Arts Way Manufacturing Co Inc 10-Q for FY2022 Q2
Arts Way Manufacturing Co Inc (ARTW)
About this 10-Q
Arts Way Manufacturing Co Inc filed this 10-Q on July 15, 2022, covering the quarter ended May 31, 2022 (FY2022 Q2).
Headline figures
Quarter ended May 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $7.28M
- up 27.4% from $5.71M a year earlier
- Net income
- $175.35K
- up 173.6% from net income of $64.09K a year earlier
- Diluted EPS
- $0.04
- up 300.0% from $0.01 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
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Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
or
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Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission File No.
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) (Zip Code) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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The |
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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company |
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| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Number of common shares outstanding as of July 5, 2022:
Art’s-Way Manufacturing Co., Inc.
Index
Page No.
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PART I – FINANCIAL INFORMATION |
1 | |
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Item 1. |
Financial Statements |
1 |
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Condensed Consolidated Balance Sheets May 31, 2022 and November 30, 2021 |
1 |
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Condensed Consolidated Statements of Operations Three-month and six-month periods ended May 31, 2022 and May 31, 2021 |
2 |
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Condensed Consolidated Statements of Stockholders’ Equity Six-month periods ended May 31, 2022 and May 31, 2021 |
3 |
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Condensed Consolidated Statements of Cash Flows Six-month periods ended May 31, 2022 and May 31, 2021 |
4 |
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Notes to Condensed Consolidated Financial Statements |
5 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
19 |
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Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
23 |
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Item 4. |
Controls and Procedures |
23 |
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PART II – OTHER INFORMATION |
24 | |
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Item 1. |
Legal Proceedings |
24 |
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Item 1A. |
Risk Factors |
24 |
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
24 |
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Item 3. |
Defaults Upon Senior Securities |
24 |
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Item 4. |
Mine Safety Disclosures |
24 |
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Item 5. |
Other Information |
24 |
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Item 6. |
Exhibits |
25 |
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SIGNATURES |
26 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
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ART’S-WAY MANUFACTURING CO., INC. |
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Consolidated Balance Sheets |
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(Unaudited) |
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May 31, 2022 |
November 30, 2021 |
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| Assets | ||||||||
| Current assets: | ||||||||
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Cash |
$ | $ | ||||||
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Accounts receivable-customers, net of allowance for doubtful accounts of $ |
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Inventories, net |
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Cost and profit in excess of billings |
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Other current assets |
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Total current assets |
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Property, plant, and equipment, net |
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Assets held for lease, net |
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Deferred income taxes |
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Other assets |
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Total assets |
$ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
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Accounts payable |
$ | $ | ||||||
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Customer deposits |
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Billings in excess of cost and profit |
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Income taxes payable |
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Accrued expenses |
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Line of credit |
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Current portion of finance lease liabilities |
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Current portion of long-term debt |
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Total current |
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| Long-term liabilities | ||||||||
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Long-term portion of finance lease liabilities |
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Long-term portion of operating lease liabilities |
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Long-term debt, excluding current portion |
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Total liabilities |
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| Commitments and Contingencies (Notes 8, 9, 10 and 13) | |
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| Stockholders’ equity: | ||||||||
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Undesignated preferred stock - $ |
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Common stock – $ |
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Additional paid-in capital |
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Retained earnings |
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Treasury stock, at cost ( |
( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
$ | $ | ||||||
See accompanying notes to consolidated financial statements.
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ART’S-WAY MANUFACTURING CO., INC. |
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Condensed Consolidated Statements of Operations |
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(Unaudited) |
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Three Months Ended |
Six Months Ended |
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May 31, 2022 |
May 31, 2021 |
May 31, 2022 |
May 31, 2021 |
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Sales |
$ | $ | $ | $ | ||||||||||||
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Cost of goods sold |
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Gross profit |
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| Expenses: | ||||||||||||||||
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Engineering |
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Selling |
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General and administrative |
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Total expenses |
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Income (Loss) from operations |
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Interest expense |
( |
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Other |
( |
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Total other income (expense) |
( |
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Income (Loss) before income taxes |
( |
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Income tax expense (benefit) |
( |
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Net Income (Loss) |
( |
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See accompanying notes to condensed consolidated financial statements.
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ART’S-WAY MANUFACTURING CO., INC. |
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Consolidated Statements of Stockholders' Equity |
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Six Months Ended May 31, 2022 and May 31, 2021 |
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(Unaudited) |
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Common Stock |
Additional |
Treasury Stock |
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Number of |
paid-in |
Retained |
Number of |
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shares |
Par value |
capital |
earnings |
shares |
Amount |
Total |
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Balance, November 30, 2020 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
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Stock based compensation |
( |
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Net (loss) |
- | - | - | ( |
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Balance, May 31, 2021 |
( |
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Common Stock |
Additional |
Treasury Stock |
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Number of |
paid-in |
Retained |
Number of |
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shares |
Par value |
capital |
earnings |
shares |
Amount |
Total |
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Balance, November 30, 2021 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
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Stock based compensation |
- | ( |
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Common stock purchase agreement |
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Net (loss) |
- | - | - | ( |
) | - | - | ( |
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Balance, May 31, 2022 |
( |
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See accompanying notes to condensed consolidated financial statements.
