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 the reasons described in this report. These factors include, but are not limited to: economic conditions that affect demand for our products; our ability to maintain compliance with our loan covenants, renew our line of credit and retain sufficient cash; the ability of our suppliers to meet our demands for raw materials and component parts; fluctuations in the price of raw materials, especially steel; our ability to predict and meet the demands of each market in which our segments operate; our ability to predict and respond to any seasonal fluctuations in demand; our ability to maintain intellectual property rights; the existence and outcome of product liability claims;claims and other ordinary course litigation; changes in environmental, health and safety regulations and employment laws; our ability to retain our principal executive officer;officers; the cost of complying with laws, regulations, and standards relating to corporate governance and public disclosure, including Section 404 of the Sarbanes-Oxley Act and related regulations implemented by the SEC, and the demand such compliance places on management’s time; and loan covenant restrictions on our ability to pay dividends. We do not intend to update the forward-looking statements contained in this report. We cannot guarantee future results, levels of activity, performance or achievements. 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.

Art’s-Way Manufacturing Co., Inc., a Delaware corporation (“we,” “us,” “our,” and the “Company”), began operations as a farm equipment manufacturer in 1956.  Since that time, we have become a worldwide manufacturer of agricultural equipment.equipment, specialized modular science buildings and pressurized steel vessels.  Our principal manufacturing plant is located in Armstrong, Iowa.

We have organized our business into three 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.  Art’s-Way Manufacturing manufactures farm equipment under our own and private labels.  Art’s-Way Manufacturing has two wholly-owned operating subsidiaries.  Art’s-Way Vessels manufactures pressure vessels and Art’s-Way Scientific manufactures modular buildings for various uses, commonly animal containment and research laboratories. For detailed financial information relating to segment reporting, see Note 1416 to our financial statements in Item 8 of this report.

Art’s-Way Manufacturing (our “Agricultural Products” segment), which accounted for 71%81.9% of our net revenue in the 20102011 fiscal year, manufactures a variety of specialized farm machinery under our own label, including: portable and stationary animal feed processing equipment and related attachments used to mill and mix feed grains into custom animal feed rations; a crop production line that includes grain drill equipment; a line of hay and forage equipment consisting of forage boxes, blowers, running gear, dump boxes and mergers; stalk shredders; a line of portable grain augers; a line of manure spreaders; sugar beet harvesting equipment; a line of land maintenance equipment; moldboard plows, and moldboard plows.potato harvesters.  We sell our labeled products through independent farm equipment dealers throughout the United S tates.States.  In addition, we manufacture and supply haysilage  blowers under an original equipment manufacturer (OEM) agreement with Case New Holland (CNH).  Sales under our OEM agreement with CNH accounted for 2% of our consolidated sales for the fiscal year ended November 30, 2010.2011. We also provide after-market service parts that are available to keep our branded and OEM produced equipment operating to the satisfaction of the end user of our products.

Art’s-Way Vessels, Inc. (“Art’s-Way Vessels” or our “Pressurized Vessels” segment), which accounted for 5%6.5% of our net revenue in the 20102011 fiscal year, is an Iowa corporation with its principal place of business located in Dubuque, Iowa.  Art’s-Way Vessels produces and sells pressurized vessels, both American Society of Mechanical Engineers (ASME) code and non-code. Art’s-Way Vessels provides a combination of services as a manufacturer and supplier of steel vessels and steel containment systems. We build in carbon steel and stainless steel, ranging from atmospheric (0 PSI) storage vessels up to any PSI pressure rating required.  We provide vessels ranging in size from 4 inches to 168 inches in diameter and in various lengths as our customers require. The vessels are primarily sold to manufacturing facilities that will use the vessel as a component part of their end product.  We primarily serve the following industries: water treatment; air receivers; refineries; co-generation; chemical; petrochemical; storage tanks; agriculture; marine; refrigeration; hydro pneumatic; heavy equipment; pharmaceuticals and mining.  In addition to our role as a fabricator of vessels, we provide services including:  custom CAD drawing; welding; interior linings and exterior finishing; passivation of stainless steel; hydrostatic and pneumatic testing; design, build and finishing of skids; installation of piping; non-destructive examination and heat treating.

