ART'S-WAY MANUFACTURING CO., INC.
ARMSTRONG, IOWA 50514-0288
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On April 24, 200322, 2004
To: The Shareholders of
ART'S-WAY MANUFACTURING CO., INC.
Notice is hereby given that the Annual Meeting of Shareholders of
Art's-Way Manufacturing Co., Inc., a Delaware corporation (the "Company"),
will be held at One Pacific Place, Suite 800, 1125 South 103 Street, Omaha,
Nebraska 68124 on Thursday, April 24, 2003,22, 2004, at 10:00 A.M. Central Daylight
Savings Time, for the following purposes:
(1) To elect seven (7) directors to serve until the next Annual Meeting
of Shareholders or until such time as their successors are elected and
qualified;
(2) To consider and vote upon a proposal to approve the 2001 Director
Stock Option Plan;
(3) To consider and vote upon a proposal to ratify the appointment
of McGladrey & Pullen, LLP as independent public accountants of the Company
for the year ending November 30, 2003;2004; and
(4)(3) To transact such other business as may properly come before
the meeting.
NOTE: The Board of Directors is not aware of any other business to
come before the Meeting.
Any action may be taken on any one of the foregoing proposals at the
Meeting on the date specified above, or on any date or dates to which the
Meeting may be adjourned. The Board of Directors of the Company has fixed
the close of business on February 17, 200316, 2004 as the record date for determining
the shareholders of the Company entitled to notice of and to vote at the
Meeting and any adjournments thereof, and only shareholders of record at
such time will be entitled to such notice and to vote. The stock transfer
books of the Company will not be closed.
You are requested to fill in and sign the enclosed form of proxy
which is solicited by the Board of Directors and to mail it promptly
in the enclosed envelope. The proxy will not be used if you attend and
vote at the Meeting in person.
By Order of the Board of Directors
John C. Breitung,
President
Armstrong, Iowa
March 10, 20032004
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE YOUR CORPORATION THE
EXPENSE OF FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM.
AN ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS OF
ART'S-WAY MANUFACTURING CO., INC.
ARMSTRONG, IOWA 50514-0288
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Art's-Way Manufacturing Co., Inc.,
a Delaware Corporation (the "Company"), for use at the Annual Meeting of
Shareholders (the "Meeting") to be held at One Pacific Place, Suite 800,
1125 South 103 Street, Omaha, Nebraska, 68124, on Thursday, April 24, 200322, 2004
at 10:00 A. M. Central Daylight Savings Time and at any and all adjournments
thereof. Shareholders of record at the close of business on February 17, 200316, 2004
are entitled to notice of and to vote at the Meeting.
PROXIES
Proxies are being solicited by the Board of Directors of the Company.
Proxies so given may be revoked at any time prior to the Annual Meeting.
No special form of revocation is required and it need not be in writing.
Proxies will be solicited by mail and the expense of the solicitation of
such proxies will be borne by the Company. In addition to the solicitation
by use of the mails, directors, officers and/or executive and administrative
employees of the Company may solicit the return of proxies by mail, telephone
or in person, without extra compensation. The Company has retained the American
Stock Transfer and Trust Company, New York, New York, to assist in solicitation
of proxies at a cost of approximately $1,800. The approximate date on which
notice of the meeting, this Proxy Statement and form of proxy are first
being sent to shareholders is March 10, 2003.2004.
Shares that are held by stock brokers in "street name" may be voted
by the stock broker on routine matters and with stockholder direction
on other matters. When the stock broker does not vote the shares, the
stock broker's abstention is referred to as a "broker non-vote."
Broker non-votes generally do not affect the determination of whether
a quorum is present at the annual meeting. Under applicable law, a broker
non-vote will have the same effect as a vote against any proposal other
than the election of directors and will have no effect on the outcome
of the election of directors.
VOTING SECURITIES
As of the close of business on February 17, 2003,16, 2004, the record date for
the Annual Meeting, the outstanding voting securities consisted of 1,938,176
shares of Common Stock, each of which is entitled to one vote.