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ART’S-WAY MANUFACTURING CO., INC. |
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Consolidated Statements of Cash Flows |
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(Unaudited) |
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Six Months Ended |
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May 31, 2022 |
May 31, 2021 |
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| Cash flows from operations: | ||||||||
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Net income (loss) |
$ | ( |
) | $ | ( |
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| Adjustments to reconcile net income (loss) to net cash used by operating activities: | ||||||||
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Stock based compensation |
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Decrease in obsolete inventory reserves |
( |
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Gain on disposal of property, plant, and equipment |
( |
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Depreciation and amortization expense |
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Accrued interest on deferred debt payments |
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Increase (decrease) in allowance for doubtful accounts |
( |
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Deferred income taxes |
( |
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| Changes in assets and liabilities: | ||||||||
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Accounts receivable |
( |
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Inventories |
( |
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Net investment in sales-type leases |
- | |||||||
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Other assets |
( |
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| Increase (decrease) in: | ||||||||
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Accounts payable |
( |
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Contracts in progress, net |
( |
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Customer deposits |
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Income taxes payable |
( |
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Accrued expenses |
( |
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Net cash used by operating activities |
( |
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| Cash flows from investing activities: | ||||||||
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Purchases of property, plant, and equipment |
( |
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Net proceeds from sale of assets |
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Net cash used in investing activities: |
( |
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| Cash flows from financing activities: | ||||||||
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Net change in line of credit |
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Principal payments on finance lease obligations |
( |
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Proceeds from term debt |
- | |||||||
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Repayment of term debt |
( |
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Cost of equity issuance |
( |
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Repurchases of common stock |
( |
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Net cash provided by financing activities |
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Net increase in cash: |
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Cash at beginning of period |
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Cash at end of period |
$ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
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Interest |
$ | $ | ||||||
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Income taxes |
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| Supplemental disclosures of non-cash operating activities: | ||||||||
| Right-of-use (ROU) assets acquired (included in other assets) | $ | $ | - | |||||
| Common stock purchase agreement shares issued (included in other assets) | $ | $ | - | |||||
See accompanying notes to consolidated financial statements.
Notes to Unaudited Condensed Consolidated Financial Statements
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1) |
Description of the Company |
Unless otherwise specified, as used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” “Art’s-Way,” and the “Company” refer to Art’s-Way Manufacturing Co., Inc., a Delaware corporation headquartered in Armstrong, Iowa, and its wholly-owned subsidiaries.
The Company began operations as a farm equipment manufacturer in 1956. Since that time, it has become a major worldwide manufacturer of agricultural equipment. Its principal manufacturing plant is located in Armstrong, Iowa.
The Company has organized its business into operating segments. Management separately evaluates the financial results of each segment because each is a strategic business unit offering different products and requiring different technology and marketing strategies. The Agricultural Products segment manufactures and sells farm equipment and related replacement parts under the Art’s-Way Manufacturing label and private labels. The Modular Buildings segment manufactures and installs modular buildings for animal containment and various laboratory uses, and the Tools segment manufactures steel cutting tools and inserts.
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2) |
Summary of Significant Accounting Policies |
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3) |
Disaggregation of Revenue |
The following table displays revenue by reportable segment from external customers, disaggregated by major source. The Company believes disaggregating by these categories depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.
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Three Months Ended May 31, 2022 |
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Agricultural |
Modular Buildings |
Tools |
Total |
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Farm equipment |
$ | $ | $ | $ | ||||||||||||
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Farm equipment service parts |
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Steel cutting tools and inserts |
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Modular buildings |
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Modular building lease income |
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Other |
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| $ | $ | $ | $ | |||||||||||||
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Three Months Ended May 31, 2021 |
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Agricultural |
Modular Buildings |
Tools |
Total |
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Farm equipment |
$ | $ | $ | $ | ||||||||||||
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Farm equipment service parts |
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Steel cutting tools and inserts |
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Modular buildings |
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Modular building lease income |
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Other |
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| $ | $ | $ | $ | |||||||||||||
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Six Months Ended May 31, 2022 |
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Agricultural |
Modular Buildings |
Tools |
Total |
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Farm equipment |
$ | $ | $ | $ | ||||||||||||
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Farm equipment service parts |
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Steel cutting tools and inserts |
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Modular buildings |
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Modular building lease income |
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Other |
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| $ | $ | $ | $ | |||||||||||||
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Six Months Ended May 31, 2021 |
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Agricultural |
Modular Buildings |
Tools |
Total |
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Farm equipment |
$ | $ | $ | $ | ||||||||||||
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Farm equipment service parts |
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Steel cutting tools and inserts |
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Modular buildings |
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Modular building lease income |
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Other |
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| $ | $ | $ | $ | |||||||||||||
The Company offered floorplan terms in its Agricultural Products segment during its Fall 2021 early order program to incentivize customers to stock farm equipment on their lots. Floorplan terms allow customers to pay the Company at the earliest of retail date or 180 days. This program has an affect on the timing of the Company’s fiscal 2022 cash flows compared with historical cash flows.
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4) |
Contract Receivables, Contract Assets and Contract Liabilities |
The following table provides information about contract receivables, contract assets, and contract liabilities from contracts with customers included on the Condensed Consolidated Balance Sheets.
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May 31, 2022 |
November 30, 2021 |
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Receivables |
$ | $ | ||||||
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Assets |
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Liabilities |
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The amount of revenue recognized in the first six months of fiscal 2022 that was included in a contract liability on November 30, 2021 was approximately $
The Company utilizes the practical expedient exception for these contracts and will report only on performance obligations greater than one year. As of May 31, 2022, the Company has no performance obligations with an original expected duration greater than one year.
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5) |
Net Income (Loss) Per Share of Common Stock |
Basic net income (loss) per share of common stock has been computed on the basis of the weighted average number of common shares outstanding. Diluted net income (loss) per share has been computed on the basis of the weighted average number of common shares outstanding plus equivalent shares assuming exercise of stock options. Potential shares of common stock that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted net income (loss) per share.