Art’s-Way Scientific, Inc. (“Art’s-Way Scientific” or our “Modular Buildings” segment), which accounted for 24%11.6% of our net revenue in the 20102011 fiscal year, is an Iowa corporation with its principal place of business in Monona, Iowa. Art’s-Way Scientific produces and sells modular buildings, which are custom designed to meet the specific research needs of our customers. BuildingsThe buildings we commonly producedproduce range from basic swine buildings to complex containment research laboratories. In 2011, welaboratories.We plan to continue our focus on providing research facilities for academic research institutions, government research and diagnostic centers, public health institutions and private research and pharmaceutical companies, as those are our primary market sectors.  Art’s-Way Scientific provides services f romfrom start to finish by designing, manufacturing, delivering, installing andor renting or financing the building units.

From its beginnings as a producer of portable grinder mixers, our Agricultural Products segment has grown through developing several new products and with our acquisitions.  In 2009,2011, we began manufacturing  a line of portable grain augersmanufactured the Megatater potato harvesting equipment in Salem, South Dakota, and in 2010 we acquired a line of manure spreaders from Roda Manufacturing, Inc., and the M&W line of hay balers from Alamo Group Inc.our Armstrong, Iowa facility, which have not been built for several years.  Today, our Agricultural Products segment manufactures ana wide array of products relating to feed processing, crop production, augers, spreaders, hay and forage, tillage and land management, potato harvesting, and sugar beet harvesting equipment.  We primarily manufacture products under the Art’s-Way, Miller Pro, Roda, M&W, and Badger brand names. Our Agricultural Products segment also maintains a small volume of OEM work for the industry’s leading manufacturers.

 

We build vessels in carbon steel and stainless steel, ranging from atmospheric (0 PSI) storage vessels up to any PSI pressure rating required.  Sizes range from 4” to 168” diameter and larger and to any length of vessel the customer requires.

We supply laboratories for bio-containment, animal science, public health, and security requirements. We custom design, manufacture, deliver, and install laboratories and research facilities to meet customers’ critical requirements. We are seeing significant requests for temporary facilities.  To respond to this demandIn addition, we began leasing buildings to customers in 2010.2010 in response to a number of customer requests for temporary facilities.

We distribute goods for our Agricultural Products segment primarily through a network of approximately 1,800 U.S. and Canadian independent dealers whose customers require specialized agricultural machinery. We have sales representation in 47 states and seven Canadian provinces; however, many dealers sell only service parts for our products.  Our dealers sell our products to various agricultural and commercial customers.  We also maintain a local sales force in our Armstrong, Iowa facility to provide oversight services for our distribution network, communicate with end users, and recruit and train dealers on the uses of our products.  Our local service parts staff is available to help customers and dealers with their service parts needs. Our Pressurized Vessels and Modular Building segme ntssegments traditionally sell products customized to the end-users’ requirements directly to the end-users.

We currently export products to six foreign countries. We have been shipping grinder mixers abroad since 2006, and have recently begun exportingexported portable rollermills as well. We look forward to strengthening these relationships and developing new international markets as well.

Our Agricultural Products segment competes in a highly competitive agricultural equipment industry. We compete with larger manufacturers and suppliers that have broader product offerings and significant resources at their disposal; however, we believe that our competitive strengths allow us to compete effectively in our market.

Management believes that grain and livestock producers, as well as those who provide services to grain and livestock operations, are the primary purchasers of agricultural equipment. Many factors influence a buyer’s choice for agricultural equipment. Any one or all factors may be determinative, but they include brand loyalty, the relationship with dealers, product quality and performance, product innovation, product availability, parts and warranty programs, price and customer service.