VOTING SECURITIES AND OWNERSHIP BY CERTAIN BENEFICIAL OWNERS
The following table sets forth the names of the persons known to the
Company who beneficially own more than 5% of the issued and outstanding
shares of Common Stock of the Company as of February 17, 2003,16, 2004, the record
date for the meeting:
Name and Address Type of Ownership Number Percent of
Ownership of Shares of Outstanding
Arthur Luscombe Of record and 123,825 6.39%118,825 6.13%
RR Beneficially
Dolliver, Iowa 50531
Franklin Resources, Inc. Beneficially 134,500 6.94%
777 Mariners Island Blvd.
San Mateo, California 94404
J. Ward McConnell, Jr.
P.O. Box 6246
Kinston, North Carolina 28501 Of record and 775,200 40.00%
P.O. Box 6246 Beneficially
Kinston, North Carolina
28501
VOTING SECURITIES OWNED BY
EXECUTIVE OFFICERS AND DIRECTORS
The following table shows certain information with respect to the
Company's common stock beneficially owned by directors and executive
officers as of February 17, 2003.16, 2004. The shares shown as beneficially owned
include shares which executive officers and directors are entitled to
acquire pursuant to outstanding stock options exercisable within sixty
days of February 17, 2003.16, 2004.
Name Type of Number of Shares Percent
Beneficial Ownership Shares of Class
James L. Koley of record and
Beneficially 84,500(2) 4.36%Thomas E. Buffamante 500 *
David R. Castle of record and
Beneficially 2,500(2)5,750 (2) *
George A. Cavanaugh, Jr. of record and 3,000(2)4,250 (2) *
BeneficiallyJames L. Koley 70,275 (2) 3.63%
Douglas McClellan of record and 18,000(2)19,250 (2) *
Beneficially
Marc H. McConnell of record and 1,250(1) *
Benefically
J. Ward McConnell, Jr. of record and 776,450(1) 40.06%
Beneficially
Thomas E. Buffamante of record and 0777,700 (1) 40.12%
Marc H. McConnell 2,800 (1) *
(nominee) Beneficially
John C. Breitung of record19,500 (3) *
Directors and 15,750(3) *
Beneficially
Directors (including of record and 901,450 46.51%
nominee) and Executive Beneficially Officers
as a Group (8 persons) 900,025 46.44%
* Less than 1%
(1) Includes 1,2502,500 shares which can be purchased by each individual
pursuant to stock options.
(2) Includes 2,5003,750 shares which can be purchased by each individual
pursuant to stock options.
(3) Includes 11,25015,000 shares which can be purchased pursuant to stock options.
BOARD OF DIRECTORS AND ELECTION
Nominees to the Board of Directors
The Board of Directors of the Company is presently composed of six (6)seven (7)
directors. At this Annual Meeting of Shareholders seven (7) directors are
to be elected to hold office until the 20042005 annual meeting of Shareholders
or until the successor of each shall be elected and qualified. All of the
nominees named herein are presently serving as members of the Board of
Directors except Mr. Buffamante who has been nominated by the Board of
Directors. Management has no reason to believe that any of those named
below will be unable or unwilling to serve. If for any reason any nominee
named is unable to serve, the shares represented by all valid proxies will
be voted for the election of a substitute nominee recommended by the Board
of Directors or the Board of Directors may reduce the size of the Board.
Nominees receiving the highest number of affirmative votes cast, up to
the number of directors to be elected, will be elected as directors. The proxy
holders will vote the proxies for the below seven nominees.
The name of each nominee, his age, the year in which he was first
elected a director, his principal occupation or occupations for the past
five years and positions (other than director) with the Company are as follows:
J. WARD McCONNELL, JR., age 71,72, Kinston, North Carolina. Private investor
for more than five years. Was appointedMr. McConnell is Chairman of the Board February 12,of Directors.
Mr. McConnell was a director from 1996 to 2001, returning as a director in
Feburary 2002.
THOMAS E. BUFFAMANTE, age 50,51, Olean, New York. Certified Public Accountant
and President of Buffamante Whipple Buttafaro, P.C., where he has been a
director and shareholder of the firm since 1981. Mr. Buffamante has been
a director since 2003.