Basic and diluted net income (loss) per share have been computed based on the following as of May 31, 2022 and May 31, 2021:
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For the Three Months Ended |
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May 31, 2022 |
May 31, 2021 |
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Numerator for basic and diluted net income (loss) per share: |
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Net income (loss) |
$ | $ | ||||||
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Denominator: |
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For basic net income (loss) per share - weighted average common shares outstanding |
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Effect of dilutive stock options |
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For diluted net income (loss) per share - weighted average common shares outstanding |
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Net Income (Loss) per share - Basic: |
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Net Income (Loss) per share |
$ | $ | ||||||
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Net Income (Loss) per share - Diluted: |
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Net Income (Loss) per share |
$ | $ | ||||||
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For the Six Months Ended |
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May 31, 2022 |
May 31, 2021 |
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Numerator for basic and diluted net income (loss) per share: |
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Net income (loss) |
$ | ( |
) | $ | ( |
) | ||
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Denominator: |
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For basic net income (loss) per share - weighted average common shares outstanding |
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Effect of dilutive stock options |
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For diluted net income (loss) per share - weighted average common shares outstanding |
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Net Income (Loss) per share - Basic: |
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Net Income (Loss) per share |
$ | ( |
) | $ | ( |
) | ||
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Net Income (Loss) per share - Diluted: |
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Net Income (Loss) per share |
$ | ( |
) | $ | ( |
) | ||
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6) |
Inventory |
Major classes of inventory are:
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May 31, 2022 |
November 30, 2021 |
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Raw materials |
$ | $ | ||||||
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Work in process |
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Finished goods |
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Total Gross Inventory |
$ | $ | ||||||
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Less: Reserves |
( |
) | ( |
) | ||||
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Net Inventory |
$ | $ | ||||||
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7) |
Accrued Expenses |
Major components of accrued expenses are:
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May 31, 2022 |
November 30, 2021 |
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Salaries, wages, and commissions |
$ | $ | ||||||
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Accrued warranty expense |
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Other |
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| $ | $ | |||||||
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8) |
Assets Held for Lease |
Major components of assets held for lease are:
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May 31, 2022 |
November 30, 2021 |
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Modular Buildings |
$ | $ | ||||||
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Total assets held for lease |
$ | $ | ||||||
There were rents recognized from assets held for lease included in sales on the Condensed Consolidated Statements of Operations during the three and six months ended May 31, 2022 and May 31, 2021.
The Company has two of the seven rental buildings under lease agreements as of July 5, 2022.
The future minimum lease receipts from assets held for lease for periods after May 31, 2022 are as follows:
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Year Ending November 30, |
Amount |
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2022 |
$ | |||
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2023 |
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Total |
$ | |||
On June 14, 2022, the Company received a purchase order in the amount of $
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9) |
Product Warranty |
The Company offers warranties of various lengths to its customers depending on the specific product and terms of the customer purchase agreement. The average length of the warranty period is year from the date of purchase. The Company’s warranties require it to repair or replace defective products during the warranty period at no cost to the customer. Product warranty is included in the price of the product and provides assurance that the product will function in accordance with agreed-upon specifications. It does not represent a separate performance obligation under ASC 606. The Company records a liability for estimated costs that may be incurred under its warranties. The costs are estimated based on historical experience and any specific warranty issues that have been identified. Although historical warranty costs have been within expectations, there can be no assurance that future warranty costs will not exceed historical amounts. The Company periodically assesses the adequacy of its recorded warranty liability and adjusts the balance as necessary. The accrued warranty balance is included in accrued expenses as shown in Note 7 “Accrued Expenses.” Changes in the Company’s product warranty liability for the three and six months ended May 31, 2022 and May 31, 2021 are as follows:
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For the Three Months Ended |
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May 31, 2022 |
May 31, 2021 |
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Balance, beginning |
$ | $ | ||||||
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Settlements / adjustments |
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Warranties issued |
( |
) | ( |
) | ||||
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Balance, ending |
$ | $ | ||||||
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For the Six Months Ended |
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May 31, 2022 |
May 31, 2021 |
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Balance, beginning |
$ | $ | ||||||
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Settlements / adjustments |
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Warranties issued |
( |
) | ( |
) | ||||
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Balance, ending |
$ | $ | ||||||
The Company was carrying a larger warranty accrual in fiscal 2021 than historically reported due to a large construction project in the Modular Buildings segment. The warranty period for this project closed on April 9, 2022.
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10) |
Loan and Credit Agreements |
Bank Midwest Revolving Lines of Credit
The Company maintains a $
In connection with the Line of Credit, the Company, Art’s-Way Scientific Inc. and Ohio Metal Working Products/Art’s-Way Inc. each entered into a Commercial Security Agreement with Bank Midwest, dated September 28, 2017, pursuant to which each granted to Bank Midwest a first priority security interest in certain inventory, equipment, accounts, chattel paper, instruments, letters of credit and other assets to secure the obligations of the Company under the Line of Credit. Each of Art’s-Way Scientific Inc. and Ohio Metal Working Products/Art’s-Way Inc. also agreed to guarantee the obligations of the Company pursuant to the Line of Credit, as set forth in Commercial Guaranties, each dated September 28, 2017.
To further secure the Line of Credit, the Company granted Bank Midwest a mortgage on its Canton, Ohio property held by Ohio Metal Working Products/Art’s-Way Inc. The Term Loan is secured by a mortgage on the Company’s Armstrong, Iowa and Monona, Iowa properties. Each mortgage is governed by the terms of a separate Mortgage, dated September 28, 2017, and each property is also subject to a separate Assignment of Rents, dated September 28, 2017.
The Reserve Line of Credit is secured by any and all security documents between the Company and Bank Midwest.
Bank Midwest Term Loans
The Company carries a $
Compliance
If the Company or its subsidiaries (as guarantors pursuant to the Commercial Guaranties) commits an event of default with respect to the promissory notes and fails or is unable to cure that default, Bank Midwest may immediately terminate its obligation, if any, to make additional loans to the Company and may accelerate the Company’s obligations under the promissory notes. Bank Midwest shall also have all other rights and remedies for default provided by the Uniform Commercial Code, as well as any other applicable law and the various loan agreements. In addition, in an event of default, Bank Midwest may foreclose on the mortgaged property.