While our larger competitors may have resources greater than ours, we believe we compete effectively in the farm equipment industry by serving smaller markets in specific product areas rather than directly competing with larger competitors across an extensive range of products. Art’s-Way Manufacturing caters to niche markets in the agricultural industry. We do not have a direct competitor that has the same product offerings that we do; instead,do. Instead, each of our product lines for Art’s-Way Manufacturing  competes with similar products of many other manufacturers.  Some of our product lines face greater competition than others, but we believe that our products are competitively priced with greater diversity than most competitor product lines. Other companies produce feed processing equipment, sugar bee tbeet harvesting and defoliating equipment, grinders, shredders and other products similar to ours; therefore, we focus on providing the best product available at a reasonable price. Overall, we believe our products are competitively priced with above average quality and performance, in a market where price, product performance and quality are principal elements.

In addition, in order to capitalize on brand recognition for our Agricultural Products segment, we have numerous product lines produced under our labellabels and private labels, and have made strategic acquisitions to strengthen our dealer base.  We also provide aftermarket service parts which are available to keep our branded and OEM-produced equipment operating to the satisfaction of the customer.  Art’s-Way Manufacturing sells products to customers in the United States and six foreign countries through a network of approximately 1,800 independent dealers in the United States and Canada, as well as overseas dealers in the United Kingdom and Australia.

We believe that our competitive pricing, product quality and performance, a network of worldwide and domestic distributors and our strong market share for many of our products allow us to compete effectively in the agricultural products market.

Competition in the pressurized vessel industry is intense.  It is critical in this business to deliver a quality product on a timely basis.  We believe that Art’s-Way Vessels has room for improvements from a delivery standpoint.  We have narrowed the scope of products that it will produce, which we expect will help us to better control production schedules.  We believe Art’s-Way Vessels has the ability and the capacity to increase sales.

We believe the main competitive strength of our Pressurized Vessels segment is our ability to provide products and services under one entity.  Often, the services provided by Art’s-Way Vessels are handled by two or more of our competing suppliers. We have the ability to fabricate pressurized vessels to our customers’ specifications, and we also provide a variety of services before and after installation.  Our high quality products and services save our customers time in an industry where time and quality are of utmost importance.

We expect continued competition from Art’s-Way Scientific’s existing competitors as well as competition from new entrants into the modular building market. To some extent, we believe barriers to entry in the modular building industry limit the competition we face in the industry. Barriers to entry in the market consist primarily of access to capital, access to a qualified labor pool, and the bidding process that accompanies many jobs in the health and education markets. Despite these barriers, manufacturers who have a skilled work force and adequate production facilities could adapt their manufacturing facilities to produce modular structures.

We believe the competitive strength of our Modular Buildings segment is our ability to design and produce high-tech modular buildings in a fraction of the time of conventionalmore quickly thanconventional design/build firms.  Conventional design/build construction may take two to five years, while our modular laboratories can be delivered in as little as six months.  As one of the few companies in the industry to supply turnkey modular buildings and laboratories, we believe we provide high quality buildings at reasonable prices that meet our customers’ time, flexibility and security expectations.

Raw materials for Art’s-Way Manufacturing, Art’s-Way Vessels and Art’s-Way Scientific are acquired from domestic and foreign sources and normally are readily available.  Currently, we purchase the lifter wheels used to manufacture our sugar beet harvesters from a supplier located in China. We also purchase rake tines and gearboxes from a supplier in Italy.  However, these suppliers are not principal suppliers and there are domesticalternative sources for these materials available.materials.

We have an original equipment manufacturer (OEM) supplier agreement with Case New Holland (CNH) for our Agricultural Products segment. Under the OEM agreement, we have agreed to supply CNH’s requirements for certain feed processing and service parts, primarily blowers, under CNH’s label.  The agreement has no minimum requirements and can be cancelled upon certain conditions.  The initial term of the agreement with CNH ran through September 2006, but the agreement continues in force until terminated or cancelled. We have not terminated or cancelled the agreement as of November 30, 2010.2011. For the years ended November 30, 20102011 and 2009,2010, sales under the CNH label aggregated approximately 2% and 8%2% of consolidated sales, respectively.

We maintain manufacturing rights on several products, including those purchased from Miller-St. Nazianz in 2007, which cover unique aspects of design. We also have trademarks covering product identification.  We believe our trademarks and licenses help us to retain existing business and secure new relationships with customers.  We currently have no pending applications for intellectual property rights.

