(Mark One) |
x |
Quarterly
report pursuant to section 13 or 15(d) of the Securities Exchange
Act of
1934
|
For the quarterly period ended August 31, 2008 |
¨ |
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.
|
5556
Highway 9, Armstrong, Iowa
50514
|
(Address
of Principal Executive Offices)
|
(Unaudited)
|
|
|
|
||||
|
|
August
|
|
November
|
|
||
|
|
2008
|
|
2007
|
|||
Assets
|
|||||||
Current
assets:
|
|||||||
Cash
|
$
|
295,066
|
$
|
612,201
|
|||
Accounts
receivable-customers, net of allowance for doubtful accounts of
$225,286
and $148,636 in 2008 and 2007, respectively
|
3,247,616
|
3,087,781
|
|||||
Inventories,
net
|
14,044,011
|
8,636,602
|
|||||
Deferred
taxes
|
850,000
|
773,555
|
|||||
Cost
and Profit in Excess of Billings
|
582,221
|
265,615
|
|||||
Other
current assets
|
243,799
|
408,870
|
|||||
Total
current assets
|
19,262,713
|
13,784,624
|
|||||
Property,
plant, and equipment, net
|
6,689,044
|
5,497,200
|
|||||
Covenant
not to Compete
|
255,000
|
300,000
|
|||||
Goodwill
|
375,000
|
375,000
|
|||||
Other
Assets
|
8,308
|
9,771
|
|||||
Total
assets
|
$
|
26,590,065
|
$
|
19,966,595
|
|||
Liabilities
and Stockholders’ Equity
|
|||||||
Current
liabilities:
|
|||||||
Notes
payable to bank
|
$
|
2,151,943
|
$
|
397,859
|
|||
Current
portion of term debt
|
421,602
|
250,027
|
|||||
Accounts
payable
|
2,830,874
|
1,368,988
|
|||||
Customer
deposits
|
441,463
|
53,196
|
|||||
Billings
in Excess of Cost and Profit
|
407,394
|
7,675
|
|||||
Accrued
expenses
|
1,430,493
|
1,323,008
|
|||||
Income
taxes payable
|
47,500
|
146,905
|
|||||
Total
current liabilities
|
7,731,269
|
3,547,658
|
|||||
Long-term
liabilities
|
|||||||
Deferred
taxes
|
430,000
|
205,998
|
|||||
Term
debt, excluding current portion
|
6,190,627
|
6,069,657
|
|||||
Total
liabilities
|
14,351,896
|
9,823,313
|
|||||
Stockholders’
equity:
|
|||||||
Common
stock – $0.005 par value. Authorized 5,000,000 shares; issued 3,974,352
and 3,968,352 shares in 2008 and 2007
|
19,872
|
19,842
|
|||||
Additional
paid-in capital
|
2,019,010
|
1,828,427
|
|||||
Retained
earnings
|
10,199,287
|
8,295,013
|
|||||
Total
stockholders’ equity
|
12,238,169
|
10,143,282
|
|||||
Total
liabilities and stockholders’ equity
|
$
|
26,590,065
|
$
|
19,966,595
|
Three
Months Ended
|
Year
to Date
|
||||||||||||
August
31,
|
August
31,
|
August
31,
|
August
31,
|
||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Net
sales
|
$
|
9,420,696
|
$
|
8,191,523
|
$
|
23,855,763
|
$
|
19,165,728
|
|||||
Cost
of goods sold
|
7,214,281
|
5,410,688
|
17,035,449
|
13,201,569
|
|||||||||
Gross
profit
|
2,206,415
|
2,780,835
|
6,820,314
|
5,964,159
|
|||||||||
Expenses:
|
|||||||||||||
Engineering
|
110,031
|
59,401
|
259,707
|
273,510
|
|||||||||
Selling
|
495,658
|
297,522
|
1,373,388
|
750,573
|
|||||||||
General
and administrative
|
730,242
|
575,348
|
2,463,615
|
1,846,250
|
|||||||||
Total
expenses
|
1,335,931
|
932,271
|
4,096,710
|
2,870,333
|
|||||||||
Income
from operations
|
870,484
|
1,848,564
|
2,723,604
|
3,093,826
|
|||||||||
Other
