ARTW Arts Way Manufacturing Co Inc

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

[x]	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended May 31, 2015

or

[ ]	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______ to ______

 

Commission File No. 0-5131

 

ART’S-WAY MANUFACTURING CO., INC.

(Exact name of registrant as specified in its charter)

 

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)

 

(712) 864-3131

(Registrant’s telephone number, including area code)

 

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. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:

 

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☒

                                   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

Number of common shares outstanding as of June 17, 2015: 4,061,052

 

 

Art’s-Way Manufacturing Co., Inc.

 

Index

 

Page No.

 

PART I – FINANCIAL INFORMATION		1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets May 31, 2015 and November 30, 2014	1
	Condensed Consolidated Statements of Operations Three- and Six-month periods ended May 31, 2015 and May 31, 2014	2
	Condensed Consolidated Statements of Cash Flows Six-month periods ended May 31, 2015 and May 31, 2014	3
	Notes to Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15
Item 4.	Controls and Procedures	16
PART II – OTHER INFORMATION		16
Item 1.	Legal Proceedings	16
Item 1A.	Risk Factors	16
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 3.	Defaults Upon Senior Securities	16
Item 4.	Mine Safety Disclosures	16
Item 5.	Other Information	16
Item 6.	Exhibits	16
	SIGNATURES	17
	Exhibit Index	18

 

 

PART I – FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

 

ART’S-WAY MANUFACTURING CO., INC.

Condensed Consolidated Balance Sheets

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

ART’S-WAY MANUFACTURING CO., INC.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

ART’S-WAY MANUFACTURING CO., INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

Notes to Unaudited 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 Item 1 of Part I of this report and the audited consolidated financial statements and related notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K and the amendment thereto on Form 10-K/A for the fiscal year ended November 30, 2014. Some of the statements in this report may contain 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 “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 expectations regarding our warranty costs and order backlog; (ii) our beliefs regarding the sufficiency of working capital and cash flows, and our continued ability to renew or obtain financing on reasonable terms when necessary; (iii) the impact of recently issued accounting pronouncements; (iv) and our expectations concerning our primary capital and cash flow needs.

 

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 tightening credit markets on our ability to continue to obtain financing on reasonable terms; (ii) our ability to continue to meet debt obligations and comply with financial covenants; (iii) obstacles related to integration of acquired product lines and businesses; (iv) the effect of general economic conditions, including consumer and governmental spending, on the demand for our products and the cost of our supplies and materials; (v) fluctuations in seasonal demand and our production cycle; and (vi) other factors described from time to time in our reports to the SEC. 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 the financial statements as of May 31, 2015 have remained unchanged from November 30, 2014. Disclosure of these critical accounting policies is incorporated by reference from Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended November 30, 2014.

 

 

Results of Operations

 

Net Sales and Cost of Sales

 

Our consolidated corporate sales for the three- and six-month periods ended May 31, 2015 were $7,804,000 and $15,093,000, respectively, compared to $9,469,000 and $15,706,000 during the same respective periods in 2014, a $1,665,000, or 17.6%, decrease for the quarter and a $613,000 or 3.9% decrease year-to-date. On a quarterly basis, much of the decrease is due to the delay of shipments due to extreme weather conditions in 2014, which shifted revenues traditionally recognized in the first fiscal quarter to the second. The decreases year-to-date in revenue are primarily due to decreased sales of our Universal Harvester line of reels and at our tools segment. Consolidated gross margin for the three- and six-month periods ended May 31, 2015 was 28.3% and 28.2%, respectively, compared to 24.6% and 23.4% for the same respective periods in fiscal 2014.

 

Our second quarter agricultural segment sales were $6,365,000 compared to $7,562,000 during the same period of 2014, a decrease of $1,197,000, or 15.8%. This decrease is primarily due to higher second quarter sales in 2014 that had been delayed from the first quarter due to inclement weather. Our year-to-date agricultural segment sales were $11,681,000 in 2015 as compared to $12,004,000 in 2014, a $323,000, or 2.7% decrease. This decrease is largely due to the previously mentioned decline in sales of Universal Harvester reels, but is offset by increased grinder mixer sales. The gross margin of our agricultural products segment for the three- and six-months ended May 31, 2015 was 30.1% and 31.0%, respectively, compared to 26.3% and 24.6% for the same respective periods in 2014. Most of this increase is due to greater efficiencies in our manufacturing facilities and improved management of our inventories as compared to the previous year.