DAVID R. CASTLE, age 53,54, Birminghan, England. Director of Operations Worldwide
for Avery Weigh-Tronix since September 2002, President of Weigh-Tronix, Inc.,
Fairmont, Minnesota since May 1998, where he had served as Vice President
and General Manager of their Santa Rosa facility since July 1990.
Chairman of the Compensation and Stock Option Committee and Chairman of
the Audit Committee. Mr. Castle has been a director since 2000.
GEORGE A. CAVANAUGH, JR., age 82,83, Ocala, Florida. Retired since 1981;
formerly President of Cavanaugh & Associates, Inc., Manufacturers
Representative, Southfield, Michigan. Member of the Compensation and
Stock Option Committee. Mr. Cavanaugh has been a director since 1972.
JAMES L. KOLEY, age 72,73, Omaha, Nebraska. Past Chairman of the Board of
the law firm of Koley Jessen P.C., Omaha, Nebraska since February 1988.
Director of Dover Corporation, New York, New York. Member of the
Audit Committee. Mr. Koley has been a director since 1976.
DOUGLAS McCLELLAN, age 52,53, Clarence, New York. President of
Filtration Unlimited, Akron, New York, where he has held various
positions for more than five years. Member of the Compensation
and Stock Option Committee and Audit Committee.
Mr. McClellan has been a director since 1987.
MARC H. McCONNELL, age 23,24, Bath, New York. President of Babcock Co., Inc.,
Bath, New York since JuneJuly 2001. Prior to that time attended Cornell
University's School of Industrial & Labor Relations at Ithaca, New York.
Mr. McConnell was appointed to Board of Directors July 2001. Member of the
Audit Committee.
The Board of Directors recommends a vote FOR the seven nominees listed above.
Vote Required for Ratification
The affirmative vote of a majority of the shares represented at the
meeting is required to elect the Board of Directors.
BOARD NOMINATING PROCESS
In connection with the nominations for the Board of Directors for the
2004 Annual Meeting of Shareholders, the Board of Directors of the Company,
as a whole, acted as a Nominating Committee. In accordance with NASDAQ
requirements, the nominees were approved by all five of the independent
directors of the Board, as defined in the NASDAQ listing standards. Because
the Board of Directors is comprised solely of persons who are not employees
or officers of the Company, the Board does not deem it necessary to have a
separate Nominating Committee. Prior to the 2004 Annual Meeting of
Shareholders, the Board of Directors intends to consider adopting a charter
for the Board of Directors when acting as the Nominating Committee.
If a charter is adopted, the charter will be posted on the Company's web site.
The Board of Directors will consider director candidates recommended
by holders of common stock. In order for a candidate to be considered,
a stockholder must submit information on the proposed candidate not less
than 60, nor more than 90 days prior to the first anniversary of the
preceding year's annual meeting. For the 2005 Annual Meeting of
Shareholders, a nomination would need to be received not later than
February 21, 2005, nor before January 21, 2005. The nomination must
include the following information:
(1) the full name and address of candidate;
(2) the age of the candidate;
(3) a five-year business history of the candidate;
(4) the amount of common stock of the Company owned by the candidate;
(5) any family relationships between the candidate and any executive
officer or current director of the Company;
(6) any business transactions between the candidate or the candidate's
business and the Company; and
(7) a written consent of the candidate to be named in the Company's
proxy statement and to serve as a director if elected.
Additionally, any holder of common stock nominating a candidate is
encouraged to set forth any other qualifications which he or she believes
the candidate has to serve as director of the Company and the reasons why
the holder believes the candidate should be elected to the Board of Directors
of the Company.
