ARMSTRONG, Iowa, Oct. 8, 2018 /PRNewswire/ -- Art's Way
Manufacturing Co., Inc. (Nasdaq: ARTW), a diversified,
international manufacturer and distributor of equipment serving
agricultural, research and steel cutting needs, announces its
financial results for the third quarter and year to date of fiscal
2018.
|
For the Three
Months Ended
|
(Continuing
Operations, Consolidated)
|
|
August 31,
2018
|
August 31,
2017
|
Sales
|
$
|
5,280,000
|
$
|
6,550,000
|
Operating Income
(Loss)
|
$
|
(559,000)
|
$
|
109,000
|
Net Income
(Loss)
|
$
|
(767,000)
|
$
|
42,000
|
EPS
(Basic)
|
$
|
(0.18)
|
$
|
0.01
|
EPS
(Diluted)
|
$
|
(0.18)
|
$
|
0.01
|
|
|
|
|
|
Weighted Average
Shares Outstanding:
|
|
|
|
|
Basic
|
|
4,209,445
|
|
4,161,421
|
Diluted
|
|
4,209,445
|
|
4,161,421
|
|
For the Nine
Months Ended
|
(Continuing
Operations, Consolidated)
|
|
August 31,
2018
|
August 31,
2017
|
Sales
|
$
|
15,940,000
|
$
|
15,660,000
|
Operating
(Loss)
|
$
|
(1,326,000)
|
$
|
(965,000)
|
Net (Loss)
|
$
|
(1,948,000)
|
$
|
(721,000)
|
EPS
(Basic)
|
$
|
(0.46)
|
$
|
(0.17)
|
EPS
(Diluted)
|
$
|
(0.46)
|
$
|
(0.17)
|
|
|
|
|
|
Weighted Average
Shares Outstanding:
|
|
|
|
|
Basic
|
|
4,198,250
|
|
4,148,6966
|
Diluted
|
|
4,198,250
|
|
4,148,966
|
Sales: Our consolidated corporate sales for continuing
operations for the three- and nine-month periods ended August 31, 2018 were $5,280,000 and $15,940,000, respectively, compared to
$6,550,000 and $15,660,000 for the same respective periods in
fiscal 2017, a $1,270,000 or 19.4%,
decrease for the three months and a $280,000, or 1.8%, increase for the nine months.
The decrease for the three months is primarily due to decreased
sales in our agricultural products and tools segments. More
specifically, our agricultural products segment had approximately
$720,000 of passthrough revenue from
self-propelled beet harvester equipment in 2017, which was not
replicated in 2018. We also note that we experienced a
$572,000 reduction in year-over-year
revenue attributable to activity from our now-closed Art's-Way
International subsidiary. Despite this, our consolidated
corporate sales for the nine-months have increased. Adjusted
for these items, our consolidated corporate sales for the
nine-months are up almost $1,600,000
in 2018, as we shift our focus to Art's-Way produced products.
Our tools segment's decrease in sales year over year was the
result of losing a major customer. We have, however, been
able to achieve higher gross profit margins with new tools
customers. Consolidated gross margin for the three-month
period ended August 31, 2018 was
22.3% compared to 22.1% for the same period in fiscal 2017.
Consolidated gross margin for the nine-month period ended
August 31, 2018 was 21.6% compared to
21.5% for the same period in fiscal 2017. These increased
gross margins are largely attributable to increased labor
efficiency in our agricultural products segment, as margins have
decreased in our modular buildings and tools segments. While
our gross margins are up in the agricultural products segment,
gross margins have also received downward pressure from the
liquidation of non-strategic inventory, including our snow blower
line from our Canadian subsidiary, which was sold off at
cost. The decrease in gross margins for our modular buildings
segment is due to increased deprecation expense from utilizing
leased assets in our operations. The decrease in gross
margins for our tools segment is due to lower revenues with less
variable margin to absorb fixed costs.
Income (Loss) from Continuing Operations:
Consolidated net (loss) from continuing operations was $(767,000) for the three-month period and
$(1,948,000) for the nine-month
period ended August 31, 2018 compared
to net income (loss) of $42,000 and
$(721,000) for the same respective
periods in fiscal 2017. The increased net loss for the three
months ended August 31, 2018 was due
to the discovery of mold in our West
Union facility. We estimated approximately
$252,000 of expense for mold
remediation and $67,000 in damaged
inventory, and we recognized an impairment of approximately
$199,000 of the asset held for
lease. The West Union
facility is currently unoccupied and is listed for lease. Our
net (loss) from continuing operations includes carrying costs of
this facility. The increased net (loss) from continuing
operations for the nine-months was largely due to the revaluing of
our deferred tax asset at the new income tax rates for the 2018 tax
year, which resulted in a loss of approximately $300,000. We also recognized a loss of
approximately $253,000 from the
liquidation of our Canadian subsidiary related to the cumulative
translation adjustment in the second quarter of fiscal 2018.
These expenses were non-cash expenses and one-time
adjustments. Despite the continued losses, we have reduced
our total bank debt by approximately $532,000 since year end. Our margins are
generally depressed from historic levels because low volumes caused
by market conditions continue to impact our ability to cover our
fixed costs. Margins are also impacted as we continue to
right-size our inventories to focus on products we feel our
customers will want to purchase in the future.
