(Mark One) |
x |
Quarterly
report pursuant to section 13 or 15(d) of the Securities Exchange
Act of
1934
|
For the quarterly period ended May 31, 2008 |
o |
Transition
report pursuant to section 13 or 15(d) of the Securities Exchange
Act of
1934
|
For the transition period from ______ to ______ |
DELAWARE
|
42-0920725
|
|
(State
or Other Jurisdiction of Incorporation
or
Organization)
|
I.R.S.
Employer Identification No.
|
(Unaudited)
|
|||||||
May
|
November
|
||||||
2008
|
2007
|
||||||
Assets
|
|||||||
Current
assets:
|
|||||||
Cash
|
$
|
1,229,140
|
$
|
612,201
|
|||
Accounts
receivable-customers, net of allowance for doubtful accounts of $212,723
and $148,636 in 2008 and 2007, respectively
|
3,770,351
|
3,087,781
|
|||||
Inventories,
net
|
14,210,344
|
8,636,602
|
|||||
Deferred
taxes
|
805,000
|
773,555
|
|||||
Cost
and Profit in Excess of Billings
|
55,006
|
265,615
|
|||||
Other
current assets
|
677,941
|
408,870
|
|||||
Total
current assets
|
20,747,782
|
13,784,624
|
|||||
Property,
plant, and equipment, net
|
6,408,051
|
5,497,200
|
|||||
Covenant
not to Compete
|
270,000
|
300,000
|
|||||
Goodwill
|
375,000
|
375,000
|
|||||
Other
Assets
|
8,795
|
9,771
|
|||||
Total
assets
|
$
|
27,809,628
|
$
|
19,966,595
|
|||
Liabilities
and Stockholders’ Equity
|
|||||||
Current
liabilities:
|
|||||||
Notes
payable to bank
|
$
|
2,407,939
|
$
|
397,859
|
|||
Current
portion of term debt
|
415,616
|
250,027
|
|||||
Accounts
payable
|
1,485,560
|
1,368,988
|
|||||
Customer
deposits
|
3,249,616
|
53,196
|
|||||
Billings
in Excess of Cost and Profit
|
634,002
|
7,675
|
|||||
Accrued
expenses
|
1,252,417
|
1,323,008
|
|||||
Income
taxes payable
|
61,516
|
146,905
|
|||||
Total
current liabilities
|
9,506,666
|
3,547,658
|
|||||
Long-term
liabilities
|
|||||||
Deferred
taxes
|
387,000
|
205,998
|
|||||
Term
debt, excluding current portion
|
6,296,611
|
6,069,657
|
|||||
Total
liabilities
|
16,190,277
|
9,823,313
|
|||||
Stockholders’
equity:
|
|||||||
Common
stock – $0.01 par value. Authorized 5,000,000 shares; issued
1,986,176 and 1,984,176 shares in 2008 and 2007
|
19,862
|
19,842
|
|||||
Additional
paid-in capital
|
1,938,590
|
1,828,427
|
|||||
Retained
earnings
|
9,660,899
|
8,295,013
|
|||||
Total
stockholders’ equity
|
11,619,351
|
10,143,282
|
|||||
Total
liabilities and stockholders’ equity
|
$
|
27,809,628
|
$
|
19,966,595
|
Three
Months Ended
|
Year
to Date
|
||||||||||||
May
31,
|
May
31,
|
May
31,
|
May
31,
|
||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Net
sales
|
$
|
7,686,553
|
$
|
5,699,168
|
$
|
14,435,067
|
$
|
10,974,205
|
|||||
Cost
of goods sold
|
5,247,976
|
4,014,104
|
9,821,168
|
7,790,881
|
|||||||||
Gross
profit
|
2,438,577
|
1,685,064
|
4,613,899
|
3,183,324
|
|||||||||
Expenses:
|
|||||||||||||
Engineering
|
74,208
|
135,021
|
149,676
|
214,109
|
|||||||||
Selling
|
424,916
|
220,704
|
877,730
|
453,051
|
|||||||||
General
and administrative
|
900,258
|
591,076
|
1,733,373
|
1,270,902
|
|||||||||
Total
expenses
|
1,399,382
|
946,801
|
2,760,779
|
1,938,062
|
|||||||||
Income
from operations
|
1,039,195
|
738,263
|
1,853,120
|
1,245,262
|
|||||||||
Other
income (expense):
|
|||||||||||||
Interest
expense
|
(143,657
|
)
|
(72,240
|
)
|
(266,289
|
)
|
(178,211
|
)
|
|||||
Other
|
393,935
|
171,264
|
435,714
|
353,953
|
|||||||||
Total
other income
|
250,278
|
99,024
|
169,425
|
175,742
|
|||||||||