 

Our second quarter and year-to-date sales at our pressurized vessels segment were $476,000 and $1,003,000, respectively, compared to $475,000 and $898,000 for the same respective periods in 2014. The year-to-date increase of $105,000, or 11.7%, was caused in part by the addition of our new line of stock tanks available for sale. Gross margin for the quarter and year-to-date ended May 31, 2015 was 16.2% and 10.6% respectively, compared to 3.8% and 6% for the same respective periods in 2014. This increase is largely due to manufacturing efficiencies gained to-date during fiscal 2015.

 

Our three- and six-month sales for our modular building segment were $409,000 and $1,058,000, respectively, compared to $537,000 and $998,000 for the same respective periods in fiscal 2014, a decrease of $128,000, or 23.8%, for the three-month period but a $60,000, or 6.0%, increase for the six-month period. Gross margin for the quarter and year-to-date ended May 31, 2015 was 22.0% and 16.0%, respectively, compared to 10.2% and 11.7% for the same respective periods in 2014.

 

Our tools segment had sales of $554,000 during the three months ended May 31, 2015, compared to $895,000 for the same period in 2014, a 38.1% decrease. Year-to-date sales for our tools segment were $1,351,000 in 2015 compared to $1,806,000 in 2014, a $455,000, or 25.2%, decrease. These decreases are largely due to a general decline in the energy industry. Gross margin for out tools segment was 22.4% and 26.7% for the three-and six-month periods ending May 31, 2015, respectively, compared to 29.5% and 30.1% for the same respective periods of fiscal 2014.

 

Expenses 

 

Our second fiscal quarter consolidated selling expenses were $581,000 compared to $640,000 for the same period in 2014. Our year-to-date consolidated selling expenses were $1,146,000 in 2015 compared to $1,176,000 for the same period in 2014. The decreases in the second quarter and year-to-date are largely due to decreased commission and salary expense compared to prior year periods. Selling expenses as a percentage of sales were 7.4% and 7.6% for the three- and six-month periods ended May 31, 2015, respectively, compared to 6.8% and 7.5% for the same respective periods in 2014.

 

Consolidated engineering expenses were $120,000 and $235,000 for the three and six months ended May 31, 2015, respectively, compared to $118,000 and $232,000 for the same respective periods in 2014. Engineering expenses as a percentage of sales were 1.5% and 1.6% for the three- and six-month periods ended May 31, 2015, respectively, compared to 1.2% and 1.5% for the same respective periods in 2014.

 

Consolidated administrative expenses for the three and six months ended May 31, 2015 were $1,093,000 and $2,136,000, respectively, compared to $1,126,000 and $2,111,000 for the same respective periods in 2014. Administrative expenses as a percentage of sales were 14.0% and 14.2% for the three- and six-month periods ended May 31, 2015, respectively, compared to 11.9% and 13.4% for the same respective periods in 2014.

 

 

Income

 

Consolidated net income was $232,000 for the three-month period ended May 31, 2015, compared to $253,000 for the same period in 2014. This decrease is due to the decreased revenue levels in the second quarter of fiscal 2015. Consolidated net income for the six-month period ended May 31, 2015 was $400,000 compared to a net loss of $5,000 in the same period of 2014. This increase in income is due to a $622,000 increase in operating income in our agricultural products segment in the first six months of 2015 compared to 2014, but was offset by operating losses at our tools and modular buildings segments.

 

Order Backlog

 

The consolidated order backlog net of discounts as of June 25, 2015 was $5,706,000 compared to $6,747,000 as of June 25, 2014. The agricultural products segment order backlog was $3,316,000 as of June 25, 2015 compared to $5,821,000 in fiscal 2014. We are just now experiencing decreased order volume as a result of the overall downturn in the agricultural economy, which has been affecting other agricultural manufacturers for some time. The backlog for the pressurized vessels segment was $463,000 as of June 25, 2015, compared to $227,000 in fiscal 2014. The backlog for the modular buildings segment was $1,388,000 as of June 25, 2015, compared to $200,000 in fiscal 2014. Most of this increase is due to a new order for seven Calf Care buildings that will be joined into a single complex. The backlog for the tools segment was $539,000 as of June 25, 2015, compared to $499,000 in fiscal 2014. 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 sources of funds for the six months ended May 31, 2015 were proceeds from the U.S. Bank Line of Credit and increased customer deposits; our primary uses of cash were for inventories, payments on term debt, and dividends paid to stockholders. We expect our primary capital needs to relate to costs of operation, including production.