We pay royalties for our use of certain manufacturing rights. Under our OEM and royalty agreement with CNH, CNH sold us the license to manufacture, sell and distribute certain plow products designed by CNH and their replacement and component parts.  We pay semi-annual royalty payments based on the invoiced price of each licensed product and service part we sell.  Under our royalty agreement with Roda, we pay annual royalty payments based on the invoiced price for each product and service part we sell.  Our royalty agreement with M&W requires us to pay royalties on a quarterly basis.

Art’s-Way Manufacturing is continually engaged in research and development activities to improve and enhance our existing products.  We perform research and development activities internally, and the cost of our research and development activities is not borne by our customers.  Our research and development expenses are cyclical; they may be high in one year, but would tend to be lower the next, with an increase in production expenses as our new ideas are manufactured.  Research and development expenses during our 20102011 fiscal year accounted for $182,000$175,000 of our total consolidated engineering expenses, compared to $212,000$188,000 during our 20092010 fiscal year. For more information please see “Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERA TIONS.OPERATIONS.”

Art’s-Way Vessels produces custom tanks and vessels that are manufactured in accordance with specifications provided by our customers. Similarly, Art’s-Way Scientific designs modular buildings in accordance with customer specifications.  Art’s-Way Vessels did not incur any research and development costs in 2010.2011.  Art’s-Way Scientific developed a smart frame which accounted for $6,000 of our total consolidateddid not incur any research and development expenses.costs in 2011.

Art’s-Way Scientific must design, manufacture and install its modular buildings in accordance with state building codes, and the company has been able to achieve the code standards in all instances.  In addition, we are subject to various federal, state and local laws and regulations pertaining to environmental protection and the discharge of materials into the environment. During our 2010 fiscal year, we expended $24,000 on environmental compliance.

As of November 30, 2010,2011, we employed approximately one hundred thirtyone-hundred twenty-six employees at Art’s-Way Manufacturing, fivefour of whom were employed on a part-time basis.  As forof the same date, we had approximately fifteenseventeen full-time employees at Art’s-Way Vessels.  In addition, Art’s-Way Scientific employed approximately twenty fiveseventeen employees, twoone of whom worked on a part-time basis.  We experience immaterial fluctuations in employee levels based upon demand for our product lines, and the numbers provided above do not necessarily represent our peak employment during our 20102011 fiscal year.  See “Item 2. PROPERTIES.”

Our executive offices, production and warehousing facilities are located in Armstrong, Iowa.  These facilities were constructed after 1965 and remain in goodfair condition.  The facilities in Armstrong contain approximately 249,000 square feet of usable space, which includes a 9,200 square foot addition built in fiscal 2009. During fiscal year 2008, we installed approximately 40,100 square feet of raised steel roofing at a cost of $300,000.  During fiscal year 2010, we  updated and remodeled the roof over the 15,000 square feet of office area at a cost of $146,000.  We plan to complete the reroofing project over the next several years. We expect to complete the roof over the 15,000 square feet of office area in 2011.  In addition, we own approximately 127 acres of land west of Armstrong, on which the factory and inventory storage space is situated. We currently lease excess land to third parties for farmi ng.farming.

We had been leasing a small manufacturing facility on a month-to-month basis in Salem, South Dakota.  During fiscal 2010 we purchased this facility.  The facility contains approximately 15,000 square feet of usable space.

We completed construction on a new facility for Art’s-Way Vessels in Dubuque, Iowa as of February 2008.  The facility is 34,450 square feet, steel-framed, with a crane that runs the length of the building.  A paint booth and a blast booth were installed in the first quarter of 2009. The new facility gives usprovides  the capacity needed to hire additional employees and increase production.  We expect that production levels will continue to increase in the future, and we still have excess production capacity for that growth.future.

We completed construction in November 2007 of our facility in Monona, Iowa, which houses the manufacturing for Art’s-Way Scientific. The previous facility was completely destroyed by fire in January 2007.  The facility was custom-designed to meet our production needs. It has approximately 50,000 square feet and accommodates a sprinkler system and crane.

All of our real property is subject to mortgages granted to West Bank as security for our long-term debt.  See “Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – Capital Resources and Credit Facilities” for more information.