Compliance with the following Bank Midwest covenants is measured annually at November 30. A maximum debt to worth ratio of
The Company also has a minimum working capital requirement of $
SBA Economic Injury Disaster Loans
The Company secured three loans in the amount of $
A summary of the Company’s term debt is as follows:
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May 31, 2022 |
November 30, 2021 |
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Bank Midwest loan payable in monthly installments of $ |
$ | $ | ||||||
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U.S. Small Business Administration loan payable in monthly installments of $ |
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U.S. Small Business Administration loan payable in monthly installments of $ |
||||||||
|
U.S. Small Business Administration loan payable in monthly installments of $ |
||||||||
|
Bank Midwest loan payable in monthly installments of $ |
||||||||
|
Total term debt |
$ | $ | ||||||
|
Less current portion of term debt |
||||||||
|
Term debt, excluding current portion |
$ | $ | ||||||
A summary of the minimum maturities of term debt follows for the years ending November 30:
|
Year |
Amount |
|||
|
2022 |
$ | |||
|
2023 |
||||
|
2024 |
||||
|
2025 |
||||
|
2026 |
||||
|
2027 and thereafter |
||||
| $ | ||||
|
11) |
Income Taxes |
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating losses.
|
12) |
Related Party Transactions |
During the three and six months ended May 31, 2022, and May 31, 2021, the Company did recognize any revenues from transactions with a related party, and no amounts in accounts receivable balances were due from a related party. From time to time, the Company purchases various supplies from related parties, which are companies in which Marc McConnell, the Chairman of the Company’s Board of Directors, has an ownership interest and also serves as President. J. Ward McConnell Jr.’s estate, the J. Ward McConnell, Jr. Living Trust, is paid a monthly fee to guarantee a portion of the Company’s term debt in accordance with the USDA guarantee obtained on the Company’s term debt. In the three and six months ended May 31, 2022, the Company recognized $
|
13) |
Leases |
|
May 31, 2022 |
November 30, 2021 |
|||||||
|
Operating lease right-of-use assets (in other assets) |
$ | |||||||
|
Current portion of operating lease liabilities (in accrued expenses) |
$ | |||||||
|
Long-term portion of operating lease liabilities |
||||||||
|
Total operating lease liabilities |
$ | |||||||
The Company recorded $
Future maturities of operating lease liabilities are as follows:
|
Years Ending November 30 |
||||
|
2022 |
||||
|
2023 |
||||
|
2024 |
||||
|
2025 |
||||
|
2026 |
||||
|
Total lease payments |
||||
|
Less imputed interest |
( |
) | ||
|
Total operating lease liabilities |
The components of finance leases on the Consolidated Balance Sheets on May 31, 2022 and November 30, 2021 were as follows:
|
May 31, 2022 |
November 30, 2021 |
|||||||
|
Finance lease right-of-use assets (net of amortization in other assets) |
$ | $ | ||||||
|
Current portion of finance lease liabilities |
$ | $ | ||||||
|
Long-term portion of finance lease liabilities |
||||||||
|
Total finance lease liabilities |
$ | $ | ||||||
Future maturities of finance lease liabilities as of May 31, 2022 are as follows:
|
Year Ending November 30, |
||||
|
2022 |
$ | |||
|
2023 |
$ | |||
|
2024 |
$ | |||
|
2025 |
$ | |||
|
2026 |
$ | |||
|
2027 and thereafter |
$ | |||
|
Total lease payments |
||||
|
Less imputed interest |
( |
) | ||
|
Total finance lease liabilities |
$ |
The weighted average lease term of the Company’s finance leases are
On June 29, 2022 the Company signed a finance lease proposal for a forklift that has
On July 5, 2022, the Company entered into a finance lease agreement for a Haas milling machine for its Tools segment to increase production capacity and efficiency. The finance lease consists of
|
14) |
Equity Incentive Plan and Stock Based Compensation |
On February 25, 2020, the Board of Directors of the Company (the “Board”) authorized and approved the Art’s-Way Manufacturing Co., Inc. 2020 Equity Incentive Plan (the “2020 Plan”). The 2020 Plan was approved by the stockholders on April 30, 2020. The 2020 Plan replaced the Art’s-Way Manufacturing Co., Inc. 2011 Equity Incentive Plan (the “2011 Plan”) and prior plans. The 2020 Plan added an additional
The 2020 Plan permits the plan administrator to award nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance awards, and stock appreciation rights to employees (including officers), directors, and consultants. The Board has approved a director compensation policy pursuant to which non-employee directors are automatically granted restricted stock awards of
|
For the Three Months Ended |
||||||||
|
May 31, 2022 |
May 31, 2021 |
|||||||
|
Shares issued to directors (immediate vesting) |
||||||||
|
Shares issued to directors, employees, and consultants (three-year vesting) |
||||||||
|
Total shares issued |
||||||||
|
For the Six Months Ended |
||||||||
|
May 31, 2022 |
May 31, 2021 |
|||||||
|
Shares issued to directors (immediate vesting) |
||||||||
|
Shares issued to directors, employees, and consultants (three-year vesting) |
88,500 | |||||||
|
Unvested shares forfeit upon termination |
( |
) | - | |||||
|
Total shares issued |
||||||||
|
For the Three Months Ended |
||||||||
|
May 31, 2022 |
May 31, 2021 |
|||||||
|
Stock-based compensation expense |
||||||||
|
Treasury share repurchase expense |
( |
) | ( |
) | ||||
|
Stock-based compensation expense net of treasury repurchases |
||||||||
|
For the Six Months Ended |
||||||||
|
May 31, 2022 |
May 31, 2021 |
|||||||
|
Stock-based compensation expense |
||||||||
|
Treasury share repurchase expense |
( |
) | ( |
) | ||||
|
Stock-based compensation expense net of treasury repurchases |
||||||||
| Total shares issued | ||||||||
Stock-based compensation expense reflects the fair value of stock-based awards measured at the grant date and recognized over the relevant vesting period. The Company estimates the fair value of each stock-based option award on the measurement date using the Black-Scholes option valuation model which incorporates assumptions as to stock price volatility, the expected life of the options, risk-free interest rate, and dividend yield. Expected volatility is based on historical volatility of the Company’s stock and other factors. The Company uses historical option exercise and termination data to estimate the expected term the options are expected to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield is calculated using historical dividend amounts and the stock price at the option issuance date.