In selecting nominees for the Board of Directors, the Board of Directors,
acting as the Nominating Committee, will consider all candidates submitted,
including incumbent Board members based upon the qualifications of the
candidates, the business and financial experience of the candidates, the
experience of the candidates serving on public company boards of directors,
and other skills sets deemed appropriate by the Board of Directors to enact
the mission and business purposes of the Company. Each nominee for the
2004 Annual Meeting of Shareholders is currently a director of the Company.
Currently the Company does not engage any third parties, for a fee or
otherwise, to identify or evaluate potential nominees. No nominations for
candidates were received from any holders of common stock for the
2004 Annual Meeting.
SECURITY HOLDER COMMUNICATIONS TO THE BOARD OF DIRECTORS
Any holder of common stock wishing to communicate with the Board of
Directors about any matter involving the business or operations of the
Company should send the communication, in written form, to the President
of the Company at the Company's principal place of business in Armstrong,Iowa.
The President of the Company will promptly send the communication to each
member of the Board of Directors.
BOARD OF DIRECTOR COMMITTEES, MEETINGS
The Board of Directors has an Audit Committee and a Compensation and
Stock Option Committee. The Board has no Nominating Committee.
The Audit Committee's principal functions are to evaluate and review
financial procedures, controls and reporting. The Audit Committee recommends
selection of the independent public accountants. The Audit Committee had
twofour meetings in the last fiscal year.year, two regular meeting and two meetings
by tele-conference.
The Compensation and Stock Option Committee has the responsibility to
review and advise management on broad compensation policies such as salary
ranges and incentive programs. The Committee also administers the Incentive
Stock Option Plans and grants options pursuant to the Plans. Furthermore
the Committee has the responsibility to approve and recommend to the Board
of Directors base salaries, salary increases and other benefits for elected
officers. The Compensation and Stock Option Committee had two meetingsone meeting in the
last fiscal year.
The Board of Directors held fourfive meetings in the last fiscal year.year, four
regular meetings and one meeting by tele-conference. Each director attended
100% of the meetings of the Board and the Board Committees of which he was
a member. EachThomas Buffamante attended 100% of the meetings after his election
at the Annual Meeting of Shareholders on April 24, 2003.
The Board of Directors encourages all directors to attend the annual
shareholders' meetings. At the 2003 annual meeting six directors attended.
Prior to April 24, 2003 each director, other than the Chairman of the
Board, who iswas not an employee of the Company or a subsidiary, receivesreceived
$4,500 per year plus $900 for attendance at each of the meetings of the
Board, as well as $788 for attendance at each meeting of a standing committee
on which he serves.served. The Chairman of a standing committee receivesreceived $1,035
for each meeting attended. Effective April 24, 2003, each director, other
than the Chairman of the Board, receives $12,000 per year with no committee
and attendance fees.
The Chairman of the Board receives $60,000 per year and is eligible for
a discretionary bonus. APPROVAL OF THE 2001 DIRECTOR STOCK OPTION PLAN
On July 24, 2001,For the Boardbonus paid in fiscal 2003, the Compensation
Committee considered the effort and time expended on Company affairs by the
Chairman in 2002 and awarded a bonus of Directors approved$30,000. Because the 2001 Director Stock
Option Plan (the "Directors' Plan"). Approval of the Directors' Plan requires
the affirmative vote ofCompany was in
a majority of the shares represented and voting at the
annual meeting.
Material Features of the Directors' Plan
The following is a description of the material features of the Directors'
Plan. This description is qualified in its entirety by referencedifficult financial situation when J. Ward McConnell, Jr., became Chairman,
Mr. McConnell spent considerable time during 2002 attempting to the
Directors' Plan which is attached to this Proxy Statement.
The Directors' Plan providessecure
permanent financing for the granting of Non-Qualified Stock
Options ("NQSO") to each non-employee director of the Company who has served
as a member of the Board of Directors forwhich was concluded in 2003. Mr. McConnell
also conducted at least one year. The maximum
aggregate numbermonthly meetings with management of shares of common stock that may be issued under the
Directors' Plan s 50,000 of which 30,000 are subject to existing options.