income (expense):
|
|||||||||||||
Interest
expense
|
(133,164
|
)
|
(154,440
|
)
|
(399,453
|
)
|
(332,651
|
)
|
|||||
Other
|
69,992
|
(177,309
|
)
|
505,706
|
176,644
|
||||||||
Total
other income
|
(63,172
|
)
|
(331,749
|
)
|
106,253
|
(156,007
|
)
|
||||||
Income
before income taxes
|
807,312
|
1,516,815
|
2,829,857
|
2,937,819
|
|||||||||
Income
tax
|
268,923
|
586,767
|
925,582
|
1,069,312
|
|||||||||
Net
income
|
$
|
538,389
|
$
|
930,048
|
$
|
1,904,275
|
$
|
1,868,507
|
|||||
Net
income per share:
|
|||||||||||||
Basic
|
0.14
|
0.24
|
0.48
|
0.47
|
|||||||||
Diluted
|
0.13
|
0.23
|
0.48
|
0.47
|
Year
To Date
|
|||||||
August
|
August
|
||||||
2008
|
2007
|
||||||
Cash
flows from operations:
|
|||||||
Net
income
|
$
|
1,904,275
|
$
|
1,868,507
|
|||
Adjustments
to reconcile net income to net cash provided (used) by operating
activities:
|
|||||||
Stock
based compensation
|
145,851
|
42,766
|
|||||
(Gain)
Loss on disposal of property, plant, and equipment
|
(418,269
|
)
|
(329,258
|
)
|
|||
Depreciation
expense
|
392,233
|
244,112
|
|||||
Amortization
expense
|
45,000
|
-
|
|||||
Fire
loss of operating supplies
|
-
|
(364,409
|
)
|
||||
Deferred
income taxes
|
147,557
|
155,349
|
|||||
Changes
in assets and liabilities:
|
|||||||
(Increase)
decrease in:
|
|||||||
Accounts
receivable
|
(159,835
|
)
|
(421,627
|
)
|
|||
Inventories
|
(5,407,409
|
)
|
(1,561,847
|
)
|
|||
Other
current assets
|
(83,801
|
)
|
(30,602
|
)
|
|||
Other,
net
|
1,464
|
110,240
|
|||||
Increase
(decrease) in:
|
|||||||
Accounts
payable
|
1,461,886
|
280,335
|
|||||
Contracts
in progress, net
|
83,113
|
(223,590
|
)
|
||||
Customer
deposits
|
388,267
|
(141,653
|
)
|
||||
Income
taxes payable
|
(99,405
|
)
|
13,181
|
||||
Accrued
expenses
|
107,485
|
199,318
|
|||||
Net
cash (used in) operating activities
|
(1,491,588
|
)
|
(159,178
|
)
|
|||
Cash
flows from investing activities:
|
|||||||
Purchases
of property, plant, and equipment
|
(1,584,079
|
)
|
(1,269,618
|
)
|
|||
Proceeds
from insurance recoveries
|
666,591
|
1,233,633
|
|||||
Proceeds
from sale of property, plant, and equipment
|
550
|
-
|
|||||
Net
cash (used in) investing activities
|
(916,938
|
)
|
(35,985
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Net
change in line of credit
|
1,754,084
|
390,531
|
|||||
Payments
of notes payable to bank
|
(207,455
|
)
|
(27,185
|
)
|
|||
Proceeds
from term debt
|
500,000
|
-
|
|||||
Proceeds
from the exercise of stock options
|
44,762
|
-
|
|||||
Net
cash provided by financing activities
|
2,091,391
|
363,346
|
|||||
Net
increase (decrease) in cash
|
(317,135
|
)
|
168,183
|
||||
Cash
at beginning of period
|
612,201
|
2,072,121
|
|||||
Cash
at end of period
|
$
|
295,066
|
$
|
2,240,304
|
|||
Supplemental
disclosures of cash flow information:
|
|||||||
Cash
paid/(received) during the period for:
|
|||||||
Interest
|
$
|
366,821
|
$
|
330,534
|
|||
Income
taxes
|
877,380
|
863,129
|
|||||
Supplemental
disclosures of noncash investing activities:
|
|||||||
Proceeds
from insurance recoveries
|
$
|
666,591
|
$