|
15) |
Common Stock Purchase Agreement |
On March 29, 2022, Art’s-Way Manufacturing Co., Inc. (the “Company”) entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with Alumni Capital LP, a Delaware limited partnership (“Alumni Capital”), pursuant to which the Company agreed to sell, and Alumni Capital agreed to purchase, upon request of the Company in one or more transactions, a number of shares of the Company’s common stock, par value $
Among other limitations, unless otherwise agreed upon by Alumni Capital, each sale of shares will be limited to
In exchange for Alumni Capital entering into the Purchase Agreement, the Company issued
The Purchase Agreement provides that the Company will file a registration statement under the Securities Act covering the resale of the shares issued to Alumni Capital. Alumni Capital’s obligation to purchase shares of Common Stock under the Purchase Agreement is conditioned upon, among other things, the registration statement having been declared effective by the Securities and Exchange Commission. The Company filed a registration statement on Form S-3 (the “Registration Statement”) April 27, 2022 which was declared effective on May 9, 2022 by the SEC.
As of July 15, 2022 no shares have been sold or issued to Alumni Capital pursuant to the Purchase Agreement other than the
The Company incurred approximately $
|
16) |
Disclosures About the Fair Value of Financial Instruments |
The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties. At May 31, 2022 and November 30, 2021, the carrying amount approximated fair value for cash, accounts receivable, accounts payable, notes payable to bank, finance lease liabilities and other current and long-term liabilities. The carrying amounts of current assets and liabilities approximate fair value because of the short maturity of these instruments. The fair value of the finance lease liabilities also approximate recorded value as that is based on discounting future cash flows at rates implicit in the lease. The rates implicit in the lease do not materially differ from current market rates. The fair value of the Company’s term loans payable also approximates recorded value because the interest rates charged under the loan terms are not substantially different from current interest rates.
|
17) |
Segment Information |
The Company has reportable segments: Agricultural Products, Modular Buildings and Tools. The Agricultural Products segment manufactures and sells farm equipment and related replacement parts under the Art’s-Way Manufacturing label. The Modular Buildings segment manufactures and installs modular buildings for various uses, commonly animal containment and research laboratories. The Tools segment manufactures steel cutting tools and inserts.
The accounting policies applied to determine the segment information are the same as those described in the summary of significant accounting policies. Management evaluates the performance of each segment based on profit or loss from operations before income taxes, exclusive of nonrecurring gains and losses.
Approximate financial information with respect to the reportable segments is as follows.
|
Three Months Ended May 31, 2022 |
||||||||||||||||
|
Agricultural Products |
Modular Buildings |
Tools |
Consolidated |
|||||||||||||
|
Revenue from external customers |
$ | $ | $ | $ | ||||||||||||
|
Income (loss) from operations |
( |
) | ( |
) | ||||||||||||
|
Income (loss) before tax |
( |
) | ( |
) | ||||||||||||
|
Total Assets |
||||||||||||||||
|
Capital expenditures |
||||||||||||||||
|
Depreciation & Amortization |
$ | $ | $ | $ | ||||||||||||
|
Three Months Ended May 31, 2021 |
||||||||||||||||
|
Agricultural Products |
Modular Buildings |
Tools |
Consolidated |
|||||||||||||
|
Revenue from external customers |
$ | $ | $ | $ | ||||||||||||
|
Income (loss) from operations |
( |
) | ( |
) | ||||||||||||
|
Income (loss) before tax |
( |
) | ( |
) | ||||||||||||
|
Total Assets |
||||||||||||||||
|
Capital expenditures |
- | - | ||||||||||||||
|
Depreciation & Amortization |
$ | $ | $ | $ | ||||||||||||
|
Six Months Ended May 31, 2022 |
||||||||||||||||
|
Agricultural Products |
Modular Buildings |
Tools |
Consolidated |
|||||||||||||
|
Revenue from external customers |
$ | $ | $ | $ | ||||||||||||
|
Income (loss) from operations |
( |
) | ( |
) | ( |
) | ||||||||||
|
Income (loss) before tax |
( |
) | ( |
) | ( |
) | ||||||||||
|
Total Assets |
||||||||||||||||
|
Capital expenditures |
||||||||||||||||
|
Depreciation & Amortization |
$ | $ | $ | $ | ||||||||||||
|
Six Months Ended May 31, 2021 |
||||||||||||||||
|
Agricultural Products |
Modular Buildings |
Tools |
Consolidated |
|||||||||||||
|
Revenue from external customers |
$ | $ | $ | $ | ||||||||||||
|
Income (loss) from operations |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Income (loss) before tax |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Total Assets |
||||||||||||||||
|
Capital expenditures |
||||||||||||||||
|
Depreciation & Amortization |
$ | $ | $ | $ | ||||||||||||
*The consolidated total in the tables is a sum of segment figures and may not tie to actual figures in the condensed consolidated financial statements due to rounding.