Income
before income taxes
|
1,289,473
|
837,287
|
2,022,545
|
1,421,004
|
|||||||||
Income
tax
|
400,428
|
279,157
|
656,659
|
482,545
|
|||||||||
Net
income
|
$
|
889,045
|
$
|
558,130
|
$
|
1,365,886
|
$
|
938,459
|
|||||
Net
income per share:
|
|||||||||||||
Basic
|
0.45
|
0.28
|
0.69
|
0.47
|
|||||||||
Diluted
|
0.45
|
0.28
|
0.68
|
0.47
|
Year
To Date
|
|||||||
May
|
May
|
||||||
2008
|
2007
|
||||||
Cash
flows from operations:
|
|||||||
Net
income
|
$
|
1,365,886
|
$
|
938,459
|
|||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|||||||
Stock
based compensation
|
94,823
|
2,750
|
|||||
(Gain)
Loss on disposal of property, plant, and equipment
|
(399,449
|
)
|
(698,884
|
)
|
|||
Depreciation
expense
|
250,222
|
169,594
|
|||||
Amortization
expense
|
30,000
|
-
|
|||||
Deferred
income taxes
|
149,557
|
122,341
|
|||||
Changes
in assets and liabilities:
|
|||||||
(Increase)
decrease in:
|
|||||||
Accounts
receivable
|
(682,570
|
)
|
33,884
|
||||
Inventories
|
(5,573,742
|
)
|
(2,323,004
|
)
|
|||
Other
current assets
|
(118,494
|
)
|
(17,334
|
)
|
|||
Other,
net
|
977
|
15,802
|
|||||
Increase
(decrease) in:
|
|||||||
Accounts
payable
|
116,572
|
420,748
|
|||||
Contracts
in progress, net
|
836,936
|
(68,564
|
)
|
||||
Customer
deposits
|
3,196,420
|
1,687,206
|
|||||
Income
taxes payable
|
(85,389
|
)
|
(119,570
|
)
|
|||
Accrued
expenses
|
(70,591
|
)
|
(240,506
|
)
|
|||
Net
cash (used in) operating activities
|
(888,842
|
)
|
(77,078
|
)
|
|||
Cash
flows from investing activities:
|
|||||||
Purchases
of property, plant, and equipment
|
(1,161,074
|
)
|
(163,793
|
)
|
|||
Proceeds
from insurance recoveries
|
248,872
|
499,999
|
|||||
Net
cash provided by (used in) investing activities
|
(912,202
|
)
|
336,206
|
||||
Cash
flows from financing activities:
|
|||||||
Net
change in line of credit
|
2,010,080
|
93,531
|
|||||
Payments
of notes payable to bank
|
(107,457
|
)
|
(90,760
|
)
|
|||
Proceeds
from term debt
|
500,000
|
-
|
|||||
Proceeds
from the exercise of stock options
|
15,360
|
-
|
|||||
Net
cash provided by financing activities
|
2,417,983
|
2,771
|
|||||
Net
increase in cash
|
616,939
|
261,899
|
|||||
Cash
at beginning of period
|
612,201
|
2,072,121
|
|||||
Cash
at end of period
|
$
|
1,229,140
|
$
|
2,334,020
|
|||
Supplemental
disclosures of cash flow information:
|
|||||||
Cash
paid/(received) during the period for:
|
|||||||
Interest
|
$
|
254,706
|
$
|
208,308
|
|||
Income
taxes
|
592,500
|
685,779
|
|||||
Supplemental
disclosures of noncash investing activities:
|
|||||||
Proceeds
from insurance recoveries
|
$
|
-
|
$
|
499,999
|
|||
Insurance
recoveries receivable
|
399,449
|
982,506
|
|||||
Net
book value of assets destroyed
|
|||||||
Property,
plant and equipment
|
-
|
(334,041
|
)
|
||||
Cost
incurred on contracts in progress
|
-
|
(379,375
|
)
|
||||
Inventories
|
-
|
(70,205
|
)
|
||||
Gain
on insurance recovery
|
$
|
399,449
|
$
|
698,884
|
(1) |
Summary
of Significant Account
Policies
|
(2) |
Income
Per Share
|
For the three months ended
|
|||||||
May 31, 2008
|
May 31, 2007
|
||||||
Basic:
|
|||||||
Numerator,
net income
|
$
|
889,045
|
$
|
558,130
|
|||
Denominator:
Average number of common shares outstanding
|
1,986,176
|
1,978,176
|
|||||
Basic
earnings per common share
|
$
|
0.45
|
$
|
0.28
|
|||
Diluted
|
|||||||
Numerator,
net income
|
$
|
889,045
|
$
|
558,130
|
|||
Denominator:
