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 August 31, 1996 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. Employee Identification No.
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 filling requirements for the
past 90 days. Yes X No __
Number of shares of common stock outstanding on
September 11, 1996: 1,231,631
PART I -FINANCIAL INFORMATION
ITEM 1
FINANCIAL STATEMENTS
ART'S-WAY MANUFACTURING CO., INC.
STATEMENTS OF OPERATIONS
QUARTERS ENDED AUGUST 31, 1996 AND AUGUST 31, 1995
(Unaudited)
1996 1995
NET SALES $3,955,730 $2,800,020
COST OF GOODS SOLD 2,978,084 2,159,862
GROSS PROFIT 977,646 640,158
EXPENSES:
Engineering 64,103 81,588
Selling 321,306 392,796
General and administrative 457,181 503,591
Total 842,590 977,975
INCOME (LOSS) FROM OPERATIONS 135,056 (337,817)
OTHER DEDUCTIONS:
Interest expense (122,612) (150,925)
Other (665) (69)
Other deductions (123,277) (150,994)
INCOME (LOSS) BEFORE INCOME TAXES 11,779 (488,811)
INCOME TAX EXPENSE (BENEFIT) 4,123 (171,084)
NET INCOME (LOSS) $ 7,656 $ (317,727)
INCOME (LOSS) PER SHARE (NOTE 2) $0.01 $ ($0.30)
See accompanying notes to financial statements.
ART'S-WAY MANUFACTURING CO., INC.
BALANCE SHEETS
August 31, May 31,
1996 1996
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $(115,899) $91,513
Accounts receivable-customers,
net of allowance for doubtful
accounts of $29,975 in August
and $26,975 in May,
respectively 2,342,657 2,464,241
Inventories (Note 4) 5,163,398 6,200,743
Deferred income taxes 734,522 734,522
Other current assets 107,215 87,475
Total current assets 8,231,893 9,578,494
PROPERTY, PLANT AND EQUIPMENT,
at cost 9,099,545 9,091,255
Less accumulated depreciation 6,919,339 6,783,941
Net property, plant and equipment 2,180,206 2,307,314
TOTAL $10,412,099 $11,885,808
See accompanying notes to consolidated financial statements.
August 31, May 31,
1996 1996
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to bank $1,346,391 $2,281,809
Current portion of long-term debt 426,000 426,000
(Note 6)
Accounts payable 480,038 506,912
Customer deposits (Note 3) 38,353 371,801
Accrued expenses (Note 5) 928,201 1,007,326
Total current liabilities 3,218,983 4,593,848
LONG-TERM DEBT, excluding current 1,313,500 1,420,000
portion (Note 6)
DEFERRED INCOME TAXES 160,038 160,038
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value.
Authorized 5,000,000 shares;
issued 1,340,778 shares 13,408 13,408
Additional paid-in capital 2,295,089 2,295,089
Retained earnings 5,848,526 5,840,870
8,157,023 8,149,367
Less cost of common shares in treasury
of 254,147 in August and 254,147 2,437,445 2,437,445
in May
Total stockholders' equity 5,719,578 5,711,922
TOTAL $10,412,099 $11,885,808
See accompanying notes to financial statements.
ART'S-WAY MANUFACTURING CO., INC.
STATEMENTS OF CASH FLOWS
QUARTERS ENDED AUGUST 31, 1996 AND AUGUST 31, 1995
(Unaudited)
YEAR TO DATE
1996 1995
CASH FLOW FROM OPERATIONS:
Net Income (loss) $7,656 $(317,727)
Adjustment to reconcile net loss to net
cash provided (used) by operations:
Depreciation 135,398 144,231
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 121,584 1,156,197
Inventories 1,037,345 482,408
Sundry (7,797) (116,534)
Increase (Decrease) in:
Accounts payable (26,874) (832,207)
Customer deposits (333,448) 21,630
Accrued expenses (79,125) (124,665)
Income taxes, net (11,943) 473,258
Total adjustments 835,140 1,204,318
Net cash provided by operations 842,796 886,591
CASH USED IN INVESTING ACTIVITIES -
Purchases of property, plant and equipment (8,290) 0
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock
from treasury - 6,323
Increase (decrease) in short-term loan (935,418) (1,431,056)
Increase (decrease) in long-term loan (106,500) 556,666
Net cash used by financing activities (1,041,918) (868,067)
Net increase (decrease) in cash and
temporary cash investments (207,412) 18,524
Cash and temporary cash investments
at beginning of period 91,513 86,051
Cash and temporary cash investments at
end of the period $(115,899) $104,575
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $107,825 $38,388
Income taxes 16,066 1,184
See accompanying notes to consolidated financial statements.