The Directors' Plan is administered by a Committee currently composed of
three directors, Messrs. Castle, Cavanaugh, Jr. and McClellan. Members of
the Committee are entitled to participate in the Directors' Plan. Subject to
limits imposed by the terms of the Directors' Plan, the Committee has the
power to administer the Directors' Plan in its sole and absolute discretion;
provided, however, that the Committee shall have no authority to grant NQSOs,
to determine the number of shares of common stock subject to NQSOs or the
price at which each share of common stock covered by an NQSO may be purchased
pursuant to the Directors' Plan.
Pursuant to the terms of the Directors' Plan, any person who is a
non-employee director and has served for a period of one year, shall be
granted NQSOs to purchase 5,000 shares of common stock granted on the
business day following the first anniversary. The options vest and are
exercisable at the rate of 1,250 shares per year.
Each NQSO will have a term of ten years from the date of grant and will
have a per share exercise price equal to the fair market value of the common
stock on the date of grant. Any option exercisable must be exercised within
90 days after the date a director terminates for any reason other than
disability, death, retirement or cause. In the event of the disability or
death of a director, options may be exercised for one year after the date of
disability or death. If a director retires, the options must be exercised
within 90 days after retirement. If a director is terminated for cause, all
options expire on the date of termination.
Tax Consequences
No taxable income is realized by a director upon the grant of an NQSO and
no deduction is available to the Company. Upon exercise of the option, the
excess of the fair market value of the shares on the date exercise over the
option price will be taxable to the director and deductible by the Company.
The tax basis of shares acquiredCompensation Committee intends to similarly review Mr. McConnell's efforts
and contributions for fiscal 2003 and will consider an appropriate bonus to be
the fair market value on the date of
exercise. For shares held for more than year following exercise of the
option, the director will realize long-term capital gain or loss upon
disposition (assuming the stock would be a capital assetpaid in his or her hands).
Other Information
The following table sets forth the names of the directors who have been
granted NQSOs pursuant to the Directors' Plan, the number of options granted,
the exercise price and expiration date of each directors options.
Name Shares Price Date
James L. Koley 5,000 $2.32 7/24/11
David R. Castle 5,000 $2.32 7/24/11
George A. Cavanaugh, Jr. 5,000 $2.32 7/24/11
Douglas McClellan 5,000 $2.32 7/24/11
Marc H. McConnell 5,000 $2.75 7/24/12
J. Ward McConnell, Jr. 5,000 $3.75 2/12/13
(1) Of the options granted to Directors Marc H. McConnell and J. Ward
McConnell, Jr. 1,250 shares are currently exercisable; of the options
granted to Messrs. Koley, Castle, Cavanaugh, Jr. and McClellan, 2,500 shares
are currently exercisable.
The Board of Directors recommends that the shareholders vote FOR the
approval of the Director Stock Option Plan.fiscal 2004.
EXECUTIVE OFFICERS OF THE COMPANY
John C. Breitung, age 60,61, was appointed President on January 16, 2001.
From 1998 to 2000, Mr. Breitung served as Vice President, Operations for
GKN Armstrong Wheels, Armstrong, Iowa. From 1996 to 1998, he served as
Vice President, Operations for Monona Wire Corporation, Monona, Iowa.
EXECUTIVE COMPENSATION
Compensation and Stock Option Committee Report on Executive Compensation
The Compensation and Stock Option Committee of the Board is composed of
three independent, non-employee Directors and has the responsibilities as
described on page 4 of this Proxy Statement. The Committee has furnished
the following report:
The compensation philosophy of the Company is to provide a compensation
package to executives that will, with base salary, incentive compensation
and stock options, maximize long-term shareholder value.
The Company's policy is to pay base salaries that are at, or near,
the average for similar companies. Salary increases are considered annually
and are based on current salary and the individual performance during the past
year. The Committee recommends to the Board salary increases for the Company's
President, John C. Breitung.
The incentive compensation plan for executive officers is a performance
driven bonus plan to promote the objectives of the Company. Profitability is
the underlying factor in the determination of the annual bonus plan. Each
year the Compensation and Stock Option Committee recommends to the Board
the specific bonus plan for executive officers.
