for benefits for each of the years in the
three-year period ended May 31, 1996 in conformity with generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion
on the basic financial statements taken as a whole. The
supplemental schedules of assets held for investment purposes
and reportable transactions are presented for the purpose of
additional analysis and are not a required part of the basic
financial statements but are supplementary information required
by the Department of Labor's Rules and Regulations for Reporting
and Disclosure under the Employee Retirement Income Security
Act of 1974. The Fund Information in the statements of changes
in net assets available for benefits is presented for purposes
of additional analysis rather than to present the changes in net
assets available for benefits of each fund. The supplemental
schedules and Fund Information have been subjected to the
auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in
all material respects in relation to the basic financial
statements taken as a whole.
KPMG Peat Marwick LLP
November 22, 1996
1
ART'S-WAY MANUFACTURING CO., INC.
SAVINGS PLAN
Statements of Net Assets Available for Benefits
May 31, 1996 and 1995
1996 1995
Assets:
Investments:
Principal Mutual Life Insurance Company -
deposit contract, at contract value
(cost: 1996, $3,952,003;
1995, $3,779,898) $ 3,952,003 3,779,898
At fair value (note 1):
Money Market Fund (cost: 1996, $34,835;
1995, $89,893) 35,499 100,550
Shares of registered investment companies:
Washington Mutual Investment Fund
(cost: 1996, $1,105,487;
1995, $1,054,470) 1,641,504 1,421,043
Income Fund of America (cost: 1996,
$726,012; 1995, $780,300) 864,975 853,755
U.S. Government Fund (cost: 1996,
$174,295; 1995, $175,491) 168,061 169,854
Art's-Way Common Stock Fund
(cost: 1996, $168,374; 1995, $178,326) 147,392 107,806
Participant loans, at unpaid balance 93,964 -
Net assets available for benefits (note 2) $6,903,398 $6,432,906
See accompanying notes to financial statements.
2
ART'S-WAY MANUFACTURING CO., INC.
SAVINGS PLAN
Statements of Changes in Net Assets Available for
Benefits with Fund Information
Year ended May 31, 1996
Principal
Life
Ins. Co. Wash. Income AW
deposit Money Mutual Fund U.S. Common
contract Mrkt. Inv. of Govt. Stock Loan
Fund Fund America Fund Fund Fund Total
Additions to
net assets
attributed to:
Investment
income (loss):
Net
appreciation
(depreciation)
in fair value
of
investments: - - 250,317 85,966 - (22,319) - 313,964
Interest
income 261,212 7,801 - - 232 - - 269,245
Dividend
income - - 42,621 44,691 12,039 - - 99,351
Capital
gains - - 73,196 9,412 - - - 82,608
Net
investment
income
(loss) 261,212 7,801 366,134 140,069 12,271 (22,319) - 765,168
Contributions:
Employer 1,339 - 398 284 111 25 - 2,157
Employees 77,978 509 40,165 30,956 12,247 3,831 - 165,686
Total
contri-
butions 79,317 509 40,563 31,240 12,358 3,856 - 167,843
Interfund
transfers,
net 84,024 73,024 (142,639)(148,996)(17,464)58,087 93,964 -
Total
add-
itions 424,553 81,334 264,058 22,313 7,165 39,624 93,964 933,011
Deductions
from
net assets
attributed to:
Administrative
expenses 240 23 - - - - - 263
Benefits
paid to
partic-
ipants 252,208 146,362 43,597 11,093 8,958 38 - 462,256
Total
deduc-
tions 252,448 146,385 43,597 11,093 8,958 38 - 462,519
Net
increase
(decr-
ease) 172,105 (65,051) 220,461 11,220 (1,793) 39,586 93,964 470,492
Net assets
available for
benefits:
Beginning
of year 3,779,898 100,550 1,421,043 853,755 169,854 107,806 - 6,432,906
End of
year $3,952,003 35,499 1,641,504 864,975 168,061 147,392 93,964 6,903,398
(Continued)
3
ART'S-WAY MANUFACTURING CO., INC.