 

We have an $8,000,000 revolving Line of Credit with U.S. Bank, which, as of May 31, 2015, had an outstanding principal balance of $3,318,878. The Line of Credit is renewable annually, and is scheduled to mature on May 1, 2016. For additional information about our financing activities, please refer to Note 8 to the audited consolidated financial statements and to the discussion entitled “Liquidity and Capital Resources,” each contained in our Annual Report on Form 10-K and our amendment thereto on Form 10-K/A for the fiscal year ended November 30, 2014, as well as Note 7 to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report.

 

We believe that our cash flows from operations and current financing arrangements provide sufficient cash to finance operations for the next twelve months. We expect to continue to rely on cash from financing activities to supplement our cash flows from operations in order to meet our liquidity and capital expenditure needs in the near future. We expect to continue to be able to procure financing upon reasonable terms.

 

Off Balance Sheet Arrangements

 

None.

 

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), 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 and provide reasonable assurance that information required to be disclosed by us in the periodic and current reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the periods specified by the Securities and Exchange Commission’s rules and forms.

 

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.

 

None.

 

Item 3.

Defaults Upon Senior Securities.

 

None.

 

Item 4.

Mine Safety Disclosures.

 

Not applicable.

 

Item 5.

Other Information.

 

On May 1, 2015, the Company extended the maturity date of its $8,000,000 revolving line of credit with U.S. Bank from May 1, 2015 to July 1, 2015 pursuant to the terms of an Amendment to Loan Agreement and Note with U.S. Bank. On June 23, 2015, the Company further extended the maturity date of its line of credit from July 1, 2015 to May 1, 2016. These Amendments to Loan Agreement and Note are attached hereto as Exhibit 10.1 and 10.2 and are incorporated herein by reference.

 

Item 6.

Exhibits.

 

See “Exhibit Index” on page 20 of this report.

 

 

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: June 30, 2015		By:	/s/ Carrie L. Majeski
			Carrie L. Majeski
			President and Chief Executive Officer
Date: June 30, 2015		By:	/s/ Amber J. Murra
			Amber J. Murra
			Chief Financial Officer

 

 

Art’s-Way Manufacturing Co., Inc.

Exhibit Index

Form 10-Q for the Quarterly Period Ended May 31, 2015

 

 

 

Exhibit No.	Description
10.1	Amendment to Loan Agreement and Note dated May 1, 2015 – filed herewith.
10.2	Amendment to Loan Agreement and Note dated June 23, 2015 – filed herewith.
31.1	Certificate of Chief Executive Officer pursuant to 17 CFR 13a-14(a) – filed herewith.
31.2	Certificate of Chief Financial Officer pursuant to 17 CFR 13a-14(a) – filed herewith.
32.1	Certificate of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 - filed herewith.
32.2	Certificate of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 - filed herewith.
101	The following materials from this report, formatted in XBRL (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.

 

 

 

 18

Exhibit 10.1

 

AMENDMENT TO LOAN AGREEMENT AND NOTE

 

This amendment (the “Amendment”) is made between the undersigned borrower (the “Borrower”) and U.S. Bank National Association (the “Bank”) and shall be effective as of the date set forth on the last page of the Amendment, except as otherwise provided below.

 

RECITALS

 

A.

Borrower (or predecessor) and Bank (or predecessor) executed a loan agreement originally dated or amended or restated as of May 1, 2013 (as further amended and/or restated, the “Agreement”). In accordance with the Agreement, Borrower (or predecessor) executed a note originally dated or amended as of May 1, 2013 (as further amended and/or restated, the “Note”). The Agreement, the Note and all collateral and/or other documents, which may or may not be identified in the Agreement, which supplement, secure or otherwise relate to the credit facility created under the Agreement and evidenced by the Note are collectively referred to as the “Loan Documents”. The Loan Documents set forth the terms and conditions upon which Borrower has obtained or may obtain a loan or loans from Bank in the original or amended or restated principal amount of $8,000,000.00, as such amount may have been or may from time to time be increased or decreased according to the terms of the Loan Documents.