Average number of common shares outstanding
|
1,986,176
|
1,978,176
|
|||||
Effect
of dilutive stock options
|
6,278
|
5,006
|
|||||
1,992,454
|
1,983,182
|
||||||
Diluted
earnings per common share
|
$
|
0.45
|
$
|
0.28
|
For the six months ended
|
|||||||
May 31, 2008
|
May 31, 2007
|
||||||
Basic:
|
|||||||
Numerator,
net income
|
$
|
1,365,886
|
$
|
938,459
|
|||
Denominator:
Average number of common shares outstanding
|
1,985,619
|
1,978,176
|
|||||
Basic
earnings per common share
|
$
|
0.69
|
$
|
0.47
|
|||
Diluted
|
|||||||
Numerator,
net income
|
$
|
1,365,886
|
$
|
938,459
|
|||
Denominator:
Average number of common shares outstanding
|
1,985,619
|
1,978,176
|
|||||
Effect
of dilutive stock options
|
9,436
|
4,438
|
|||||
1,995,055
|
1,982,614
|
||||||
Diluted
earnings per common share
|
$
|
0.68
|
$
|
0.47
|
(3) |
|
|
May
31,
2008
|
|
November
30,
2007
|
|
||
Raw
materials
|
$
|
10,390,195
|
$
|
4,468,920
|
|||
Work
in process
|
917,188
|
336,108
|
|||||
Finished
goods
|
4,935,293
|
5,033,063
|
|||||
$
|
16,242,676
|
$
|
9,838,091
|
||||
Less:
Reserves
|
(2,032,332
|
)
|
(1,201,489
|
)
|
|||
$
|
14,210,344
|
$
|
8,636,602
|
(4) |
Accrued
Expenses
|
|
May
31,
2008
|
|
November
30,
2007
|
|
|||
Salaries,
wages, and commissions
|
$
|
608,919
|
$
|
562,806
|
|||
Accrued
warranty expense
|
240,141
|
262,665
|
|||||
Other
|
403,357
|
497,537
|
|||||
$
|
1,252,417
|
$
|
1,323,008
|
(5) |
Product
Warranty
|
Three Months Ended
|
|||||||
May 31, 2008
|
May 31, 2007
|
||||||
Balance,
beginning
|
$
|
238,198
|
$
|
221,089
|
|||
Settlements
made in cash or in-kind
|
(85,718
|
)
|
(11,125
|
)
|
|||
Warranties
issued
|
87,661
|
43,889
|
|||||
Balance,
ending
|
$
|
240,141
|
$
|
253,853
|
Six Months Ended
|
|||||||
May 31, 2008
|
May 31, 2007
|
||||||
Balance,
beginning
|
$
|
262,665
|
$
|
230,740
|
|||
Settlements
made in cash or in-kind
|
(262,478
|
)
|
(118,819
|
)
|
|||
Warranties
issued
|
239,954
|
141,932
|
|||||
Balance,
ending
|
$
|
240,141
|
$
|
253,853
|
(6) |
Loan
and Credit Agreements
|
|
May
31,
2008
|
|
November
30,
2007
|
|
|||
West
Bank loan payable in monthly installments of $42,500 including interest
at
5.75% due May 1, 2013 (A)
|
3,898,161
|
3,989,684
|
|||||
West
Bank loan payable in monthly installments of $11,000 including interest
at
5.75% due May 1, 2013(A)
|
1,316,003
|
1,330,000
|
|||||
West
Bank loan payable in monthly installments of $12,550 including interest
at
5.75% due May 1, 2013 (A)
|
1,498,063
|
1,000,000
|
|||||
Total
term debt
|
6,712,227
|
6,319,684
|
|||||
Less
current portion of term debt
|
415,616
|
250,027
|
|||||
Term
debt, excluding current portion
|
$
|
6,296,611
|
$
|
6,069,657
|
(7) |
Recently
Issued Accounting
Pronouncements
|
(8) |
Stock
Option Plan
|
(9) |
2007
Acquisition
|
(10) |
Segment
Information
|
Agricultural
Products
|
|
Pressurized
Vessels
|
|
Modular
Buildings
|
|
Consolidated
|
|||||||
Revenue
from external customers
|
$
|
5,066,000
|
$
|
90,000
|
$
|
2,531,000
|
$
|
7,687,000
|
|||||
Income
from operations
|
760,000
|
(224,000
|
)
|
503,000
|
1,039,000
|
||||||||
Income
before tax
|
685,000
|
(273,000
|
)
|
877,000
|
1,289,000
|
||||||||
Total
Assets
|
20,622,000
|
2,633,000
|
4,555,000
|
27,810,000
|
|||||||||
Capital
expenditures
|
300,000
|
187,000
|
41,000
|
528,000
|
|||||||||
Depreciation
& Amortization
|
108,000
|
10,000
|
22,000
|
140,000
|
Agricultural
Products
|
|
Pressurized