|
1,233,633
|
|||
Insurance
recoveries receivable
|
-
|
248,872
|
|||||
Gains
recognized in previous years
|
(248,872
|
)
|
|||||
Net
book value of assets destroyed
|
|||||||
Property,
plant and equipment
|
-
|
(339,258
|
)
|
||||
Cost
incurred on contracts in progress
|
-
|
(379,375
|
)
|
||||
Cost
incurred for plant supplies
|
(364,409
|
)
|
|||||
Inventories
|
-
|
(70,205
|
)
|
||||
Gain
on insurance recovery
|
$
|
417,719
|
$
|
329,258
|
|||
Non
cash financing activity:
|
|||||||
Refinanced
existing debt with West Bank
|
$
|
4,100,000.00
|
For the three months ended
|
|||||||
August
31,
2008
|
August
31,
2007
|
||||||
Basic:
|
|||||||
Numerator,
net income
|
$
|
538,389
|
$
|
930,048
|
|||
Denominator:
Average number of common shares outstanding
|
3,972,548
|
3,956,352
|
|||||
Basic
earnings per common share
|
$
|
0.14
|
$
|
0.24
|
|||
Diluted
|
|||||||
Numerator,
net income
|
$
|
538,389
|
$
|
930,048
|
|||
Denominator:
Average number of common shares outstanding
|
3,972,548
|
3,956,352
|
|||||
|
|
||||||
Effect
of dilutive stock options
|
17,332
|
19,552
|
|||||
3,989,880
|
3,975,904
|
||||||
Diluted
earnings per common share
|
$
|
0.13
|
$
|
0.23
|
For the nine months ended
|
|||||||
August 31,
2008
|
August 31,
2007
|
||||||
Basic:
|
|||||||
Numerator,
net income
|
$
|
1,904,275
|
$
|
1,868,507
|
|||
Denominator:
Average number of common shares outstanding
|
3,971,676
|
3,956,352
|
|||||
Basic
earnings per common share
|
$
|
0.48
|
$
|
0.47
|
|||
Diluted
|
|||||||
Numerator,
net income
|
$
|
1,904,275
|
$
|
1,868,507
|
|||
Denominator:
Average number of common shares outstanding
|
3,971,676
|
3,956,352
|
|||||
Effect
of dilutive stock options
|
22,348
|
10,498
|
|||||
3,994,024
|
3,966,850
|
||||||
Diluted
earnings per common share
|
$
|
0.48
|
$
|
0.47
|
August
31,
2008
|
November
30,
2007
|
||||||
Raw
materials
|
$
|
9,505,292
|
$
|
4,468,920
|
|||
Work
in process
|
1,378,488
|
336,108
|
|||||
Finished
goods
|
4,777,655
|
5,033,063
|
|||||
$
|
15,661,435
|
$
|
9,838,091
|
||||
Less:
Reserves
|
(1,617,424
|
)
|
(1,201,489
|
)
|
|||
$
|
14,044,011
|
$
|
8,636,602
|
August
31,
2008
|
November
30,
2007
|
||||||
Salaries,
wages, and commissions
|
$
|
868,757
|
$
|
562,806
|
|||
Accrued
warranty expense
|
324,415
|
262,665
|
|||||
Other
|
237,321
|
497,537
|
|||||
$
|
1,430,493
|
$
|
1,323,008
|
Three
Months Ended
|
|||||||
August
31,
2008
|
August
31,
2007
|
||||||
Balance,
beginning
|
$
|
240,141
|
$
|
253,853
|
|||
Settlements
made in cash or in-kind
|
(2,059
|
)
|
58,112
|
||||
Warranties
issued
|
86,333
|
50,566
|
|||||
Balance,
ending
|
$
|
324,415
|
$
|
362,531
|
Nine
Months Ended
|
|||||||
August
31,
2008
|
August
31,
2007
|
||||||
Balance,
beginning
|
$
|
262,665
|
$
|
230,740
|
|||
Settlements
made in cash or in-kind
|
(264,537
|
)
|
(60,707
|
)
|
|||
Warranties
issued
|
326,287
|
192,498
|
|||||
Balance,
ending
|
$
|
324,415
|
$
|
362,531
|
August
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)
|
3,827,603
|
3,989,684
|
|||||
West
Bank loan payable in monthly installments of $11,000 including interest