 

B.	Borrower has requested that Bank permit certain modifications to the Agreement and Note as described below.

 

C.	Bank has agreed to such modifications, but only upon the terms and conditions outlined in the Amendment.

 

In consideration of the mutual covenants contained herein, and for other good and valuable consideration, Borrower and Bank agree as follows:

 

ADDITIONS, DELETIONS OR CHANGES IN TERMS

 

The following provisions are hereby added to the Agreement and Note or, if so indicated below, specified provisions of the Agreement and Note are modified, in part, or deleted or performance thereof is waived to the extent provided below. If any provision or partial provision added below already exists in the Agreement or Note, such provision is restated in its entirety. Capitalized terms used in the Amendment not otherwise defined herein shall have the meanings ascribed to them in the Agreement.

 

Modification of Maturity Date.     Any references in the Agreement or Note to the maturity date or date of final payment are hereby deleted and replaced with “July 1, 2015”.

 

Interest Rate.     Notwithstanding anything to the contrary in the Note or the Amendment, for purposes of determining any rate of interest which is based upon a stated formula, neither the interest rate nor the index or other referenced rate upon which the interest rate is based shall at any time be less than 0%.

 

Payment Schedule.     The payment schedule for the Note shall be amended as follows:

 

Interest is payable beginning June 1, 2015, and on the same date of each consecutive month thereafter ( excepts that if a given month does not have such a date, the last day of such month), plus a final interest payment with the final payment of principal.

 

Principal is payable on July 1, 2015, the maturity date.

 

Default Interest Rate.     Notwithstanding any provision of the Note to the contrary, upon any default or at any time during the continuation thereof (including failure to pay upon maturity), Bank may, at its option and subject to applicable law, (a) increase the interest rate on the Note to a rate of 5% per annum plus the interest rate otherwise payable under the Note and (b) until Bank elects to accelerate payment of the Note according to the default section, increase the required periodic payments under the Note accordingly. Notwithstanding the foregoing and subject to applicable law, upon the occurrence of a default by Borrower or any guarantor involving bankruptcy, insolvency, receivership proceedings or an assignment for the benefit of creditors, the interest rate on the Note shall automatically increase to a rate of 5% per annum plus the rate otherwise payable under the Note.

 

MISCELLANEOUS TERMS

 

Effectiveness of Prior Documents.     Except as specifically amended hereby, the Agreement, the Note and the other Loan Documents shall remain in full force and effect in accordance with their respective terms. All warranties and representations contained in the Agreement and the other Loan Documents are hereby reconfirmed as of the date hereof. All collateral previously provided to secure the Agreement and/or Note continues as security, and all guaranties guaranteeing obligations under the Loan Documents remain in full force and effect. This is an amendment, not a novation.

 

 

Preconditions to Effectiveness.      The Amendment shall only become effective upon execution by Borrower and Bank, and approval by any other third party required by Bank.

 

No Waiver of Defaults; Warranties.     The Amendment shall not be construed as or be deemed to be a waiver by Bank of existing defaults by Borrower, whether known or undiscovered. All agreements, representations and warranties made herein shall survive the execution of the Amendment.

 

Counterparts.     The Amendment may be signed in any number of counterparts, each of which shall be considered an original, but when taken together shall constitute one document.

 

Authorization.     Borrower represents and warrants that the execution, delivery and performance of the Amendment and the documents referenced herein are within the authority of Borrower and have been duly authorized by all necessary action.

 

USA PATRIOT Act; Anti-Corruption Laws, Sanctions and Anti-Terrorism Laws.

 

(a)     IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. Bank will ask each person in a financial transaction their name, address and other information that will allow Bank to identify such person. Bank may also ask to see other documents that substantiate a person’s identity.