|
18) |
Subsequent Events |
Management evaluated all other activity of the Company and concluded the following subsequent events required disclosure: the PO received for a rental building sale reported in Note 8 Assets Held for Lease and the finance lease agreement and proposal signed for Haas and forklift in Note 13 Leases. No other events have occurred that would require recognition in the condensed consolidated financial statements.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q (this “report”) and the audited consolidated financial statements and related notes thereto included in Part II, Item 8, “Financial Statements and Supplementary Data,” as well as Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the fiscal year ended November 30, 2021. Some of the statements in this report may be forward-looking statements that reflect our current view on future events, future business, industry and other conditions, our future performance, and our plans and expectations for future operations and actions. In some cases you can identify forward-looking statements by the use of words such as “may,” “should,” “anticipate,” “believe,” “expect,” “plan,” “future,” “intend,” “could,” “estimate,” “predict,” “hope,” “potential,” “continue,” or the negative of these terms or other similar expressions. Many of these forward-looking statements are located in this report under Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but they may appear in other sections as well. Forward-looking statements in this report generally relate to: (i) our warranty costs and order backlog; (ii) our beliefs regarding the sufficiency of working capital and cash flows; (iii) our expectation that we will continue to be able to renew or obtain financing on reasonable terms when necessary as well as our continued positive relationship with our creditors and lenders; (iv) the impact of recently issued accounting pronouncements; (v) our intentions and beliefs relating to our costs, business strategies, and future performance; (vi) our beliefs concerning our ability to attract and maintain an adequate workforce in a competitive labor market (vii) our expected financial results; (viii) our expectations concerning our primary capital and cash flow needs; and (ix) our expectations regarding the impact of COVID-19 on our business condition and results of operations.
You should read this report thoroughly with the understanding that our actual results may differ materially from those set forth in the forward-looking statements for many reasons, including events beyond our control and assumptions that prove to be inaccurate or unfounded. We cannot provide any assurance with respect to our future performance or results. Our actual results or actions could and likely will differ materially from those anticipated in the forward-looking statements for many reasons, including but not limited to: (i) the impact of changing credit markets on our ability to continue to obtain financing on reasonable terms; (ii) our ability to repay current debt, continue to meet debt obligations and comply with financial covenants; (iii) the effect of inflation as well as general economic conditions, including consumer and governmental spending, on the demand for our products and the cost of our supplies and materials; (iv) the ongoing COVID-19 pandemic; (v) fluctuations in seasonal demand and our production cycle; (vi) the ability of our suppliers to meet our demands for raw materials and component parts; (vii) fluctuations in the price of raw materials, especially steel; (viii) our ability to predict and meet the demands of each market in which our segments operate; and (ix) other factors described from time to time in our Securities and Exchange Commission filings. We do not intend to update the forward-looking statements contained in this report other than as required by law. We caution you not to put undue reliance on any forward-looking statements, which speak only as of the date of this report. You should read this report and the documents that we reference in this report and have filed as exhibits completely and with the understanding that our actual future results may be materially different from what we currently expect. We qualify all of our forward-looking statements by these cautionary statements.
Critical Accounting Policies
Our critical accounting policies involving the more significant judgments and assumptions used in the preparation of our financial statements as of May 31, 2022 remain unchanged from November 30, 2021. Disclosure of these critical accounting policies is incorporated by reference from Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended November 30, 2021.
Results of Operations
Net Sales and Cost of Sales
Our consolidated corporate sales for the three- and six-month periods ended May 31, 2022 were $7,275,000 and $12,888,000, respectively, compared to $5,710,000 and $11,111,000 during the same respective periods in fiscal 2021, a $1,565,000, or 27.4%, increase for the three months and a $1,777,000, or 16.0%, increase for the six months. We saw increased revenue and demand in all three business segments for the three months ended May 31, 2022 and increases in revenue in the Agricultural Products and Tools segments for the six months ended May 31, 2022. Consolidated gross margin for the three-month period ended May 31, 2022 was 30.1% compared to 30.2% for the same period in fiscal 2021. Consolidated gross margin for the six-month period ended May 31, 2022 was 26.3% compared to 24.9% for the same period in fiscal 2021. The increased margin is due largely to our Agricultural Products and Modular Buildings segment, as discussed further below.
Our second quarter sales in our Agricultural Products segment were $5,316,000 compared to $3,858,000 during the same period of fiscal 2021, an increase of $1,458,000, or 37.8%. Our year-to-date agricultural product sales were $9,477,000 compared to $7,357,000 during the same period in fiscal 2021, an increase of $2,120,000, or 28.8%. The Company continues to see historic backlog numbers through Q2 of fiscal 2022 as commodity prices remain near or at all-time highs. Our sales are up on almost all of our product offerings for the six months ended May 31, 2022 including beet equipment, manure spreaders, grinder mixers and land maintenance equipment. We expect strong demand for our products to continue in the short term as commodity prices remain high with concerns of global food shortages and with supply chain pressure creating agricultural equipment availability issues. We have seen repeated disruptions in our supply chain so far in fiscal 2022. As a result of supply chain disruptions, our planning department has been placing purchase orders and bringing in inventory further in advance of production dates than we have historically. This, as well as price increases, have led to an inventory increase of approximately $1.7 million for the first six months of fiscal 2022. Gross margin for our agricultural products segment for the three-month period ended May 31, 2022 was 35.5% compared to 36.4% for the same period in fiscal 2021. Gross margin for our agricultural products segment for the six-month period ended May 31, 2022 was 31.3% compared to 31.1% for the same period in fiscal 2021. In a period of rising costs, the Company has been proactive to maintain margins through price increases. The Company expects continued downward pressure on margins as inflation continues to affect the overall economy. The Company limited new orders on the spring early order program to mitigate further margin erosion. The Company’s current backlog fills the production schedule through the end of the 2022 calendar year.