SAVINGS PLAN
Statements of Changes in Net Assets Available for
Benefits with Fund Information, Continued
Year ended May 31, 1995
Principal
Life
Ins. Co. Money Washington Income Art's-Way
deposit Market Mutual Fund U.S. Common
contract Fund Investment of Govt. Stock
Fund America Fund Fund Total
Additions to
net assets
attributed to:
Investment
income (loss):
Net appreciation
(depreciation)
in fair value of
investments: $ - - 153,149 66,102 - (68,635) 150,616
Capital
gains - - 29,470 3,240 - - 32,710
Interest
income 239,390 11,861 - - 94 - 251,345
Dividends - - 42,473 40,375 12,813 - 95,661
Net
investment
income (loss) 239,390 11,861 225,092 109,717 12,907 (68,635) 530,332
Contributions:
Employer 79,005 31,073 34,815 21,381 405 112 166,791
Employees 110,397 41,154 55,761 33,304 (55) (18) 241,043
Total
contributions 189,402 72,227 90,576 55,185 350 94 407,834
Interfund
transfers, net(391,801)30,737 132,639 203,836 (21,814) 46,403 -
Total
additions
(deductions) 36,991 114,825 448,307 368,738 (8,557) (22,138) 938,166
Deductions from
net assets
attributed to:
Administrative
expenses 182 31 - - - - 213
Benefit payments
to
participants 227,795 55,094 39,511 542 - - 322,942
Total
deductions 227,977 55,125 39,511 542 - - 323,155
Net increase
(decrease) (190,986) 59,700 408,796 368,196 (8,557) (22,138) 615,011
Net assets
available for
benefits:
Beginning
of year 3,970,884 40,850 1,012,247 485,559 178,411 129,944 5,817,895
End of
year $ 3,779,898 100,550 1,421,043 853,735 169,854 107,806 6,432,906
4
ART'S-WAY MANUFACTURING CO., INC.
SAVINGS PLAN
Statements of Changes in Net Assets Available for
Benefits with Fund Information, Concluded
Year ended May 31, 1994
Principal
Life
Ins. Co. Washington Income Art's-Way
deposit Money Mutual Fund U.S. Common
contract Market Inv. of Govt. Stock
Fund Fund America Fund Fund Total
Additions to
net assets
attributed to:
Investment
income (loss):
Net depreciation
in fair value of
investments: $ - - (6,133) (26,633)(14,392) (9,088) (56,246)
Capital
gains - - 20,630 11,788 - - 32,418
Interest
income 288,337 1,147 - - - - 289,484
Interest and
dividends - - 27,561 24,991 15,267 - 67,819
Net investment
income (loss) 288,337 1,147 42,058 10,146 875 (9,088) 333,475
Contributions:
Employer 85,547 47,590 37,949 17,100 1,209 - 189,395
Employees 127,683 54,856 62,423 23,248 3,427 - 271,637
Total
contributions 213,230 102,446 100,372 40,348 4,636 - 461,032
Interfund
Transfers,net 22,145 (101,039)(18,411) (496) 6,316 91,485 -
Total additions 523,712 2,554 124,019 49,998 11,827 82,397 794,507
Deductions from
net assets
attributed to:
Administrative
expenses 194 - - - - - 194
Benefits paid
to participants 449,295 6,253 958 - - 2,189 458,695
Total deductions 449,482 6,253 958 - - 2,189 458,889
Net increase
(decrease) 74,223 (3,699) 123,061 49,998 11,827 80,208 335,618
Net assets
available
for benefits:
Beginning
of year 3,896,661 44,549 889,186 435,561 166,584 49,736 5,482,277
End of year $3,970,884 40,850 1,012,247 485,559 178,411 129,944 5,817,895
See accompanying notes to financial statements.
5
ART'S-WAY MANUFACTURING CO., INC.
SAVINGS PLAN
Notes to Financial Statements
May 31, 1996 and 1995
(1) Significant Accounting Policies
(a) Nature of Operations
Art's-Way Manufacturing Co., Inc. (the Company) is a
manufacturer of specialized farm machinery, equipment,
garden and recreational products which it markets under
its own and private labels.
(b) Basis of Presentation
The accompanying financial statements of the Art's-Way
Manufacturing Co., Inc. Savings Plan (the Plan) have been
prepared on the accrual basis of accounting and present the
net assets available for benefits and changes in those net
assets in accordance with generally accepted accounting
principles.
(c) Investments
Investments in securities (funds) are stated at fair value
which is based on quoted market prices. Shares of
registered investment companies are valued at quoted
market prices, which represent the net asset value of
shares held by the Plan at year-end.
The Plan entered into a fully benefit-responsive investment
contract with Princinal Mutual Life Insurance Company
(Sponsor). The contract is included in the financial
statements at contract value as reported to the plan by
the Sponsor, which approximates fair value. The Sponsor
maintains the contributions in a pooled account. Contract
value represents contributions made under the contract,
plus earnings, less Plan withdrawals. The account is
credited with earnings based on rates established annually
by the Sponsor. The crediting interest rate was 6.40% and
6.30% at May 31, 1996 and 1995, respectively. The average
yield on the investment contract was 5.81%, 7.17% and 5.83%
for each of the years ended May 31, 1996, 1995 and 1994.