 

(b)     Borrower represents, warrants, covenants and agrees as follows:

 

(i)     Borrower, each and all entities 50% or more owned, directly or indirectly, by Borrower (“Subsidiaries”), and their respective officers, employees, directors and agents are and at all times will remain in compliance with the following: (A) all laws, rules, and regulations of any jurisdiction applicable to Borrower or is Subsidiaries from time to time concerning or relating to bribery or corruption (“Anti-Corruption Laws”), (B) economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by the U.S. government, including those administered by the U.S. Department of Treasury’s Office of Foreign Assets Control or successor (“OFAC”) or the U.S. Department of State or successor (“Sanctions”), and (C) the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V) and any enabling legislation or executive order relating thereto or successor statute thereto (“Anti-Terrorism Laws”), all as may by amended from time to time.

 

(ii)     The loans made hereunder comply with, and neither the loans made hereunder nor the use of the proceeds thereof will violate, any Anti-Corruption Laws, Sanctions, or Anti-Terrorism Laws.

 

(iii)     None of the Borrower, any Subsidiary or any of their respective directors, officers or employees is (A) listed in any Sanctions-related list of designated persons maintained by OFAC or the U.S. Department of State, (B) operating, organized or resident in a country or territory which is itself the subject or target of any comprehensive Sanctions (“Sanctioned Country”), (C) an agency, political subdivision or instrumentality of the government of a Sanctioned Country, or (D) 50% or more owned, directly or indirectly, by any of the above.

 

(iv)     Borrower shall, and shall cause each Subsidiary to, provide such information and take such actions as are reasonably requested by Bank in order to assist Bank in maintaining compliance with Anti-Corruption Laws, Sanctions and the PATRIOT Act.

 

Copies; Electronic Records.     Borrower hereby acknowledges the receipt of a copy of the Amendment, the Agreement and Note and all other Loan Documents. Bank may, on behalf of Borrower, create a microfilm or optical disk or other electronic image of the Amendment, and any or all of the Loan Documents, including the Agreement and Note. Bank may store the electronic image of such Amendment and Loan Documents in its electronic form and then destroy the paper original as part of Bank’s normal business practices, with the electronic image deemed to be an original. To the extent permitted by law, Borrower and Bank agree that Bank may convert the Note into a “transferable record” or the equivalent thereof as defined in applicable law and that such transferable record shall be the authoritative copy of the Note. Bank, on its own behalf, may control and transfer such authoritative copy as permitted by such law.

 

 

Attachments.     All documents attached hereto, including any appendices, schedules, riders, and exhibits to the Amendment, are hereby expressly incorporated herein by reference.

 

Dated as of May 1, 2015

 

BORROWER:

 

Art’s Way Manufacturing Co., Inc.
a/an Delaware Corporation

 

By: /s/ Carrie Majeski
Name and Title: Carrie Majeski, President

 

BANK:

 

Agreed to:
U.S. Bank National Association

 

By: /s/ Douglas Ragaller
Name and Title: Douglas Ragaller, Market President

 

Exhibit 10.2

 

AMENDMENT TO LOAN AGREEMENT AND NOTE

 

This amendment (the “Amendment”) is made between the undersigned borrower (the “Borrower”) and U.S. Bank National Association (the “Bank”) and shall be effective as of the date set forth on the last page of the Amendment, except as otherwise provided below.

 

RECITALS

 

A.

Borrower (or predecessor) and Bank (or predecessor) executed a loan agreement originally dated or amended or restated as of May 1, 2013 (as further amended and/or restated, the “Agreement”). In accordance with the Agreement, Borrower (or predecessor) executed a note originally dated or amended as of May 1, 2013 (as further amended and/or restated, the “Note”). The Agreement, the Note and all collateral and/or other documents, which may or may not be identified in the Agreement, which supplement, secure or otherwise relate to the credit facility created under the Agreement and evidenced by the Note are collectively referred to as the “Loan Documents”. The Loan Documents set forth the terms and conditions upon which Borrower has obtained or may obtain a loan or loans from Bank in the original or amended or restated principal amount of $8,000,000.00, as such amount may have been or may from time to time be increased or decreased according to the terms of the Loan Documents.