Our second quarter sales in our Modular Buildings segment were $1,209,000 compared to $1,194,000 for the same period in fiscal 2021, an increase of $15,000, or 1.3%. Our year-to-date sales in our Modular Buildings segment were $2,077,000 compared to $2,485,000 for the same period in fiscal 2021, a decrease of $408,000, or 16.4%. While our sales increased in the three months ended May 31, 2022, we did see a decline in sales for the six months ended May 31, 2022, as we completed a large construction project in the first six months of fiscal 2021 that boosted our revenue for that period. While this project did boost our revenue in 2021, we expect the margin quality of our fiscal 2022 projects and backlog to be stronger than the margin quality of the completed project in fiscal 2021. Our current backlog and quoting activity indicate we should see a strong finish to fiscal 2022. Gross margin for the three- and six-month periods ended May 31, 2022 was 15.8% and 11.2%, respectively, compared to 15.7% and 9.1% for the same respective periods in fiscal 2021. The large construction project we finished in Q2 of fiscal 2021 brought down our fiscal 2021 margin. Rising construction material costs has put additional pressure on our gross margin in fiscal 2022. In addition, we have seen delays in delivery of construction materials that has increased our lead times on building deliveries.
Our Tools segment had sales of $750,000 and $1,334,000 during the three- and six-month periods ended May 31, 2022, respectively, compared to $658,000 and $1,269,000 for the same respective periods in fiscal 2021, a 14.0% increase and a 5.1% increase, respectively. Sales have rebounded in this segment to our pre-pandemic levels. As oil prices continue to rise, we expect some of our lost customers during fiscal 2020 to have demand for tools once again. We installed new equipment in June to help increase our output and ability to generate more sales in this time of high demand. Gross margin was 15.6% and 14.2% for the three- and six-month periods ended May 31, 2021, respectively, compared to 19.9% and 19.9% for the same respective periods in fiscal 2021. Our gross margin has decreased year on year due to high staff turnover in fiscal 2022 that has decreased the efficiency of our direct labor.
Expenses
Our second quarter consolidated selling expenses were $631,000 compared to $544,000 for the same period in fiscal 2021. Our year-to-date selling expenses were $1,118,000 in fiscal 2022 compared to $1,017,000 for the same period in fiscal 2021. Our selling expenses are up in fiscal 2022 due to increased commission expense from a sales increase and the addition of an inside sales position that focuses primarily on whole goods to improve the customer service experience in our agricultural products segment. We also have additional expense related to trade show participation in fiscal 2022 as COVID-19 restrictions have loosened. Selling expenses as a percentage of sales were 8.7% for the three- and six-month periods ended May 31, 2022, compared to 9.5% and 9.2% for the same respective periods in fiscal 2021.
Consolidated engineering expenses were $144,000 and $278,000 for the three- and six-month periods ended May 31, 2022, respectively, compared to $122,000 and $244,000 for the same respective periods in fiscal 2021. The increase in engineering expenses year on year is due to improved company benefit offering and salary increases. Engineering expenses as a percentage of sales were 2.0% and 2.2% for the three- and six-month periods ended May 31, 2022, respectively, compared to 2.1% and 2.2% for the same respective periods in fiscal 2021.
Consolidated administrative expenses for the three- and six-month periods ended May 31, 2022 were $1,097,000 and $2,105,000, respectively, compared to $907,000 and $1,724,000 for the same respective periods in fiscal 2021. Administrative expenses as a percentage of sales were 15.1% and 16.3% for the three- and six-month periods ended May 31, 2022, respectively, compared to 15.9% and 15.5% for the same respective periods in fiscal 2021. While administrative expenses are up dollar wise, they have remained steady as a percentage of sales. We have spent additional dollars on administrative expenses for employee retention programs, bonuses, and recruitment.
Net Income (Loss)
Consolidated net income was $175,000 for the three-month period ended May 31, 2022, compared to $64,000 for the same period in fiscal 2021. Our consolidated net loss for the six months ended May 31, 2022, was $(231,000) compared to $(251,000) in the same period in fiscal 2021. The improvement for the three and six months ended May 31, 2022 is fueled by the success of our Agricultural Products segment. Despite the success, we believe we can increase certain production areas by updating capital equipment. We have taken the initial steps to drive our business towards increased automation and efficiency to maximize our manufacturing output and drive our costs down by securing funding from Alumni Capital and Iowa Economic Development’s Manufacturing 4.0 program. We expect to see significant improvement in our operational ability as we are able to implement new equipment in our facility over the next 24 months. Our Modular Buildings segment had a slow start to fiscal 2022 but reached profitability each of the last two months of the fiscal quarter. We are seeing strong demand for our modular buildings to start out the second half of fiscal 2022. Despite the sales increase in the Tools segment, we have seen decreased profitability from employee turnover and rising overhead costs. We are working on additional price increases and automation to increase our volume and margin in the second half of fiscal 2022.
Order Backlog
The consolidated order backlog net of discounts as of July 10, 2022, was $10,781,000 compared to $7,416,000 as of July 10, 2021, an increase of $3,365,000 or 45%. The Agricultural Products segment order backlog was $8,643,000 as of July 10, 2022, compared to $6,005,000 in fiscal 2021 an increase of $2,638,0000 or 44%. We continue to see record backlog amounts in our Agricultural Products segment due to high commodity prices and a strong product offering. The backlog for the Modular Buildings segment was $1,401,000 as of July 10, 2022, compared to $987,000 in fiscal 2021, an increase of $414,000 or 42%. The backlog for the Tools segment was $737,000 as of July 10, 2022, compared to $424,000 in fiscal 2021, an increase of $313,000 or 74%. With our backlog up significantly in all three segments, we will be focusing on ways to increase our production output with automation and new capital equipment over the next 18 months. Our order backlog is not necessarily indicative of future revenue to be generated from such orders due to the possibility of order cancellations and dealer discount arrangements we may enter into from time to time.
Liquidity and Capital Resources
Our primary source of funds for the six months ended May 31, 2022 was cash generated by financing activities. We utilized customer deposits of approximately $1.5 million from our early order program to fund rising inventory demands from increased backlog and supply chain delays. The Company offered a 3% discount for a 50% deposit on equipment orders during the program period. The deposits allowed us to better lock in pricing on materials and maintain product margins in times of volatility. We also used term debt to fund a roof repair project for our Armstrong facility. Inventory, modular building contract fulfillment and deposits on equipment were the primary uses of cash in the first six months of fiscal 2022. We expect our primary capital needs for the remainder of fiscal 2022 to relate to operating costs, fulfillment of customer deposits, purchases of equipment that improve our operations, and the retirement of debt. We may begin drawing on the $3,000,000 equity line of credit we secured with Alumni Capital as a source of cash for operational improvements.