Stock options have historically been the third part of the overall
compensation package for executive officers and are awarded to provide
long term incentives. The 1991 Employee Stock Option Plan has expired
and only the President, Mr. Breitung, has options under that Plan. The
Compensation and Stock Option Committee recommended to the Board for
approval, the option award to Mr. Breitung. The option price for
Mr. Breitung's option was 100% of the fair market value of the shares
at the date of grant. The option is exercisable 25% on the date of grant
and 25% on each year of service after that.
David R. Castle, Chairman
George A. Cavanaugh, Jr.
Douglas McClellan
Summary Compensation Table
The following table sets forth the aggregate cash and cash equivalent
forms of remuneration accrued by the Company and its subsidiaries to, or for,
the benefit of the President. No other executive officer's remuneration
exceeded $100,000.
Annual Compensation Long Term
Compensation
Awards
Name and Principal Position Year Salary($Salary ($) Bonus($Bonus ($) All Other Options
Principal Compensation
Position
John C. Breitung 2003 $71,449 $5,000 - -
President 2002 $95,000 - - -
President 2001 $84,808 - - 15,000*
2000 - - - -
* The options were granted on January 30, 2001, expiration date of
January 30, 2011 and exercise price of $3.03.
The value of the options based on November 30, 20022003 price of $3.75$4.90
per share was $10,800.is as follows:
Options Fair Value
Vested and exercisable 11,250 $21,038
Unvested and unexercisable 3,750 $ 7,012
15,000 $28,050
Description of Stock Options Plans
The Company has in effect one stock option plan, the 2001 Director
Stock Option Plan.
Under the 2001 Director Stock Option Plan, options may be granted to
non-employee directors at a price not less than fair market value at the date
the options are granted. Non-employee directors who have served for at least
one year are automatically granted options to purchase 5,000 common shares.
Options for an aggregate of 50,000 common shares may be granted under the
Plan. Each option will be for a period of ten years and may be exercised
at a rate of 25% at the date of grant and an additional 25% after one,
two and three years of service on a cumulative basis. There are 20,000
common shares available for grant, and 30,000 options outstanding, of
which 12,50020,000 are exercisable.
Under the expired 1991 Employee Stock Option Plan, stock options
were granted to key employees to purchase shares of common stock of the
Company at a price not less than fair market value at the date the options
were granted. Options granted could be either nonqualified or incentive
stock options. The option price, vesting period, and term were set by the
Compensation Committee of the Board of Directors of the Company. Options
for an aggregate of 100,000 common shares were available for grant.
Each option was for a period of 10 years and could be exercised at a rate
of 25% at the date of grant and 25% on the first, second and third
anniversary date of the grant on a cumulative bases. Effective April 2001,
the period available for option grants under the 1991 Employee Stock Option
Plan expired and as a result, 0no shares are available for issuance.
Options Grants in the Last Fiscal Year
During the 20022003 fiscal year, Mr. Marc H.J. Ward McConnell, Jr., was granted
options to acquire 5,000 shares of Art's-Way common stock at $2.75$3.50 per share
under the 2001 Director Stock Option Plan.
Option Exercises and Fiscal Year-End Values
There were no stock options exercised during the last year by: (i)by either the
President and (ii)or the directors.
The Company has a 401(k) Savings Plan (the "Plan") which covers
substantially all full-time employees. Participating employees contribute
to the Plan through salary reductions. The Company contributes a discretionary
percentage of the Plan Participant's salary deferrals. Management of the
Plan assets will changechanged March 3, 2003 from Principal Financial Group, Des Moines,
Iowa to American United Life, Indianapolis, Indiana. Vesting of participants
is 20% per year after one year of employment until 100% vested after 6 years.
There were no contributions made by the Company in the years ended
November 30, 2003, 2002 2001 and 2000.2001. No amounts were paid or distributed to
the President named in the above table pursuant to the Plan.
CERTAIN TRANSACTIONS
In February 2002, the Company sold 640,000 shares of common stock to
an existing shareholder, Mr. J. Ward McConnell, Jr. at estimated fair value.