 

B.	Borrower has requested that Bank permit certain modifications to the Agreement and Note as described below.

 

C.	Bank has agreed to such modifications, but only upon the terms and conditions outlined in the Amendment.

 

In consideration of the mutual covenants contained herein, and for other good and valuable consideration, Borrower and Bank agree as follows:

 

ADDITIONS, DELETIONS OR CHANGES IN TERMS

 

The following provisions are hereby added to the Agreement and Note or, if so indicated below, specified provisions of the Agreement and Note are modified, in part, or deleted or performance thereof is waived to the extent provided below. If any provision or partial provision added below already exists in the Agreement or Note, such provision is restated in its entirety. Capitalized terms used in the Amendment not otherwise defined herein shall have the meanings ascribed to them in the Agreement.

 

Modification of Maturity Date.     Any references in the Agreement or Note to the maturity date or date of final payment are hereby deleted and replaced with “May 1, 2016”.

 

Interest Rate.     Notwithstanding anything to the contrary in the Note or the Amendment, for purposes of determining any rate of interest which is based upon a stated formula, neither the interest rate nor the index or other referenced rate upon which the interest rate is based shall at any time be less than 0%.

 

Payment Schedule.     The payment schedule for the Note shall be amended as follows:

 

Interest is payable beginning July 1, 2015, and on the same date of each consecutive month thereafter (except that if a given month does not have such a date, the last day of such month), plus a final interest payment with the final payment of principal.

 

Principal is payable on May 1, 2016, the maturity date.

 

Default Interest Rate.     Notwithstanding any provision of the Note to the contrary, upon any default or at any time during the continuation thereof (including failure to pay upon maturity), Bank may, at its option and subject to applicable law, (a) increase the interest rate on the Note to a rate of 5% per annum plus the interest rate otherwise payable under the Note and (b) until Bank elects to accelerate payment of the Note according to the default section, increase the required periodic payments under the Note accordingly. Notwithstanding the foregoing and subject to applicable law, upon the occurrence of a default by Borrower or any guarantor involving bankruptcy, insolvency, receivership proceedings or an assignment for the benefit of creditors, the interest rate on the Note shall automatically increase to a rate of 5% per annum plus the rate otherwise payable under the Note.

 

MISCELLANEOUS TERMS

 

Effectiveness of Prior Documents.     Except as specifically amended hereby, the Agreement, the Note and the other Loan Documents shall remain in full force and effect in accordance with their respective terms. All warranties and representations contained in the Agreement and the other Loan Documents are hereby reconfirmed as of the date hereof. All collateral previously provided to secure the Agreement and/or Note continues as security, and all guaranties guaranteeing obligations under the Loan Documents remain in full force and effect. This is an amendment, not a novation.

 

 

Preconditions to Effectiveness.      The Amendment shall only become effective upon execution by Borrower and Bank, and approval by any other third party required by Bank.

 

No Waiver of Defaults; Warranties.     The Amendment shall not be construed as or be deemed to be a waiver by Bank of existing defaults by Borrower, whether known or undiscovered. All agreements, representations and warranties made herein shall survive the execution of the Amendment.

 

Counterparts.     The Amendment may be signed in any number of counterparts, each of which shall be considered an original, but when taken together shall constitute one document.

 

Authorization.     Borrower represents and warrants that the execution, delivery and performance of the Amendment and the documents referenced herein are within the authority of Borrower and have been duly authorized by all necessary action.

 

USA PATRIOT Act; Anti-Corruption Laws, Sanctions and Anti-Terrorism Laws.

 

(a)     IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. Bank will ask each person in a financial transaction their name, address and other information that will allow Bank to identify such person. Bank may also ask to see other documents that substantiate a person’s identity.

 

(b)     Borrower represents, warrants, covenants and agrees as follows:

 

(i)     Borrower, each and all entities 50% or more owned, directly or indirectly, by Borrower (“Subsidiaries”), and their respective officers, employees, directors and agents are and at all times will remain in compliance with the following: (A) all laws, rules, and regulations of any jurisdiction applicable to Borrower or is Subsidiaries from time to time concerning or relating to bribery or corruption (“Anti-Corruption Laws”), (B) economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by the U.S. government, including those administered by the U.S. Department of Treasury’s Office of Foreign Assets Control or successor (“OFAC”) or the U.S. Department of State or successor (“Sanctions”), and (C) the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V) and any enabling legislation or executive order relating thereto or successor statute thereto (“Anti-Terrorism Laws”), all as may by amended from time to time.