There are no administrative expenses deducted from the
investment contract.
(d) Administrative Expenses
Substantially all of the administrative fees and expenses
of the Plan are paid for by the Plan's Sponsor.
(e) Payment of Benefits
Benefits are recorded when paid.
6
(f) Use of Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the
date of the financial statements and reported amounts
of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
(g) Tax Status
The Internal Revenue Service has determined and informed
the Company by a letter dated August 16, 1993 that the Plan
and related trust are designed in accordance with applicable
sections of the Internal Revenue Code (IRC). The Plan has
been amended since receiving the determination letter.
However, the Plan administrator believes that the Plan is
designed and is currently being operated in compliance with
the applicable requirements of the IRC.
(h) Reclassiflcations
Certain of the 1995 balances have been reclassified to
conform to the 1996 presentation.
(2) Plan Description
The following is a summary of the Plan. The more significant
Plan provisions are addressed below. Participants should
refer to the Plan Agreement for a more complete description
of the Plan's provisions.
(a) General
The Plan is a defined contribution investment plan sponsored
and administered by the Company for its employees. Management
believes the Plan is in compliance with the requirements of
the Employee Retirement Income Security Act of 1974 (ERISA).
Under terms of the Plan, an employee becomes eligible to
participate after receiving credit for six months of service,
as defined.
7
(b) Participant Contributions
Upon enrollment in the Plan, a participant may direct
employee contributions in any of the six investment options.
A participant may make deductible voluntary contributions
of not less than 4% under a salary deferral agreement.
The Plan also provides for rollovers of lump-sum
distributions by participants from certain individual
retirement accounts or a qualified 401(k) plan and they
may change their investment options quarterly.
(c) Employer Contributions
The employer will make matching contributions at a
discretionary percent and, at its sole discretion, may
make discretionary contributions.
When the employer makes a matching contribution,it is added
to the accounts of those participants who have made
voluntary contributions for the year as noted above.
The matching contribution under the Plan shall be equal
to a discretionary percentage of the participant's salary
reductions as determined by the employer.
The employer's discretionary contribution is shared by all
Plan members, whether or riot they have made voluntary
contributions, based on the member's compensation compared
to all participants' combined compensation and years of
service.
(d) Participant Accounts
Each participant's account is credited with the
participant's contributions, the Company's matching
contributions and an allocation of the Plan's net increase
in net assets available for benefits corresponding to the
participant's investment elections. Allocations are based
on participant account balances, as defined. The benefit
to which a participant is entitled is the benefit that can
be provided from the participant's vested account.
Forfeitures are credited to participant accounts based
on a specified formula.
(e) Vesting
Participants' voluntary contributions are immediately
vested. Vesting in the remainder of their accounts is based
on credited years of service, as defined. A participant
is 100% vested after six credited years of service.
8
(f) Participant Loans
Effective April 1, 1996, the Plan allows employees who
have at least six months of service to borrow a minimum
of $1,000 and up to a maximum equal to the lesser of
$50,000 or 50% of their vested account balance. Loans
bear interest at a percentage equal to the Sponsor's
revolving credit facility plus 1% (9.25% at May 31, 1996),
and are valued at the unpaid balance which approximates fair
market value. Loans are secured by the participant's account
balance and are scheduled for repayment by payroll deduction
from one-to-five years. Loan transactions are treated as a
transfer to (from) the loan fund from (to) the investment
funds.
(g) Payment of Benefits
During an employees' active career with the Company, part
or all of a participant's contributions and fund earnings
may be withdrawn due to hardship and based on Plan
limitations. Such hardship withdrawals are permitted
when conditions as specified by the Plan are met and are
subject to limits allowed by law.
Upon termination, disability, retirement or death, all
amounts attributed to a participant's account may be
withdrawn. The accumulated balances are generally distributed
in the form of a lump-sum settlement unless an election for
installment payments has been made by the employee prior
to retirement or death.
(h) Investment Options
Upon enrollment in the Plan, a participant may direct
employee and employer contributions in any of the six
investment options:
Principal Life Insurance Company - deposit contract -
funds are invested in an investment contract with the
Sponsor. The objective of this fund is the preservation
of capital. Contributions are guaranteed an interest
rate for a specified period of time.
Money Market Fund - funds are invested with the Sponsor
in a pooled separate account that includes high quality
commercial paper. The objective of this fund is the
preservation of capital.
