U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report April 25, 2003
ART'S-WAY MANUFACTURING CO., INC.
(Exact Name of Registrant As Specified In Its Charter)
Delaware 0-05131 42-0920725
(State Or Other Jurisdiction of (Commission (IRS Employer
Incorporation or Organization) File No.) Identification
Number)
P.O. Box 288
Armstrong, IA 50514
(Address of Principal Executive Offices) (Zip Code)
(712) 864-3131
(Telephone Number)
Not Applicable
(Former name or former address, if changed since last report.)
Art's-Way Manufacturing Co., Inc.
Form 8-K
April 25, 2003
Item 5. Other Events and Regulation FD Disclosure.
On April 25, 2003, the Company entered into a long term
financing arrangement with West Des Moines State Bank
("West Bank"), West Des Moines, Iowa. The credit facility
consists of two loan agreements with a maximum credit
available of $5,500,000.
Facility #1 is a revolving line of credit for $2,500,000 with advances
funding the working capital, letters of credit, and corporate credit card
needs of the Company. Maturity date is February 28, 2004 with refinancing
available annually. Interest rate is West Bank's prime rate (presently
4.25%) plus 1.00% adjusted daily. West Bank's fee is equal to 50 basis
points or $12,500 annually for this credit facility. Monthly interest
only payments will be required. All remaining unpaid principal and
interest will be due on the maturity date of February 28, 2004.
Collateral will consist of a first and paramount security interest
in all assets owned by the Company including, but not limited to
inventory, accounts, vehicles, accounts receivable, machinery
and equipment, and real estate.
Facility #2 is for long-term financing up to $3,000,000 that maintains
a guarantee issued by the United States Department of Agriculture (USDA)
in an amount no less than 75% of the loan amount. The loan will refinance
existing debt to UPS Capital (approximately $1,500,000), repair or acquire
equipment (approximately $250,000), provide permanent working capital
(approximately $500,000) and satisfy closing costs (approximately $50,000).
Approximately $700,000 will be reserved for future acquisitions.
West Bank reserves the right to sell the USDA guaranteed portion of
the loan. Maturity date is March 31, 2023. Interest rate is West Bank's
prime rate plus 1.50% adjusted daily. The Company will pay West Bank
a one-time origination fee of 1% of the amount of the loan. Monthly
principal and interest payments will be required in an amount adequate
to amortize the loan balance over a term of 20 years at which time
the loan shall mature. Collateral for Facility #2 is the same as
Facility #1. The USDA agrees to subordinate collateral rights in all
assets other than real estate or real property in an amount equal to
West Bank's other credit commitments during the credit commitments.
OTHER TERMS AND CONDITIONS:
1) The Company agrees to provide West Bank with the following
financial reports:
a) Monthly internally prepared balance sheets, income statements,
accounts receivable aging schedules, and borrowing base certificates.
The borrowing bases shall limit the advances from Facility #1 to 60%
of accounts receivables less than 90 days plus 60% of finished goods
inventory and 50% of raw material inventories and work-in-process plus
40% of appraised value of machinery and equipment.
b) CPA prepared audited financial statements at the conclusion of the
Company's fiscal year-end.
2) The Company agrees to maintain a minimum debt service coverage ratio
(measured at year-end) of 1.5 times.
3) The Company will maintain primary deposit accounts and credit card
accounts at West Bank.
4) The Company agrees to maintain a maximum debt/tangible net worth ratio
of 3.0 times and a minimum tangible net worth of $3,000,000 by fiscal
year-end.
5) The Company agrees to pay for all costs associated with closing the
aforementioned loans including, but not limited to legal, appraisal,
abstracting, title opinion, USDA guaranty, and filing fees.
6) Any and all documents related to the due diligence and closing of the
credit facilities will be completed to West Bank's sole satisfaction.
7) The Company agrees to pay West Bank prepayment penalty of 5% of the
amount of the loan of Facility #2 if the loan is prepaid in year one,
3% if the loan is prepaid in year two and 1% if the loan is prepaid in
year three of the contract.
8) West Bank will seek a participant bank to acquire a minimum of
$500,000 of Facility #2.
9) J. Ward McConnell, Jr. will guarantee Facility #1 on a personal
unlimited and unconditional basis. Mr. McConnell will guarantee
Facility #2 on an unlimited and unconditional basis for the first
three years of the loan. Mr. McConnell's guaranty shall then be
reduced to a percentage representing his ownership in the Company.
Mr. McConnell's guaranty shall be removed from Facility #2 in the
event that his ownership interest in the Company is reduced to a
level less than 20% after the first three years of the loan.
The Company will compensate Mr. McConnell for his personal
guarantee at an annual percentage rate of 2% of the
outstanding balance to be paid monthly.
10) The Company agrees to limit capital expenditures to an amount
of the lessor of $250,000 or the Company's aggregate depreciation
expense measured annually.
11) The Company agrees to maintain a current ratio of 1.0 times
measured at the conclusion of the fiscal year-end.
Item 7. Financial Statements and Exhibits.
(c) Exhibits. The two loan agreements and supporting documentation
will be filed as an exhibit to the Company's Form 10-Q
Quarterly Report for the period ending May 31, 2003.
SIGNATURE
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 hereunto duly
authorized.
ART'S-WAY MANUFACTURING CO., INC.
By (s) John C. Breitung
President
April 30, 2003
(Date)