 

(ii)     The loans made hereunder comply with, and neither the loans made hereunder nor the use of the proceeds thereof will violate, any Anti-Corruption Laws, Sanctions, or Anti-Terrorism Laws.

 

(iii)     None of the Borrower, any Subsidiary or any of their respective directors, officers or employees is (A) listed in any Sanctions-related list of designated persons maintained by OFAC or the U.S. Department of State, (B) operating, organized or resident in a country or territory which is itself the subject or target of any comprehensive Sanctions (“Sanctioned Country”), (C) an agency, political subdivision or instrumentality of the government of a Sanctioned Country, or (D) 50% or more owned, directly or indirectly, by any of the above.

 

(iv)     Borrower shall, and shall cause each Subsidiary to, provide such information and take such actions as are reasonably requested by Bank in order to assist Bank in maintaining compliance with Anti-Corruption Laws, Sanctions and the PATRIOT Act.

 

Copies; Electronic Records.     Borrower hereby acknowledges the receipt of a copy of the Amendment, the Agreement and Note and all other Loan Documents. Bank may, on behalf of Borrower, create a microfilm or optical disk or other electronic image of the Amendment, and any or all of the Loan Documents, including the Agreement and Note. Bank may store the electronic image of such Amendment and Loan Documents in its electronic form and then destroy the paper original as part of Bank’s normal business practices, with the electronic image deemed to be an original. To the extent permitted by law, Borrower and Bank agree that Bank may convert the Note into a “transferable record” or the equivalent thereof as defined in applicable law and that such transferable record shall be the authoritative copy of the Note. Bank, on its own behalf, may control and transfer such authoritative copy as permitted by such law.

 

 

Attachments.     All documents attached hereto, including any appendices, schedules, riders, and exhibits to the Amendment, are hereby expressly incorporated herein by reference.

 

Dated as of June 23, 2015

 

BORROWER:

 

Art’s Way Manufacturing Co., Inc.
a/an Delaware Corporation

 

By: /s/ Carrie Majeski
Name and Title: Carrie Majeski, President

 

BANK:

 

Agreed to:
U.S. Bank National Association

 

By: /s/ Douglas Ragaller
Name and Title: Douglas Ragaller, Market President

 

Exhibit 31.1

 

CERTIFICATION PURSUANT TO 17 CFR 240.13(a)-14(a)

(SECTION 302 CERTIFICATION)

 

I, Carrie L. Majeski, certify that:

 

1.	I have reviewed this quarterly report on Form 10-Q of Art’s-Way Manufacturing Co., Inc.;

 

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;

 

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;

 

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:

 

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;

 

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;

 

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

 

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

 

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):

 

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

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

 

			ART’S-WAY MANUFACTURING CO., INC.
Date:	June 30, 2015		/s/ Carrie L. Majeski
			Carrie L. Majeski
			President and Chief Executive Officer

 

Exhibit 31.2

 

CERTIFICATION PURSUANT TO 17 CFR 240.13(a)-14(a)

(SECTION 302 CERTIFICATION)

 

I, Amber J. Murra, certify that:

 

1.	I have reviewed this quarterly report on Form 10-Q of Art’s-Way Manufacturing Co., Inc.;

 

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;

 

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;

 

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:

 

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;

 

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;

 

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

 

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

 

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):

 

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

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

 

			ART’S-WAY MANUFACTURING CO., INC.
Date:	June 30, 2015		/s/ Amber J. Murra
			Amber J. Murra
			Chief Financial Officer

 

 

 

 

 

 

 

 

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, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Carrie L. Majeski, 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:

 

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

 

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

			ART’S-WAY MANUFACTURING CO., INC.
Date:	June 30, 2015		/s/ Carrie L. Majeski
			Carrie L. Majeski
			President and Chief Executive Officer

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, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Amber J. Murra, 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:

 

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

 

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

			ART’S-WAY MANUFACTURING CO., INC.
Date:	June 30, 2015		/s/ Amber J. Murra
			Amber J. Murra
			Chief Financial Officer