Proceeds from the sale of the stock were $800,000. Mr. McConnell has agreed
that without prior approval of the Board of Directors, excluding himself
and his son, he will not acquire as much as fifty percent (50%) of the
Company's common stock and will not take the Company private. Immediately
after the transaction, Mr. McConnell was elected as Chairman of the Board
of Directors of the Company. His son, Mr. Marc McConnell, is also a Board Member.director.
J. Ward McConnell, Jr. was required in 2003, to personally guarantee
the Company's two new credit facilities with West Bank, West Des Moines,Iowa.
After three years, Mr. McConnell's guarantee of the second facility
(up to $3 million) will be reduced to a percentage equaling Mr. McConnell's
ownership of the Company. After such three-year period, if Mr. McConnell's
ownership in the Company is reduced to less than 20%, the guarantee will
be removed. The Company compensates Mr. McConnell for his personal guarantee
at an annual percentage rate of 2% of the outstanding balance borrowed
under the two credit facilities, such fee paid monthly. Commencing
April 25, 2003, the Company had $2 million borrowed against the second
credit facility. The Company paid Mr. McConnell $26,284 through the
Company's 2003 fiscal year ended November 30, 2003.
PERFORMANCE GRAPH
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
The graph below compares the yearly percentage change in the cumulative
total stockholder return for Art's-Way Manufacturing Co., Inc. Common Stock
compared with the NASDAQ Stock Market-U.S. Index, and the S&P Construction
and Farm Machinery Index.
(Graph available onupon request)
Nov-97
Nov-98 Nov-99 Nov-00 Nov-01 Nov-02 Nov-03
Art's-Way
Manufacturing Co., Inc.(ARTW) 100.00 58.75 40.00 30.63 18.70 37.5068.09 52.14 31.83 63.83 82.72
NASDAQ Stock Market
- -
US Index (INAS) 100.00 122.59 210.61 163.33 121.68 93.92155.05 132.14 95.58 76.19 105.58
S & P Construction & Farm
Machinery & Heavy
Trucks Index (CFM) 100.00 81.92 91.15 85.29 99.13 113.28111.27 104.11 121.01 138.28 202.19
REPORT OF THE AUDIT COMMITTEE
The Audit Committee consists of three members of the Board of Directors,
who are independent (as defined in Rule 4200(a)(14)of the National Association
of Securities Dealers' listing standards). The Audit Committee operates
pursuant to a charter (the "Audit Committee Charter") approved and adopted
by the Board. The Audit Committee, on behalf of the Board, oversees the
Company's financial reporting process. In connection with the November 30,
20022003 financial statements and footnotes thereto, the audit committee:
(1) reviewed and discussed the audited financial statements with management;
(2) discussed with the auditors the matters required by Statement on Auditing
Standards No. 61; and (3) received and discussed with the auditors the matters
required by Independence Standards Board Statement No. 1. Based upon these
reviews and discussions, the audit committeeAudit Committee recommended to the Board of
Directors that the audited financial statements be included in the Annual
Report on Form 10-K filed with the SEC.
The Audit Committee also recommended to the Board of Directors the
selection of McGladrey & Pullen, LLP to serve as the Company's independent
public accountants for fiscal 2003.2004.
David R. Castle, Chairman
Douglas McClellan
Marc H. McConnellJames L. Koley
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
Effective March 5, 2003,The Board of Directors, acting on the company elected to change its certifying
accountant and states as follows:
* KPMG, LLP ("KPMG") was dismissed by the Company, effective March 5, 2003.
* KPMG, during the prior two audits periods, issued one going concern
opinion for the year ended November 30, 2001 and an unqualified opinion
for the year ended November 30, 2002.
* The decision to change accountants was recommeded byrecommendation of the Audit
Committee, and approved by the Board of Directors.
* During the prior two audit periods and the interim period through
March 5, 2003, there were no disagreements with KPMG, whether or not
resolved, on any matter of accounting principles or practices, financial
statement disclosure, audit scope or procedure, which, if not resolved to
KPMG's satisfaction, would have caused it to make reference to the subject
matter of the diagreements(s) in connection with its report.
* The Company requested a letter from KPMG whether or not it agrees with
the statements made by the Company and the Company filed the letter as
Exhibit 16 to Form 8-K, filed March 10, 2003.
