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, 1999
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, 1999
and 1998 and for each of the years in the three year period ended
May 31, 1999 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.
11/30/99 Art's-Way Manufacturing Co., Inc. 401 (k) Savings Plan
(Date) (Name of Plan)
/s/ William T. Green
Executive Vice President
ART'S-WAY MANUFACTURING CO., INC.
SAVINGS PLAN
Table of Contents
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 6
Schedules:
I - Item 27a - Assets Held for Investment Purposes 11
2 - Item 27d - Reportable Transactions 12
KPMG
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, 1999 and 1998, and for each of
the years in the three-year period ended May 31, 1999, as listed in
the accompanying table of contents. 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, 1999 and
1998, and the changes in net assets available for benefits for each of
the years in the three-year period ended May 31, 1999 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 LLP
November 18, 1999
ART'S-WAY MANUFACTURING CO., INC.
SAVINGS PLAN
Statements of Net Assets Available for Benefits
May 31, 1999 and 1998
1999 1998
Assets:
Investments:
Principal Life Insurance Company -
deposit contract,
at contract value (cost: 1999, $2,990,836;
1998, $4,157,128) $2,990,836 4,157,128
At fair value:
Money Market Fund (cost: 1999, $186,713;
1998, $85,389) 194,665 91,397
Small Company Blend Fund
(cost: 1999, $96,811; 1998, $145,963) 89,988 147,070
International Stock Fund
(cost: 1999, $22,874; 1998, $10,542) 23,356 11,741
Art's-Way Common Stock Fund (cost: 1999,
$207,868; 1998, $97,405) 118,395 146,841
Shares of registered investment companies:
Washington Mutual Investment Fund
(cost: 1999, $2,215,995; 1998, $1,904,562) 3,449,532 3,258,203
Income Fund of America (cost: 1999, $1,256,115;
1998, $1,114,130) 1,426,875 1,382,527
U. S. Government Fund (cost: 1999, $191,596;
1998, $167,350) 186,523 166,892
Participant loans, at unpaid balance 217,798 193,995
Total investments 8,697,968 9,555,794
Contributions receivable:
Employer - 1,908
Employee 3,340 3,838
Total contributions receivable 3,340 5,746
Net assets available for benefits $8,701,308 9,561,540
See accompanying notes to financial statements.
ART'S-WAY MANUFACTURING CO., INC.
SAVINGS PLAN
Statements of Changes in Net Assets Available for Benefits
with Fund Information
Years ended May 31, 1999, 1998 and 1997
Principal
Life
Ins. Small Inter- Wash. Income
Co. Money Co. national Mutual Fund U.S.
Deposit Market Blend Stock Inv. of Government
1999 Contract Fund Fund Fund Fund America Fund
Additions to net assets
attributed to:
Investment income (loss):
Net appreciation
(depreciation)
in fair value of
investments $ (4,393) - (13,495) (999) 123,093 (75,908) -
Interest income 204,114 10,065 - - - - (4,607)
Dividend income - - - - 59,551 69,276 10,806
Capital gains - - - - 247,800 94,138 -
Net investment
income (loss) 199,721 10,065 (13,495) (999) 430,444 87,506 6,199
Contributions:
Employer 47,512 3,244 5,214 1,649 34,302 13,188 3,152
Employee 91,135 5,839 13,853 4,398 90,032 36,935 6,855
Total contributions
138,647 9,083 19,067 6,047 124,334 50,123 10,007
Interfund transfers,
net (377,105) 89,336 (49,004) 15,086 187,650 54,358 3,648
Total additions
(38,737)108,484 (43,432) 20,134 742,428 191,987 19,854
Deductions from net
assets attributed to:
Administrative
expenses 2,216 238 138 35 - - -
Benefits paid to
participants 1,125,339 4,978 13,512 8,484 551,099 147,639 223
Total deductions 1,127,555 5,216 13,650 8,519 551,099 147,639 223
Net increase
(decrease) (1,166,292)103,268 (57,082) 11,615 191,329 44,348 19,631
Net assets available for
benefits:
Beginning of year
4,157,128 91,397 147,070 11,741 3,258,203 1,382,527 166,892
End of year $2,990,836 194,665 89,988 23,356 3,449,532 1,426,875 186,523
(Continued Below)
Art's-Way
Common
Stock Loan
1999 Fund Fund Other Total
Additions to net assets
attributed to:
Investment income:
Net appreciation
in fair value of
investments (118,280) - - (89,982)
Interest income - 16,882 - 226,454
Dividend income - - - 139,633
Capital gains - - - 341,938
Net investment
income (118,280) 16,882 - 618,043
Contributions:
Employer 7,635 - (1,908) 113,988
Employee 14,654 - (498) 263,203
Total contributions 22,289 - (2,406) 377,191
Interfund transfers,
net 69,110 6,921 - -
Total additions (26,881) 23,803 (2,406) 995,234
Deductions from net
assets attributed to:
Administrative
expenses - - - 2,627
Benefits paid to
participants 1,565 - - 1,852,839
Total deductions 1,565 - - 1,855,466
Net increase
(decrease) (28,446) 23,803 (2,406) (860,232)
Net assets available for
benefits:
Beginning of year 146,841 193,995 5,746 9,561,540
End of year $ 118,395 217,798 3,340 8,701,308
Principal
Life
Ins. Small Inter- Wash. Income
Co. Money Co. national Mutual Fund U.S.
