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, 1997
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 31, 1997
and 1996 and for each of the years in the three year period ended
May 31, 1997 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.
1/6/98 Art's-Way Manufacturing Co., Inc. 401 (k) Savings Plan
(Date) (Name of Plan)
/s/ William T. Green
Executive Vice President
KPMG Peat Marwick LLP
Two Central Park Plaza Telephone 402/348-1450
Suite 1501 Telefax 402/348-0152
Omaha, NE 68102
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Art's-Way Manufacturing Co., Inc.:
We consent to the use of our report, dated October 10, 1997, on the
financial statements of Art's-Way Manufacturing Co., Inc. Savings Plan
and the related financial statement schedules as of May 31, 1997
and 1996 and for each of the years in the three-year period ended
May 31, 1997 included herein.
KPMG Peat Marwick LLP
Omaha, Nebraska
December 22, 1997
ART'S-WAY MANUFACTURING CO., INC.
SAVINGS PLAN
Financial Statements and Supplemental Schedules
May 31, 1997 and 1996
(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 9
4. Investments 9
5. Net Assets Available for Benefits 9
Supplemental Schedules:
I - Item 27a - Assets Held for Investment Purposes 10
2 - Item 27d - Reportable Transactions 11
KPMG Peat Marwick LLP
Two Central Park Plaza
Suite 1501
Omaha, NE 68102
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, 1997 and 1996, and for each of
the years in the three-year period ended May 31, 1997, 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 examining, 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, 1997 and
1996, and the changes in net assets available for benefits for each of
the years in the three-year period ended May 31, 1997 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
October 10, 1997
ART'S-WAY MANUFACTURING CO., INC.
SAVINGS PLAN
Statements of Net Assets Available for Benefits
May 31, 1997 and 1996
1997 1996
Assets:
Investments:
Principal Mutual Life Insurance Company -
deposit contract,
at contract value (cost: 1997, $3,838,885;
1996, $3,952,003) $3,838,885 3,952,003
At fair value (note 1):
Money Market Fund (cost: 1997, $66,856;
1996, $34,835) 70,103 35,499
Shares of registered investment companies:
Washington Mutual Investment Fund
(cost: 1997, $1,403,662; 1996, $1,105,487) 2,246,527 1,641,504
Income Fund of America (cost: 1997, $842,612;
1996, $726,012) 1,044,876 864,975
U. S. Government Fund (cost: 1997, $144,102;
1996, $174,295) 140,097 168,061
Art's-Way Common Stock Fund
(cost: 1997, $249,531;
1996, $168,374) 310,904 147,392
Participant loans, at unpaid balance 148,377 93,964
Net assets available for benefits (note 2) $7,799,769 6,903,398
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
Years ended May 31, 1997, 1996 and 1995
Principal
Life
Ins. Washington Income Art's-Way
Co. Money Mutual Fund U. S. Common
Deposit Market Inv. of Gov't Stock Loan
1997 Contract Fund Fund America Fund Fund Fund Total
Additions to net assets
attributed to:
Investment income(loss):
Net appreciation
(depreciation)
in fair value of
investments
$ - - 97,164 1,685 - 83,303 - 182,152
Interest income
244,379 3,192 - - 1,174 - 11,663 260,408
Dividend income
- - 47,848 34,582 9,098 - - 91,528
Capital gains
- - 347,472 68,058 - - - 415,530
Net investment
income (loss)
244,379 3,192 492,484 104,325 10,272 83,303 11,663 949,618
Contributions:
Employer - - - - - - - -
Employee 90,326 1,881 58,707 33,237 6,382 8,664 - 199,197
Total contributions
90,326 1,881 58,707 33,237 6,382 8,664 - 199,197
Interfund transfers,
net (261,576) 42,255 72,277 54,693 (23,907) 73,508 42,750 -
Total additions
73,129 47,328 623,468 192,255 (7,253) 165,475 54,413 1,148,815
Deductions from net
assets attributed to:
Administrative
expenses
2,891 48 225 - - - - 3,164
Benefits paid to
participants
183,356 12,676 18,220 12,354 20,711 1,963 - 249,280
Total deductions
186,247 12,724 18,445 12,354 20,711 1,963 - 252,444
Net increase
(decrease)
(113,118) 34,604 605,023 179,901 (27,964) 163,512 54,413 896,371
Net assets available for
benefits:
Beginning of year
3,952,003 35,499 1,641,504 864,975 168,061 147,392 93,964 6,903,398
End of year
$3,838,885 70,103 2,246,527 1,044,876 140,097 310,904 148,377 7,799,769
(Continued)
3
ART'S-WAY MANUFACTURING CO., INC.
