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)