We have one class of $0.01 par value common stock.  As of November 30, 2010,2011, we had approximately 10098 stockholders of record.  As of February 11, 2011,9, 2012, we have approximately 102had 100 stockholders of record.

On November 8, 2011, we announced a dividend of $0.06 per share that was paid on November 30, 2011 to stockholders of record as of November 11, 2011.   On November 9, 2010 we announced a dividend of $0.06 per share that was paid on November 30, 2010 to stockholders of record as of November 12,10, 2010.  We expect that the payment of and the amount of any future dividends will depend on our financial condition at that time, and we may have to request permission from our lender to declare dividends in the future.time.

For information on our equity compensation plans, refer to Item 12, “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.”

We believe that our consolidated balance sheet indicates a strong financial position.  During fiscal year 2010,2011, we increaseddecreased our inventoriescurrent liabilities by 25.8%, and long-term liabilities by 6.6% for a total decrease of approximately 15%.  Much of this increase resulted from$2,063,000.  We paid down $695,000 on our acquisition of a line of manure spreaderscredit and $612,000 on notes payable.  Total current assets decreased by approximately 6.8% or $1,235,000.  Cash from Roda Manufacturing, Inc.,operations was used to pay down liabilities and the M&W line of hay balers from Alamo Group Inc..  We also increased our finished goods inventory in order to provide better delivery to our customers.   Payables increased over fiscal 2009 as we acquired raw materialsdebt during the fourth quarter of 2010 in orderfiscal year 2011.  We expect these actions will continue to accommodate a shift in our production schedulefree up future cash for beet equipment to early 2011.investments, acquisitions, or additional debt pay down. We believe our working capital is strong as we move into 2011,2012, because we have obtained prepayments for a portion of our equipment sales and we have availability on our operating line of credit.  Our debt levels increased this year as we financed the new facility in West Union, Iowa; nevertheless we continue to increase our tangible net worth.

Our significant accounting policies are described in Note 1 to our Consolidated Financial Statements contained in Item 8 of this report, which were prepared in accordance with GAAP.Generally Accepted Accounting Principles. Critical accounting policies are those that we believe are both important to the portrayal of our financial condition and results and require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

We believe that the following discussion represents our more critical accounting policies and estimates used in the preparation of our consolidated financial statements, although it is not inclusive.

Inventories are stated at the lower of cost or market, and cost is determined using the standard costing method.  Management monitors the carrying value of inventories using inventory control and review processes that include, but are not limited to, sales forecast review, inventory status reports, and inventory reduction programs.  We record inventory write downs to market based on expected usage information for raw materials and historical selling trends for finished goods. If the assumptions made by management do not occur, we may need to record additional write downs.

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. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be real ized.realized. The ultimate realization of deferred tax assets is entirely dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

Revenue is recognized when risk of ownership and title pass to the buyer, generally upon the shipment of the product. All sales are made to authorized dealers whose application for dealer status has been approved and who have been informed of general sales policies. Any changes in Company terms are documented in the most recently published price lists. Pricing is fixed and determinable according to the Company’s published equipment and parts price lists. Title to all equipment and parts sold shall pass to the buyer upon delivery to the carrier and is not subject to a customer acceptance provision. Proof of the passing of title is documented by the signing of the delivery receipt by a representative of the carrier. Post shipment obligations are limited to any claim with respect to the condition of the equipment or parts. A provision for warranty expenses, based on sales volume, is included in the financial statements. Our returns policy allows for new and saleable parts to be returned, subject to inspection and a restocking charge which is included in net sales. Whole goods are not returnable. Shipping costs charged to customers are included in net sales.  Freight costs incurred are included in cost of goods sold.