Deposit Market Blend Stock Inv. of Government
1998 Contract Fund Fund Fund Fund America Fund
Additions to net assets
attributed to:
Investment income:
Net appreciation
in fair value of
investments $ - - 19,758 1,326 561,412 89,582 -
Interest income 256,917 8,372 - - - - 3,544
Dividend income - - - - 42,761 62,047 8,479
Capital gains - - - - 157,281 160,620 2,290
Net investment
income 256,917 8,372 19,758 1,326 761,454 312,249 14,313
Contributions:
Employer 56,518 2,830 3,725 2,038 37,289 17,404 3,753
Employee 109,860 8,673 19,207 7,322 86,645 38,296 6,647
Total contributions
166,378 11,503 22,932 9,360 123,934 55,700 10,400
Interfund transfers,
net 56,149 1,891 104,492 1,055 146,798 (7,166) 2,108
Total additions 479,444 21,766 147,182 11,741 1,032,186 360,783 26,821
Deductions from net
assets attributed to:
Administrative
expenses 2,023 219 112 - 145 - -
Benefits paid to
participants 159,178 253 - - 20,365 23,132 26
Total deductions 161,201 472 112 - 20,510 23,132 26
Net increase
(decrease) 318,243 21,294 147,070 11,741 1,011,676 337,651 26,795
Net assets available for
benefits:
Beginning of year 3,838,885 70,103 - - 2,246,527 1,044,876 140,097
End of year $4,157,128 91,397 147,070 11,741 3,258,203 1,382,527 166,892
(Continued Below)
Art's-Way
Common
Stock Loan
1998 Fund Fund Other Total
Additions to net assets
attributed to:
Investment income:
Net appreciation
in fair value of
investments 149,519 - - 821,597
Interest income - 14,935 - 283,768
Dividend income - - - 113,287
Capital gains - - - 320,191
Net investment
income 149,519 14,935 - 1,538,843
Contributions:
Employer 6,226 - 1,908 131,691
Employee 16,267 - 3,838 296,755
Total contributions 22,493 - 5,746 428,446
Interfund transfers,
net (336,010) 30,683 - -
Total additions (163,998) 45,618 5,746 1,967,289
Deductions from net
assets attributed to:
Administrative
expenses - - - 2,499
Benefits paid to
participants 65 - - 203,019
Total deductions 65 - - 205,518
Net increase
(decrease) (164,063) 45,618 5,746 1,761,771
Net assets available for
benefits:
Beginning of year 310,904 148,377 - 7,799,769
End of year $ 146,841 193,995 5,746 9,561,540
Principal
Life
Ins. Wash. Income Art's-Way
Co. Money Mutual Fund U.S. Common
Deposit Market Inv. of Govt. Stock Loan
1997 Contract Fund Fund America Fund Fund Fund Total
Additions to net assets
attributed to:
Investment income:
Net appreciation
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 244,379 3,192 492,484 104,325 10,272 83,303 11,663 949,618
Contributions:
Employee 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
3,952,003 35,499 1,641,504 864,975 168,061 147,392 93,964 6,903,398
of year
End of $3,838,885 70,103 2,246,527 1,044,876 140,097 310,904 148,377 7,799,769
year
(Continued)
See accompanying notes to financial statements
ART'S-WAY MANUFACTURING CO., INC.