We have $5,550,000 combined availability on revolving lines of credit with Bank Midwest that, as of May 31, 2022, had an outstanding principal balance of $4,703,225. The $5,000,000 line of credit is scheduled to mature on March 30, 2023 while the additional $550,000 of line availability is scheduled to mature on November 30, 2022. The Company secured the additional line of credit to help address increased inventory needs during our beet season and to help with cash outlay needed for an initial floorplan program.
Our 2022 early order program affected cash inflows from accounts receivable as we allowed our customers a floorplan option which allows them to pay us the sooner of retail date or 180 days. As of May 31, 2022, there is approximately $463,000 in our accounts receivable on extended floorplan terms that would have typically been collected by the balance sheet date.
We believe our current operations and financing arrangements will provide sufficient cash to finance operations and pay debt when due during the next twelve months. We expect to continue to be able to procure financing upon reasonable terms.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a smaller reporting company, we are not required to provide disclosure pursuant to this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The persons serving as our principal executive officer and principal financial officer have evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period subject to this report. Based on this evaluation, the persons serving as our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of May 31, 2022. Our management has concluded that the consolidated financial statements included in this report present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
We are currently not a party to any material pending legal proceedings.
Item 1A. Risk Factors.
As a smaller reporting company, we are not required to provide disclosure pursuant to this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
The following table presents the information with respect to purchases made by us of our common stock during the second quarter of fiscal 2022:
|
Total Number of Shares Purchased (1) |
Average Price Paid per Share |
Total Number of Shares Purchased as part of Publicly Announced Plans or Programs |
Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs |
|||||||||||||
|
March 1 to March 31, 2022 |
- | $ | - | N/A | N/A | |||||||||||
|
April 1 to April 30, 2022 |
- | $ | - | N/A | N/A | |||||||||||
|
May 1 to May 31, 2022 |
9,636 | $ | 5.97 | N/A | N/A | |||||||||||
|
Total |
9,636 | $ | 5.97 | |||||||||||||
(1) Reflects shares withheld pursuant to the terms of restricted stock awards under our 2020 Plan to offset tax withholding obligations that occur upon vesting and release of shares. The value of the shares withheld is the closing price of our common stock on the date the relevant transaction occurs.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Reserve Line of Credit
Effective May 17, 2022, we secured a $550,000 reserve revolving line of credit with Bank Midwest that allows us additional funding over our current $5,000,000 line of credit. The revolving line of credit matures on November 30, 2022 and requires monthly interest-only payments. The updated Promissory Note with Bank Midwest is included as Exhibit 10.3 hereto and is incorporated by reference.
Roof Term Loan
We also entered into a term loan on May 17, 2022 in the amount of $350,000 to pay for roof repairs on our Armstrong facility. The term loan requires 59 payments of $2,972 with an estimated balloon payment of $268,176 on the maturity date of May 15, 2027. The updated Promissory Note with Bank Midwest is included as Exhibit 10.4 hereto and is incorporated by reference.
Item 6. Exhibits.
|
Exhibit No. |
Description |
|
10.1 |
|
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10.2 |
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10.3 |
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10.4 |
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31.1 |
Certificate of Chief Executive Officer pursuant to 17 CFR 13a-14(a) – filed herewith. |
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31.2 |
Certificate of Chief Financial Officer pursuant to 17 CFR 13a-14(a) – filed herewith. |
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32.1 |
Certificate of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 - filed herewith. |
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32.2 |
Certificate of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 - filed herewith. |
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101 |
The following materials from this report, formatted in iXBRL (Inline Extensible Business Reporting Language) are filed herewith: (i) condensed consolidated balance sheets, (ii) condensed consolidated statement of operations, (iii) condensed consolidated statements of cash flows, and (iv) the notes to the condensed consolidated financial statements. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101) |
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: July 15, 2022 | By: | /s/ David A. King | ||
| David A. King | ||||
| President and Chief Executive Officer | ||||
| Date: July 15, 2022 | By: | /s/ Michael W. Woods | ||
| Michael W. Woods | ||||
| Chief Financial Officer | ||||
Exhibit 31.1
CERTIFICATION PURSUANT TO 17 CFR 240.13(a)-14(a)
(SECTION 302 CERTIFICATION)
I, David A. King, certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of Art’s-Way Manufacturing Co., Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant, as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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a) |
Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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ART’S-WAY MANUFACTURING CO., INC. |
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Date: |
July 15, 2022 |
/s/ David A. King |
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David A. King |
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President and Chief Executive Officer |
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Exhibit 31.2
CERTIFICATION PURSUANT TO 17 CFR 240.13(a)-14(a)
(SECTION 302 CERTIFICATION)
I, Michael W. Woods, certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of Art’s-Way Manufacturing Co., Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant, as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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a) |
Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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ART’S-WAY MANUFACTURING CO., INC. |
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Date: |
July 15, 2022 |
/s/ Michael W. Woods |
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Michael W. Woods |
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Chief Financial Officer |
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Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report on Form 10-Q of Art’s-Way Manufacturing Co., Inc. (the “Company”) for the fiscal quarter ended May 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David A. King, as the President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
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1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
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2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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Date: |
July 15, 2022 |
/s/ David A. King |
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David A. King |
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President and Chief Executive Officer |
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Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report on Form 10-Q of Art’s-Way Manufacturing Co., Inc. (the “Company”) for the fiscal quarter ended May 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael W. Woods, as the Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
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3. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
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4. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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Date: |
July 15, 2022 |
/s/ Michael W. Woods |
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Michael W. Woods |
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Chief Financial Officer |
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