Washington Mutual Investment Fund - funds are invested
in shares of a registered investment company that invests
mainly in common stocks. The fund's objective is current
income and capital growth.
9
(h), Continued
Income Fund of America - funds are invested in shares
of a registered investment company that invests mainly
in common stocks and corporate and government bonds.
The fund's objective is current income and, secondarily,
growth of capital.
U.S. Govermment Fund - funds are invested in shares
of a registered investment company that invests mainly
in govemment-backed securities. Tle fund's objective
is current income with a preservation of capital.
Art's-Way Common Stock Fund - funds are invested in common
stock of the Company.
Participants may change their investment options quarterly and
may invest in more than one investment option. The number of
employees participating in each investment fund is unavailable
from the Sponsor.
(3) Plan Termination
Although it has not expressed any intent to do so, the
Company has the right under the Plan to discontinue its
contributions at any time and to terminate the Plan
subject to the provisions of ERISA. In the event of
Plan termination, participants will become 100% vested
in their accounts.
(4) Investments
The cost and fair value of the investments maintained by
the Plan are as follows:
Name of issuer 1996 1995
and title of issue Cost Fair value Cost Fair value
Principal Mutual
Life Insurance
Company-deposit contract $3,952,003 3,952,003 3,779,898 3,779,898
Money Market Fund 34,835 35,499 89,893 100,550
American Funds Group:
Washington Mutual
Investment Fund 1,105,487 1,641,504 1,054,470 1,421,043
Income Fund of America 726,012 864,975 780,300 853,755
U.S. Government Fund 174,295 168,061 175,491 169,854
Art's-Way Common
Stock Fund 168,374 147,392 178,326 107,806
Participant loans 93,964 93,964 - -
$6,254,970 $6,903,398 $6,058,378 $6,432,906
10
ART'S-WAY MANUFACTURING CO., INC.
SAVINGS PLAN
Notes to Financial Statements
(5) Net Assets Available for Benefits
The following is a reconciliation of net assets available for
benefits according to the financial statements to Form 5500 at
May 31, 1996 and 1995:
1996 1995
Net assets available for benefits
per the
financial statements $ 6,903,398 6,432,906
Increase (decrease) in fair
value of
insurance contract (22,654) 2,678
Net assets available for benefits
per Form 5500 $ 6,880,744 6,435,594
11
Schedule I
ART'S-WAY MANUFACTURING CO., INC.
SAVINGS PLAN
Item 27a - Assets Held for Investment Purposes
May 31, 1996 and 1995
Name of issuer 1996 1995
and title of issue Cost Fair value Cost Fair value
Principal Mutual
Life Insurance
Company - deposit
contract $ 3,952,003 3,952,003 3,779,898 3,779,898
Money Market Fund 34,835 35,499 89,893 100,550
American Funds Group:
Washington Mutual
Investment Fund 1,105,487 1,641,504 1,054,470 1,421,043
Income Fund of America 726,012 864,975 780,300 853,755
U.S. Government Fund 174,295 168,061 175,491 169,854
Art's-Way Common Stock Fund* 168,374 147,392 178,326 107,806
Participant loans 93,964 93,964 - -
$6,254,970 6,903,398 6,058,378 6,432,906
*Party in interest
See accompanying independent auditors' report.
12
Schedule 2
ART'S-WAY MANUFACTURING CO., INC.
SAVINGS PLAN
Item 27d - Reportable Transactions
Year ended May 31, 1996
Purchase Selling Cost of Net gain/
Description of assets Price Price Asset (loss)
Principal Financial Group:
Guaranteed Interest Fund $ 1,308,196 - 1,308,196 -
Guaranteed Interest Fund - 1,385,114 1,385,114 -
Washington Mutual Investment
Fund 246,245 - 246,245 -
Washington Mutual
Investment Fund - 274,783 195,228 79,555
Year ended May 31, 1995
Purchase Selling Cost of Net gain/
Description of assets Price Price Asset (loss)
Principal Financial Group:
Guaranteed Interest Fund $ 1,465,473 - 1,465,473 -
Guaranteed Interest Fund - 1,895,775 1,900,075 (4,300)
Money Market Fund 146,288 - 146,288 -
Money Market Fund - 149,115 147,494 1,621
Washington Mutual
Investment Fund 363,695 - 363,695 -
Washington Mutual
Investment Fund - 108,026 88,595 19,431
Income Fund of America 311,228 - 311,228 -
Income Fund of America - 9,123 8,946 177
See accompanying independent auditors' report.
13