Further, based on a recommendation from the Audit Committee, the Board of
Directors approved McGladryhas designated McGladrey & Pullen, LLP as independent public
accountants of the Company's successor
certifying accountant, effective March 5, 2003, to conduct the auditCompany for the fiscal year ending November 30, 2004.
McGladrey & Pullen, LLP has been the independent public accountants of
the Company since March 5, 2003. The firm has advised the Company that it
has no relationship to the Company except that of independent public
accountants.
A representative of KPMG,McGladrey & Pullen, LLP as the certifying auditors
for the year ended November 30, 2002,2003, will be present at the annual meetingAnnual Meeting
of Shareholders, and will have the opportunity to make a statement and to
respond to appropriate questions regarding preparations of the financial
statements.
The following table presents fees for professional audit services
rendered by McGladrey & Pullen, LLP for the audit of the Company's annual
financial statements for the fiscal year ended November 30, 2003 and fees
billed for other services rendered by KPMGMcGladrey & Pullen, LLP to the Companyand its
associated entity RSM McGladrey, Inc.:
2003
Audit fees (1) $51,865
Audit related fees (2) $10,260
Tax fees (3) $10,000
All other fees -
Total $72,125
(1) Audit Fees represent fees for professional services provided for the period January 24, 2002 through February 7, 2003:
Description Amount
Audit fees, excluding audit related $115,650
All other fees
Audit related fees (1) 7,900
Other non-audit services (2) 7,320
Total all other fees $15,220
(1) Audit related fees consisted principally of an
audit of the Company's annual financial statements and review of the
Company's employee benefit plan.quarterly financial statements in connection with the filing
of current and periodic reports.
(2) Other non-auditAudit Related fees consistedrepresents consultations on accounting issues.
(3) Tax Fees represent fees for professional services related to tax
compliance, which included preparation of tax compliancereturns and special projects.tax advice.
Independence:
The Audit Committee has considered whether the other fees paid to KPMGnon-audit services
provided by McGladrey & Pullen, LLP labeled
as "all other fees" above,and its associated entity RSM McGladrey,
Inc. are compatible with maintaining the independence of McGladrey & Pullen,
LLP and concluded that they do not impair the independence of KPMG LLP.McGladrey & Pullen, LLP is not
compromised by the provision of such services.
The Audit Committee pre-approves all auditing services and permitted
non-audit services, including the fees and terms of those services, to be
performed for the Company by its independent auditor prior to engagement.
The Board of Directors recommends that shareholders vote FOR the
ratification of the selection of McGladrey & Pullen, LLP as independent
public accountants.
SHAREHOLDER PROPOSALS
Any proposals of shareholders that are intended to be presented at
the Company's 20042005 Annual Meeting of Shareholders must be received at the
Company's principal offices no later than December 12, 200317, 2004 in order to
be included in the proxy statement and on the form of proxy which will
be solicited by the Board of Directors in connection with that meeting.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors to file initial reports of
ownership and reports in changes of ownership with the Securities and
Exchange Commission (SEC). Executive officers and directors are required
by SEC regulations to furnish the Company with copies of all Section 16(a)
forms they file. Based solely on a review of the copies of such forms
furnished to the Company, the Company believes all persons subject to
these reporting requirements filed the required reports on a timely basis.
OTHER MATTERS
Management knows of no other matters which may be brought before
the meeting. If any other matters are presented at the meeting on which
a vote may properly be taken, the persons named in the enclosed proxy
will vote thereon in accordance with their best judgment.
FINANCIAL STATEMENTS
Financial statements of the Company are included in the Annual Report
to Shareholders for the fifty-two weeks ended November 30, 2002,2003, which report
is mailed herewith to all stockholders entitled to vote at the meeting.
The Annual Report is not part of the soliciting material.
A copy of the Company's 20022003 10-K Report is available without charge
upon written request of John C. Breitung, President, Art's-Way Manufacturing
Co., Inc., P.O. Box 288, Armstrong, Iowa 50514-0288.