ART'S-WAY MANUFACTURING CO., INC.
NOTES TO 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 10-K for the fiscal year ended May 31, 1996. The
results of operations for the first quarter ended August 31,
1996 are not necessarily indicative of the results for the
entire fiscal year ending May 31, 1997.
2. EARNINGS (LOSS) PER SHARE
Earnings (loss) per common share are based on the weighted
average number of shares outstanding of 1,086,631 at
August 31, 1996 and 1,073,681 at August 31, 1995. Outstanding
stock options have no material dilutive effect upon earnings
(loss) per share.
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: August 31, May 31,
1996 1996
Raw material $ 569,773 $ 631,354
Work-in-process 1,849,874 2,235,737
Finished goods 3,067,751 3,683,652
Inventory market write-down (324,000) (350,000)
Total $5,163,398 $6,200,743
5. ACCRUED EXPENSES
Major components of accrued expenses are:
August 31, May 31,
1996 1996
Salaries, wages and commissions $289,820 $305,413
Provision for pending claims 150,000 160,000
Other 488,381 541,913
Total $ 928,201 $1,007,326
6. NOTES PAYABLE - LONG-TERM
A summary of the Company's long-term debt at August 31, 1996
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 for twenty-four months
with the final payment due during the twenty-fourth month
unless the revolving credit facility is renewed. In the
event that the term of the revolving credit facility is
subsequently extended, the term loan shall continue to
amortize based upon the payment schedule outlined above.
$1,739,500
Total long-term debt 1,739,500
Less current portion of long-term debt 426,000
Long-term debt, excluding current portion $1,313,500
7. SUBSEQUENT EVENTS
On September 4, 1996, the Company announced the acquisition
of the Logan potato farm equipment line.The agreement provides
for a $250,000 cash payment, 145,000 shares of common and
future payments for raw materialand work-in-processinventories
of approximately $400,000. On September 24, 1996, the Company
announced the acquisition of the DMI grain wagon line.
The agreement provides for a cash payment of $250,000 and
certain royalty payments on future sales.
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(a) Liquidity and Capital Resources
At August 31, 1996, the Company's liquidity had increased
since fiscal year end, May 31, 1996. The quick ratio at
August 31, 1996, was .69:1 as compared to .56:1 at May 31,
1996. The current ratio was 2.56:1 at August 31, 1996, as
compared to 2.08:1 at May 31, 1996. This increase in
liquidity is partially the result of a reduction in
inventories of $1,037,000, a decrease in short term
borrowings of $935,000 and a decrease in customer deposits
of $333,000.
As of August 31, 1996, 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 41% higher than a year ago. Sales of
the Company's beet equipment were up sharply, reflecting
management's intention to produce major product lines
nearer the season of use. Sales of feed processing
equipment continue to lag which o attributed to weaknesses
in the hog cattle industry and the high price of animal
feed. Sales of the Company's other products were
significantly higher as management continues to drive
down excess inventories.
Gross profits were up 66% on the higher sales and stronger
margins. The ratio of cost of goods sold to net sales
declined to 75.3% from 78.9% a year ago as we achieved
significantly higher manufacturing efficiencies. Operating
expenses were 9% lower despite the higher volume activity
as management continues to restructure the Company to
operate profitably at lower sales levels. Interest and
financing costs fell 19% as the Company continues to
operate at planned lower inventory levels.
Part II - Other Information
ITEM 1. LEGAL PROCEEDINGS
Various legal actions and claims are pending against the
Company. In the opinion of management, appropriate
provisions have been made in the accompanying 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____________October 10, 1996___ /s/ J. David Pitt
(J. David Pitt, President)
Date____________October 10, 1996___ /s/ William T. Green
(William T. Green, Executive
Vice President,
Chief Financial Officer)