SAVINGS PLAN
Statements of Changes in Net Assets Available for Benefits
with Fund Information, Continued
Principal
Life
Ins. Washington Income Art's-Way
Co. Money Mutual Fund U. S. Common
Deposit Market Inv. of Gov't Stock Loan
1996 Contract 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
Employee
77,978 509 40,165 30,956 12,247 3,831 - 165,686
Total
contributions
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 additions
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
participants
252,208 146,362 43,597 11,093 8,958 38 - 462,256
Total deductions
252,448 146,385 43,597 11,093 8,958 38 - 462,519
Net increase
(decrease)
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)
4
ART'S-WAY MANUFACTURING CO., INC.
SAVINGS PLAN
Statements of Changes in Net Assets Available for Benefits with
Fund Information, Concluded
Principal
Life
Ins. Washington Income Art's-Way
Co. Money Mutual Fund U. S. Common
Deposit Market Inv. of Gov't Stock
1995 Contract Fund 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
Interest income 239,390 11,861 29,470 3,240 - - 283,961
Dividend income - - - - 94 - 94
Capital gains - - 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
Employee 110,397 41,154 55,761 33,804 (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 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
Benefits paid 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 1,421,043 853,755 169,854 107,806 6,432,906
See accompanying notes to financial statements
5
ART'S-WAY MANUFACTURING CO., INC.
SAVINGS PLAN
Notes to Financial Statements
May 31, 1997 and 1996
(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) Investment Valuation and Income Recognition
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
Principal Mutual Life Insurance Company (Sponsor). The contract is included
in the financial statements at contract value as reported to the plan by the
Sponsor because it is fully benefit responsive. 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, and there are no administrative expenses deducted from the
investment contract.
Purchase and sale of securities are recorded on a trade-date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.
(d) Administrative Expenses
Substantially all of the administrative fees and expenses of the Plan are
paid for by the Company.
(e) Payment of Benefits
Benefits are recorded when paid.
(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.
6
(Continued)
ART'S-WAY MANUFACTURING CO., INC.
SAVINGS PLAN
Notes to Financial Statements
(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.
(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 not 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.
(Continued)
7
ART'S-WAY MANUFACTURING CO., INC.
SAVINGS PLAN
Notes to Financial Statements
(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% to 9.50% 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.
- 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.
- US. Government Fund - funds are invested in shares of a registered
investment company that invests mainly in government-backed
securities. The 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.
(Continued)
8
ART'S-WAY MANUFACTURING CO., INC.
SAVINGS PLAN
Notes to Financial Statements
(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 1997 1996
and title of issue Cost Fair value Cost Fair value
Principal Mutual Life Insurance
Company - deposit contract $ 3,838,885 3,834,421 3,952,003 3,952,003
Money Market Fund 66,856 70,103 34,835 35,499
American Funds Group:
Washington Mutual
Investment Fund 1,403,662 2,246,527 1,105,487 1,641,504
Income Fund of America 842,612 1,044,876 726,012 864,975
U.S. Government Fund 144,102 140,097 174,295 168,061
Art's-Way Common Stock Fund 249,531 310,904 168,374 147,392
Participant loans 148,377 148,377 93,964 93,964
$ 6,694,025 7,795,305 6,254,970 6,903,398
(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, 1997 and 1996:
1997 1996
Net assets available for benefits per the
financial statements $ 7,799,769 6,903,398
Decrease in fair value of insurance contract (4,464) (22,654)
Net assets available for benefits per
Form 5500 $ 7,795,305 6,880,744
9
ART'S-WAY MANUFACTURING CO., INC. Schedule I
SAVINGS PLAN
Item 27a - Assets Held for Investment Purposes
May 31, 1997 and 1996
1997 1996
Cost Fair value Cost Fair value
Principal Mutual Life Insurance
Company - deposit contract $3,838,885 3,834,421 3,952,003 3,952,003
Money Market Fund 66,856 70,103 34,835 35,499
American Fund Groups:
Washington Mutual
Investment Fund 1,403,662 2,246,527 1,105,487 1,641,504
Income Fund of America 842,612 1,044,876 726,012 864,975
U.S. Government Fund 144,102 140,097 174,295 168,061
Art's-Way Common Stock Fund* 249,531 310,904 168,374 147,392
Participant loans 148,377 148,377 93,964 93,964
$6,694,025 7,795,305 6,254,970 6,903,398
*Party in interest
See accompanying independent auditors' report.
10
ART'S-WAY MANUFACTURING CO., INC. Schedule 2
SAVINGS PLAN
Item 27d - Reportable Transactions
May 31, 1997 and 1996
Purchase Selling Cost of Net
Description of assets price price asset gain (loss)
Year ended May 31,1997
Principal Financial Group:
Guaranteed Interest Fund $528,991 - 528,991 -
Guaranteed Interest Fund - 878,523 878,523 -
Washington Mutual Investment Fund 372,586 - 372,586 -
Washington Mutual Investment Fund - 115,035 74,412 40,623
Year ended May 31, 1996
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
See accompanying independent auditors' report.