SAVINGS PLAN
Notes to Financial Statements
May 31, 1999 and 1998
(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.
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 Company stock is valued at its quoted market
price. Participant loans are valued at cost, which approximates
fair value.
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, which approximates fair value,
as reported to the Plan by the Sponsor. 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.
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 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.
(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 eight investment options. A participant may make deductible
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.
(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 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 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' 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.
(f) Participant Loans
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% (8.75% to 9.50%
at May 31, 1999), 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 eight 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.
- Small Company Blend Fund - funds are invested in stocks of
smaller, seasoned companies where potential for long-term
growth is expected to be above average.
- International Stock Fund - funds are invested in common stocks
of corporations located outside the United States. Countries and
industries are selected after evaluating the economic, social,
and political factors of each market.
- 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.
(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 1999 1998
and title of issue Cost Fair value Cost Fair value
Principal Mutual Life Insurance
Company - deposit contract $ 2,990,836 2,990,836 4,157,128 4,157,128
Money Market Fund 186,713 194,665 85,389 91,397
Small Company Blend Fund 96,811 89,988 145,963 147,070
International Stock Fund 22,874 23,356 10,542 11,741
American Funds Group:
Washington Mutual Investment Fund
2,215,995 3,449,532 1,904,562 3,258,203
Income Fund of America 1,256,115 1,426,875 1,114,130 1,382,527
U.S. Government Fund 191,596 186,523 167,350 166,892
Art's-Way Common Stock Fund 207,868 118,395 97,405 146,841
Participant loans 217,798 217,798 193,995 193,995
$ 7,386,606 8,697,968 7,876,464 9,555,794
ART'S-WAY MANUFACTURING CO., INC. Schedule I
SAVINGS PLAN
Item 27a - Assets Held for Investment Purposes
May 31, 1999 and 1998
199 1998
Cost Fair value Cost Fair value
Principal Mutual Life Insurance
Company - deposit contract $2,990,836 2,990,836 4,157,128 4,157,128
Money Market Fund 186,713 194,665 85,389 91,397
Small Company Blend Fund 96,811 89,988 145,963 147,070
International Stock Fund 22,874 23,356 10,542 11,741
American Fund Groups:
Washington Mutual
Investment Fund 2,215,995 3,449,532 1,904,562 3,258,203
Income Fund of America 1,256,115 1,426,875 1,114,130 1,382,527
U.S. Government Fund 191,596 186,523 167,350 166,892
Art's-Way Common Stock Fund* 207,868 118,395 97,405 146,841
Participant loans 217,798 217,798 193,995 193,995
$7,386,606 8,697,968 7,876,464 9,555,794
*Party in interest
See accompanying independent auditors' report.
ART'S-WAY MANUFACTURING CO., INC. Schedule 2
SAVINGS PLAN
Item 27d - Reportable Transactions
For the years ended May 31, 1999 and 1998
Purchase Selling Cost of Net
Description of assets price price asset gain (loss)
Year ended May 31,1999
Principal Financial Group:
Guaranteed Interest Fund $ 743,133 - 743,133 -
Guaranteed Interest Fund - 2,106,331 2,106,331 -
Washington Mutual Investment Fund
716,829 - 716,829 -
Washington Mutual Investment Fund
- 637,991 405,396 232,595
Income Fund of America 315,228 - 315,228 -
Income Fund of America - 195,986 173,244 22,742
Art's-Way Stock Fund 376,504 - 376,504 -
Art's-Way Stock Fund - 286,670 266,040 20,630
Year ended May 31, 1998
Principal Financial Group:
Guaranteed Interest Fund $1,350,639 - 1,350,639 -
Guaranteed Interest Fund - 1,266,380 1,266,380 -
Washington Mutual Investment Fund
543,311 - 543,311 -
Washington Mutual Investment Fund
- 73,961 42,411 31,550
Income Fund of America 363,022 - 363,022 -
Income Fund of America - 112,379 91,503 20,876
Art's-Way Stock Fund 52,075 - 52,075 -
Art's-Way Stock Fund - 365,657 204,200 161,457
See accompanying independent auditors' report.