Vessels
|
|
Modular
Buildings
|
|
Consolidated
|
|||||||
Revenue
from external customers
|
$
|
3,102,000
|
$
|
1,203,000
|
$
|
1,394,000
|
$
|
5,699,000
|
|||||
Income
from operations
|
98,000
|
320,000
|
320,000
|
738,000
|
|||||||||
Income
before tax
|
93,000
|
298,000
|
446,000
|
837,000
|
|||||||||
Total
Assets
|
13,031,000
|
2,098,000
|
2,677,000
|
17,806,000
|
|||||||||
Capital
expenditures
|
71,000
|
11,000
|
11,000
|
93,000
|
|||||||||
Depreciation
& Amortization
|
69,000
|
13,000
|
12,000
|
94,000
|
Agricultural
Products
|
|
Pressurized
Vessels
|
|
Modular
Buildings
|
|
Consolidated
|
|||||||
Revenue
from external customers
|
$
|
9,193,000
|
$
|
203,000
|
$
|
5,039,000
|
$
|
14,435,000
|
|||||
Income
from operations
|
1,291,000
|
(460,000
|
)
|
1,022,000
|
1,853,000
|
||||||||
Income
before tax
|
1,198,000
|
(536,000
|
)
|
1,360,000
|
2,022,000
|
||||||||
Total
Assets
|
20,622,000
|
2,633,000
|
4,555,000
|
27,810,000
|
|||||||||
Capital
expenditures
|
332,000
|
710,000
|
119,000
|
1,161,000
|
|||||||||
Depreciation
& Amortization
|
219,000
|
20,000
|
41,000
|
280,000
|
Agricultural
Products
|
|
Pressurized
Vessels
|
|
Modular
Buildings
|
|
Consolidated
|
|||||||
Revenue
from external customers
|
$
|
6,374,000
|
$
|
2,254,000
|
$
|
2,346,000
|
$
|
10,974,000
|
|||||
Income
from operations
|
386,000
|
530,000
|
329,000
|
1,245,000
|
|||||||||
Income
before tax
|
329,000
|
486,000
|
606,000
|
1,421,000
|
|||||||||
Total
Assets
|
13,031,000
|
2,098,000
|
2,677,000
|
17,806,000
|
|||||||||
Capital
expenditures
|
116,000
|
17,000
|
31,000
|
164,000
|
|||||||||
Depreciation
& Amortization
|
129,000
|
25,000
|
16,000
|
170,000
|
(11) |
Subsequent
Events
|
(a)
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
(i) |
Critical
Accounting Policies
|
(ii) |
Results
of Operations
|
(iii) |
Liquidity
and Capital Resources
|
(b)
|
Off
Balance Sheet Arrangements.
|
None.
|
FOR
|
WITHHELD
|
|
Thomas
E. Buffamante
|
1,833,313
|
15,904
|
David
R. Castle
|
1,833,313
|
15,904
|
Fred
W. Krahmer
|
1,833,284
|
15,923
|
James
Lynch
|
1,833,313
|
15,904
|
Douglas
McClellan
|
1,833,313
|
15,904
|
J.
Ward McConnell, Jr.
|
1,814,450
|
34,757
|
Marc
H. McConnell
|
1,817,881
|
31,326
|
Total
number of shares voted in favor:
|
1,233,691
|
|||
Total
number of shares voted against:
|
44,011
|
|||
Total
number of abstentions:
|
10,197
|
|||
Total
number of broker non-votes:
|
561,308
|
Total
number of shares voted in favor:
|
1,821,659
|
|||
Total
number of shares voted against:
|
15,453
|
|||
Total
number of abstentions:
|
12,095
|
|||
Total
number of broker non-votes:
|
0
|
By:
|
/s/
Carrie L. Majeski
|
Carrie
L.Majeski
|
|
Chief
Executive Officer/President
(principal
executive and financial
officer) |
Exhibit
No.
|
Description
|
Method of
Filing
|
||
3.1
|
Articles
of Incorporation of Art’s-Way Manufacturing Co., Inc.
|
1
|
||
3.2
|
Bylaws
of Art’s-Way Manufacturing Co., Inc.
|
1
|
||
10.1
|
Change
in Terms Agreement dated May 1, 2008.
|
*
|
||
10.2
|
Change
in Terms Agreement dated May 1, 2008.
|
*
|
||
10.3
|
Change
in Terms Agreement dated May 1, 2008.
|
*
|
||
31.1
|
Certificate
pursuant to 17 CFR 240 13(a)-14(a)
|
*
|
||
32.1
|
Certificate
pursuant to 18 U.S.C. Section 1350
|
*
|
(1)
|
Incorporated
by reference to the exhibit of the same number on our annual report
on
Form 10-K for the fiscal year ended May 27,
1989.
|
(*) |
Filed
herewith.
|