Earnings (Loss) per Share from Continuing Operations:
(Loss) per basic and diluted share from continuing operations for
the third quarter of fiscal 2018 was $(0.18), compared to income per basic and diluted
share from continuing operations of $0.01 for the same period in fiscal 2017.
(Loss) per basic and diluted share from continuing operations for
the nine months ended August 31, 2018
was $(0.46), compared to (loss) per
basic and diluted share from continuing operations of $(0.17) for the same period in fiscal
2017.
Chairman of the Art's Way Board of Directors, Marc H. McConnell reports, "Despite expecting
profitable results for this quarter earlier in the year, we are
disappointed to report that our business has been impacted
significantly by multiple factors that ultimately drove negative
results.
"As discussed in previous earnings calls, we have been
significantly affected by the announcement of tariffs aimed at
correcting trade imbalances. We have been absorbing
significant increases in material costs that we were not able to
immediately recapture by re-pricing our products. We also
experienced extended lead times and disruption to the flow of
purchased material and components needed to produce our whole
goods. This disruption along with other operational
inefficiencies, including difficulty hiring qualified labor, led to
substandard output despite incurring overtime and other costs
associated with trying to overcome productivity issues.
"In addition to these difficulties, we also experienced
unforeseen expenses associated with mold discovered at our
previously closed facility in West
Union which we have been trying to sell for quite some time.
This same event also led to us writing off affected inventory at
the facility as well as taking an impairment on the book value of
the building itself.
"Despite the many challenges of the quarter and year, we remain
committed to continuing to simplify our business, improving our
balance sheet health, and reducing our borrowings while also
executing on the key strategic and competitive priorities of
quality, customer service, product development, and continuous
improvement. We made progress during the quarter on these
fronts and will continue to make the proper long-term decisions
that will help us position the company well for future improvement
in market conditions.
"The agricultural equipment industry remains in upheaval due to
tremendous uncertainty in the commodity marketplace and we are
consequently seeing a conservative approach by our dealers to
ordering and stocking inventory. While this is giving us very
little visibility of forward demand, we do expect margin expansion
due to significant price realization, less liquidation activity,
and improved efficiencies.
"In our modular buildings segment, we are pleased to report
backlog growth and have invested in building our management team
and production capacity accordingly. We are seeing improving
efficiency and margins on our products as well as a growing lease
fleet that is providing the recurring revenue stream we have been
seeking to build. We expect the business to continue to build
momentum and contribute going forward. In our tools segment,
we are experiencing soft demand but improving margins, ultimately
resulting in positive earnings that has been steady if not
overwhelming.
"Going forward we remain focused on continuing to work on
strategic objectives despite market conditions. We have
operational improvements to make and are in the midst of recruiting
key personnel to enhance our production and operations
expertise. We know that we ultimately must increase
production capacity to achieve the performance levels we expect
from the business. Until that capacity is met with different market
conditions it will remain difficult for us to achieve consistent
profitability. From here forward we will discontinue the quarterly
investor calls so that we may put the energy and resources that
have gone into preparing for and conducting the call into improving
the operational performance of the business. Concurrent with this
change we intend to enhance our earnings releases to be more
descriptive than they have been previously."
About Art's Way Manufacturing Co., Inc.
Art's Way manufactures and distributes farm machinery niche
products including animal feed processing equipment, sugar beet
defoliators and harvesters, land maintenance equipment, plows, hay
and forage equipment, manure spreaders, reels for combines and
swathers, and top and bottom drive augers, as well as modular
animal confinement buildings and laboratories, and specialty tools
and inserts. After-market service parts are also an important part
of Art's Way's business. Art's Way has three reporting segments:
agricultural products; modular buildings; and tools.
For more information contact: Carrie Gunnerson, President, Chief Executive
Officer and Interim Chief Financial Officer
712-864-3131
investorrelations@artsway-mfg.com
Or visit the Company's website at
www.artsway-mfg.com/
Cautionary Statements
This news release includes "forward-looking statements" within
the meaning of the federal securities laws. Statements made in this
release that are not strictly statements of historical facts,
including our expectations regarding: (i) our business position;
(ii) future results; (iii) future operational changes; (iv) future
costs of materials; (v) the timing of increased performance; and
(vi) the benefits of our business model and strategy, are
forward-looking statements. Statements of anticipated future
results are based on current expectations and are subject to a
number of risks and uncertainties, including, but not limited to:
customer demand for our products; credit-worthiness of our
customers; our ability to operate at lower expense levels; our
ability to complete projects in a timely and efficient manner in
accordance with customer specifications; our ability to renew or
obtain financing on reasonable terms; our ability to repay current
debt, continue to meet debt obligations and comply with financial
covenants; domestic and international economic conditions,
including the impact of tariffs; factors affecting the strength of
the agricultural sector; the cost of raw materials; unexpected
changes to performance by our operating segments; and other factors
detailed from time to time in our Securities and Exchange
Commission filings. Actual results may differ markedly from
management's expectations. We caution readers not to place undue
reliance upon any such forward-looking statements. We do not
intend to update forward-looking statements other than as required
by law.
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SOURCE Art's Way Manufacturing Co., Inc.