at
5.75% due May 1, 2013(A)
|
1,302,275
|
1,330,000
|
|||||
West
Bank loan payable in monthly installments of $12,550 including interest
at
5.75% due May 1, 2013 (A)
|
1,482,351
|
1,000,000
|
|||||
Total
term debt
|
6,612,229
|
6,319,684
|
|||||
Less
current portion of term debt
|
421,602
|
250,027
|
|||||
Term
debt, excluding current portion
|
$
|
6,190,627
|
$
|
6,069,657
|
Agricultural
Products
|
Pressurized
Vessels
|
Modular
Buildings
|
Consolidated
|
||||||||||
Revenue
from external customers
|
$
|
6,685,000
|
$
|
25,000
|
$
|
2,711,000
|
$
|
9,421,000
|
|||||
Income
from operations
|
580,000
|
(241,000
|
)
|
531,000
|
870,000
|
||||||||
Income
before tax
|
546,000
|
(279,000
|
)
|
540,000
|
807,000
|
||||||||
Total
Assets
|
19,274,000
|
2,643,000
|
4,673,000
|
26,590,000
|
|||||||||
Capital
expenditures
|
327,000
|
41,000
|
56,000
|
424,000
|
|||||||||
Depreciation
& Amortization
|
118,000
|
13,000
|
24,000
|
155,000
|
Agricultural
Products
|
Pressurized
Vessels
|
Modular
Buildings
|
Consolidated
|
||||||||||
Revenue
from external customers
|
$
|
4,552,000
|
$
|
1,319,000
|
$
|
2,321,000
|
$
|
8,192,000
|
|||||
Income
from operations
|
943,000
|
286,000
|
620,000
|
1,849,000
|
|||||||||
Income
before tax
|
679,000
|
266,000
|
572,000
|
1,517,000
|
|||||||||
Total
Assets
|
11,956,000
|
2,094,000
|
3,596,000
|
17,646,000
|
|||||||||
Capital
expenditures
|
34,000
|
55,000
|
1,017,000
|
1,106,000
|
|||||||||
Depreciation
& Amortization
|
60,000
|
14,000
|
0
|
74,000
|
Agricultural
Products
|
Pressurized
Vessels
|
Modular
Buildings
|
Consolidated
|
||||||||||
Revenue
from external customers
|
$
|
15,878,000
|
$
|
228,000
|
$
|
7,750,000
|
$
|
23,856,000
|
|||||
Income
from operations
|
1,872,000
|
(701,000
|
)
|
1,553,000
|
2,724,000
|
||||||||
Income
before tax
|
1,744,000
|
(815,000
|
)
|
1,901,000
|
2,830,000
|
||||||||
Total
Assets
|
19,274,000
|
2,643,000
|
4,673,000
|
26,590,000
|
|||||||||
Capital
expenditures
|
659,000
|
751,000
|
175,000
|
1,585,000
|
|||||||||
Depreciation
& Amortization
|
338,000
|
34,000
|
65,000
|
437,000
|
Agricultural
Products
|
Pressurized
Vessels
|
Modular
Buildings
|
Consolidated
|
||||||||||
Revenue
from external customers
|
$
|
10,927,000
|
$
|
3,573,000
|
$
|
4,666,000
|
$
|
19,166,000
|
|||||
Income
from operations
|
1,329,000
|
816,000
|
949,000
|
3,094,000
|
|||||||||
Income
before tax
|
1,008,000
|
752,000
|
1,178,000
|
2,938,000
|
|||||||||
Total
Assets
|
11,956,000
|
2,094,000
|
3,596,000
|
17,646,000
|
|||||||||
Capital
expenditures
|
150,000
|
72,000
|
1,048,000
|
1,270,000
|
|||||||||
Depreciation
& Amortization
|
189,000
|
39,000
|
16,000
|
244,000
|
(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.
|
By:
|
/s/
Carrie L. Majeski
|
Carrie
L.Majeski
|
|
Chief
Executive Officer/President
(principal
executive and financial
officer)
|
|
Date:
October 7, 2008
|
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
|
||
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 August 27,
1989.
|
(*) |
Filed
herewith.
|