In certain circumstances, upon the customer’s written request, we may recognize revenue when production is complete and the good is ready for shipment. At the buyer’s request, we will bill the buyer upon completing all performance obligations, but before shipment. The buyer dictates that we ship the goods per their direction from our manufacturing facility, as is customary with this type of agreement, in order to minimize shipping costs. The written agreement with the customer specifies that the goods will be delivered on a schedule to be determined by the customer, with a final specified delivery date, and that we will segregate the goods from our inventory, such that they are not available to fill other orders. This agreement also specifies that the buyer is required to purchase all goods manufactured under this agreement. Title of the goods will pass to the buyer when the goods are complete and ready for shipment, per the customer agreement. At the transfer of title, all risks of ownership have passed to the buyer, and the buyer agrees to maintain insurance on the manufactured items that have not yet been shipped.  We have operated using bill and hold agreements with certain customers for many years, with consistent satisfactory results for both buyer and seller. The credit terms on this agreement are consistent with the credit terms on all other sales.  All risks of loss are shouldered by the buyer, and there are no exceptions to the buyer’s commitment to accept and pay for these manufactured goods. Revenues recognized at the completion of production in 2011 and 2010 were $532,200 and 2009 were $593,572 and $2,115,533,$593,600, respectively.

Art’s-Way Scientific, Inc. is in the construction industry, and, as such, accounts for long-term contracts on the percentage-of-completion method. Revenue and gross profit are recognized as work is performed based on the relationship between actual costs incurred and total estimated costs at completion. Contract losses are recognized when current estimates of total contract revenue and contract cost indicate a loss. Estimated contract costs include any and all costs appropriately allocable to the contract. The provision for these contract losses will be the excess of estimated contract costs over estimated contract revenues.

Costs and profit in excess of amounts billed are classified as current assets and billings in excess of cost and profit are classified as current liabilities.

Stock-based compensation expense reflects the fair value of stock-based awards measured at the grant date and recognized over the relevant vesting period.  We estimate the fair value of each stock-based 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.

On a consolidated basis, our sales and gross profit increased during our 2010 fiscal year.  Our consolidated net sales totaled $28,951,378$27,620,000 for the periodfiscal year ended November 30, 2010,2011, which represents a 10.1% increase4.6% decrease from our consolidated net sales of $26,296,133$28,951,000 in 2009.2010.  Our consolidated gross profit increased from 20.4%23.5% in 2010 to 23.5% between our 2009 and 2010 fiscal years,25.3% in 2011, or from $5,372,247$6,809,000 to $6,809,136,$7,007,000, respectively.  Our consolidated expenses increased by 7.2%3.3%, from $4,663,858$4,914,000 in 2010 to $4,914,108.$5,077,000 in 2011. Because the majority of our corporate general and administrative expenses are borne by Art’s-Way Manufacturing, that entity represented $3,797,562$4,052,000 of our total consolidated operating expenses, while Art’s-Way Vessels and Art’s-Way Scientific represented $432,792$336,000 and $683,754$689,000 of the tota l,total, respectively. Art’s-Way Manufacturing was responsible for $1,960,516 andprovided operating income of $2,428,000 in 2011.  Art’s-Way Scientific was responsible for $552,481 of our consolidated income from operations.and Art’s-Way Vessels had operating losses of $617,969.$(50,000) and $(448,000), respectively.  Our effective tax rate for the years ending November 30, 2011 and 2010 were 21.0% and 32.4%, respectively, a decrease of 11.4%.  The 11.4% decrease was due to taking advantage of additional tax deductions and credits for our fiscal year 2010 tax filings, which were filed during fiscal year 2011.

As with other farm equipment manufacturers, we depend on our network of dealers to influence customers’ decisions, and dealer influence is often more persuasive than a manufacturer’s reputation or the price of the product.  Following our acquisition of the Miller Pro hay and forage product lines in September 2007, former Miller Pro dealers began selling our products, which management believes improves recognition and acceptance of our products.

Sales of our agricultural products are seasonal; however, we have tried to decrease this impact of seasonality through the development of beet harvesting machinery coupled with private labeled products, as the peak periods for these different products occur at different times.

We believe that our pressurized vessel sales are not seasonal.  Our modular building sales are somewhat seasonal, and we believe that this is due to the budgeting and funding cycles of the universities that commonly purchase our modular buildings.  We believe that this cycle can be offset by building backlogs of inventory and through increased sales to other public and private sectors.

The following table represents our working capital and current ratio for the past two fiscal years: