ARTS WAY MANUFACTURING CO INC

Previous wording

Our Agricultural Products segment saw a 34.7% decline in revenue in fiscal 2024 due to suppressed commodity prices, high borrowing rates and saturated inventory levels. Our Modular Buildings segment increased revenues by 25.9% and recorded strong profitability. Our consolidated revenues from continued operations decreased 19.1% year on year, and we had $461,000 of operating income from continuing operations for the fiscal year ended November 30, 2024.

Current wording

Our Agricultural Products segment saw a 13.1% decline in revenue in fiscal 2025 as commodity prices remained depressed from highs in 2023 coupled with high borrowing rates and rising input costs. Our Modular Buildings segment increased revenues by 4.0% and once again recorded strong profitability. Our consolidated revenues from continued operations decreased 6.2% year over year, and we recorded $289,000 of operating income for the fiscal year ended November 30, 2025.

Previous wording

We finished the year ended November 30, 2024 with approximately $94,000 of consolidated net loss from continued operations, $307,000 of net income and saw our working capital increase by approximately $802,000.

Current wording

We finished the year ended November 30, 2025 with approximately $1,035,000 of consolidated net income and saw our working capital increase by approximately $1,851,000, primarily driven by increased inventory levels in our Agricultural Products segment as we prepared for anticipated year-end tax-motivated purchases and potential market improvement.

Previous wording

We expect to have access to capital as needed throughout fiscal 2025 from the collection of receivables, sale of inventory and the expected receipt of approximately $1.2 million of gross proceeds from a filed Employee Retention Credit or ERC. Due to the timing of filing an ERC claim after the IRS announced a moratorium on processing applications, and uncertainty surrounding the nature and timing of the claim approval and subsequent payment process, recognition of the claim is deferred until payment is received. Accordingly, the claim has not been recorded in receivables, assets, or income. On November 30, 2024 we had $3,571,563 available on our line of credit and $930,036 of excess collateral towards our borrowing base. Our working capital remained strong at approximately $6,492,000 in fiscal 2024 with a current ratio of 1.98. Our banking relationship remains positive, and we expect it to only strengthen as our balance sheet continues to improve through the retirement of debt. We believe that our current cash and financing arrangements will provide sufficient cash to finance operations for the next 12 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.

Current wording

We expect to have access to capital as needed throughout fiscal 2026 from the collection of receivables, sale of inventory and the completion of projects under contract in our Modular Buildings segment. On November 30, 2025, we had $747,563 available on our line of credit and $4,012,816 of collateral in excess of our borrowing. Our working capital continued to strengthen in fiscal 2025, up to approximately $8,343,000, with a current ratio of 2.30, an increase from $6,492,000 in working capital and a current ratio of 1.98 in fiscal 2024. Our banking relationship remains positive, and we expect it to only strengthen as our balance sheet continues to improve through the retirement of debt. We believe that our current cash and financing arrangements will provide sufficient cash to finance operations for the next 12 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.

Previous wording

In certain circumstances, upon the customer’s written request, we may recognize revenue when production is complete, and the goods are ready for shipment. At the customer’s request, we will bill the customer upon completing all performance obligations, but before shipment. The customer dictates that we ship the goods per its 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 customer is required to purchase all goods manufactured under this agreement. Title of the goods will pass to the customer 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 customer, and the customer 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 the customers and us. The credit terms on this agreement are consistent with the credit terms on other sales. All risks of loss are shouldered by the customer, and there are no exceptions to the customer’s commitment to accept and pay for these manufactured goods. Revenues recognized when goods were ready for shipment in fiscal 2024 were approximately $1,073,000 comp ared to $3,110,000 in fiscal 2023.

Current wording

In certain circumstances, upon the customer’s written request, we may recognize revenue when production is complete, and the goods are ready for shipment. At the customer’s request, we will bill the customer upon completing all performance obligations, but before shipment. The customer dictates that we ship the goods per its 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 customer is required to purchase all goods manufactured under this agreement. Title of the goods will pass to the customer 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 customer, and the customer 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 the customers and us. The credit terms on this agreement are consistent with the credit terms on other sales. All risks of loss are shouldered by the customer, and there are no exceptions to the customer’s commitment to accept and pay for these manufactured goods. There were no revenues recognized when goods were ready for shipment in fiscal 2025 comp ared to $1,073,000 in fiscal 2024.

Previous wording

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. Customer deposits consist of advance payments from customers, in the form of cash, for revenue to be recognized in the following year.

Current wording

Our return 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. Customer deposits consist of advance payments from customers, in the form of cash, for revenue to be recognized in the following year.

Previous wording

Our consolidated net sales from continuing operations totaled $24,499,000 for the 2024 fiscal year, which represents a 19.1% decrease from our consolidated net sales of $30,281,000 for the 2023 fiscal year. We increased revenue in our Modular Buildings segment while our Agricultural Products segment was met with difficult market conditions in fiscal 2024. Our consolidated gross profit as a percentage of net sales increased to 29.8% in the 2024 fiscal year compared to 28.3% of net sales in the 2023 fiscal year. Our consolidated operating expenses from continuing operations decreased by 2.9%, from $7,053,000 in the 2023 fiscal year to $6,849,000 in the 2024 fiscal year. The majority of our corporate general and administrative expenses are borne by our Agricultural Products segment, including costs associated with being a public company. The Agricultural Products segment represented $5,665,000 of our total consolidated operating expenses, while our Modular Buildings segment represented $1,184,000.

Current wording

Our consolidated net sales from continuing operations totaled $22,975,000 for the 2025 fiscal year, which represents a 6.2% decrease from our consolidated net sales of $24,499,000 for the 2024 fiscal year. Revenue increased in our Modular Buildings segment while our Agricultural Products segment continued to experience difficult market conditions in fiscal 2025. Our consolidated gross profit as a percentage of net sales decreased to 27.3% in the 2025 fiscal year compared to 29.8% of net sales in the 2024 fiscal year. Our consolidated operating expenses from continuing operations decreased by 12.7%, from $6,849,000 in the 2024 fiscal year to $5,977,000 in the 2025 fiscal year. The majority of our corporate general and administrative expenses are borne by our Agricultural Products segment, including costs associated with being a public company. The Agricultural Products segment represented $4,439,000 of our total consolidated operating expenses, while our Modular Buildings segment represented $1,539,000.

Previous wording

Our consolidated operating income from continuing operations for the 2024 fiscal year was $461,000 compared to operating income of $1,531,000 for the 2023 fiscal year. Our Agricultural Products segment had an operating loss of $1,510,000, and our Modular Buildings segment had operating income of $1,971,000.

Current wording

Our consolidated operating income for the 2025 fiscal year was $289,000, a 37% decrease from consolidated operating income of $461,000 for the 2024 fiscal year. Our Agricultural Products segment had an operating loss of $1,462,000, and our Modular Buildings segment had operating income of $1,751,000.

Previous wording

Consolidated net income for the 2024 fiscal year was $307,000 compared to net income of $267,000 in the 2023 fiscal year.

Current wording

Consolidated net income for the 2025 fiscal year was $1,035,000 compared to consolidated net income of $307,000 in the 2024 fiscal year.

Previous wording

Our effective tax rate for the 2024 and 2023 fiscal years was 30.3% and 29.9%, respectively.

Current wording

Our effective tax rate for the 2025 and 2024 fiscal years was 28.0% and 30.3%, respectively.

Previous wording

Our Agricultural Products segment’s operating expenses for the 2024 fiscal year were $5,665,000 compared to $5,920,000 for the 2023 fiscal year, a decrease of $255,000, or 4.3%. A large share of the operating expense decrease is related to our selling expenses, most notably, commission expense, for which we saw a decrease of $418,000 due to the large sales decrease and the hiring of an inside salesperson. Some of this decrease was offset with added salary for the inside salesperson and travel expense. Our general and administrative expenses increased approximately $333,000 from fiscal 2023. The increase is due to $186,000 of additional salary expense due to wage increases and from the hiring of a HR manager at the end of fiscal 2023 along with a $48,000 increase in computer contract expense related to an enterprise resource planning or ERP conversion that we completed in August of 2023. We also paid out approximately $201,000 in early retirement benefits to employees in the spring of fiscal 2024 in order to drop our headcount to align with our lessened demand. We estimate the early retirement will save us $263,000 in wages and benefits annually moving forward. In addition to early retirement, we also enacted layoffs and strategic terminations that are expected to cut approximately $750,000 of operating expenses annually. Our engineering expenses decreased approximately $166,000 from fiscal 2023 due to a reduction in headcount in our engineering department. We expect the engineering headcount reduction to be temporary, as we recognize the strategic value in new product development and continued product improvement. Total loss from operations for our Agricultural Products segment during the 2024 fiscal year was $1,510,000 compared to operating income of $664,000 for the 2023 fiscal year. The sudden deterioration of the agricultural markets in fiscal 2024 was the primary driver for the decline in operating income from fiscal 2023. We reacted quickly when we identified adverse market conditions early on in fiscal 2024, and began right-sizing operations and overhead expenses to facilitate better performance in fiscal 2025.

Current wording

Our Agricultural Products segment’s operating expenses for the 2025 fiscal year were $4,439,000 compared to $5,665,000 for the 2024 fiscal year, a decrease of $1,226,000, or 21.6%. Our selling expenses accounted for approximately $450,000 of the operating expense decrease. Our director of sales pursued a new opportunity at the end of fiscal 2024 and we did not replace him. We also had an inside salesperson depart at the same time, which further decreased salaries and travel costs in selling expense. To fill the gaps left by these employees, we promoted an inside salesman and the CEO, CFO and VP of Operations stepped in to absorb day-to-day sales responsibilities. We also utilized some existing territory representatives to help better service our customers after the departures. Our general and administrative expenses decreased approximately $689,000 from fiscal 2024 partially due to our CEO stepping down in October of 2024 and other personnel layoffs. Our chairman of the board stepped in to fill the CEO role in October of 2024 and has been serving in this role since. We expect our current CEO to remain in the role for the foreseeable future. We believe this will avoid extra administrative expenses, which is advantageous in today's market conditions. In fiscal 2024, we paid out approximately $201,000 in early retirement benefits to employees in order to drop our headcount to align with our lessened demand. This impacted our general and administrative expense in 2024; it was not repeated in 2025. Our engineering expenses decreased approximately $87,000 from fiscal 2024 due to a reduction in headcount in our engineering department. We expect the engineering headcount reduction to be temporary, as we recognize the strategic value in new product development and continued product improvement. We focused our engineering effort in fiscal 2025 on new product development and successfully used other resources to take non-value added inquiries off our engineering team. Total loss from operations for our Agricultural Products segment during the 2025 fiscal year was $1,462,000 compared to operating loss of $1,510,000 for the 2024 fiscal year. Despite the 13.1% decrease in revenue, we improved our results. We also benefited from an employee retention credit refund of approximately $1,235,000 that brought our net loss to $341,000 for this segment.

Previous wording

*Discontinued Operations.*On June 7, 2023 we announced we would be discontinuing our Tools segment with the last day of normal operations occurring on July 14, 2023. Just over a year later, on October 21, 2024, we completed the sale of the remaining real estate associated with our Tools segment for $1,800,000. The assets and liabilities of this segment were gone prior to November 30, 2024 and will no longer report discontinued operations in our current year financials moving forward. Our discontinued operations generated approximately $1,271,000 from operating, investing and financing activities mainly related to closing activities and the sale of real estate. Our Tools segment reported net income of $402,000 for the twelve months ended November 30, 2024 compared to net loss of $496,000 in the same period of fiscal 2023.

Current wording

*Discontinued Operations.*On June 7, 2023 we announced we would be discontinuing our Tools segment with the last day of normal operations occurring on July 14, 2023. Just over a year later, on October 21, 2024, we completed the sale of the remaining real estate associated with our Tools segment for $1,800,000. The assets and liabilities of this segment were gone prior to November 30, 2025 and will no longer report discontinued operations in our current year financials moving forward. Our discontinued operations generated approximately $1,271,000 from operating, investing and financing activities mainly related to closing activities and the sale of real estate in fiscal 2024. Our Tools segment reported no activity for the twelve months ended November 30, 2025 compared to net income of $402,000 in the same period of fiscal 2024.

Previous wording

We are subject to a number of trends and uncertainties that may affect our short-term or long-term liquidity, sales revenues, and operations. Similar to other farm equipment manufacturers, we are affected by items unique to the farm industry, including fluctuations in farm income resulting from changes in commodity prices, crop damage caused by weather and insects, government farm programs, interest rate fluctuations, and other unpredictable variables. Other uncertainties include our OEM customers and the decisions they make regarding their current supply chain structure, inventory levels, and overall business conditions. Management believes that our business is dependent on the farming industry for the bulk of our sales revenues. As such, our business tends to reap the benefits of increases in farm net income, as farmers tend to purchase equipment in lucrative times and forgo purchases in less profitable years. Direct government payment over the past few years and costs of agricultural production are increasing; further increases in the value of production will benefit our business, while any future decreases in the value of production will decrease farm net income and may negatively affect our financial results.

Current wording

We are subject to a number of trends and uncertainties that may affect our short-term or long-term liquidity, sales revenues, and operations. Similar to other farm equipment manufacturers, we are affected by items unique to the farm industry, including fluctuations in net farm income resulting from changes in commodity prices, crop damage caused by weather and insects, government farm programs, interest rate fluctuations, rising input costs and other unpredictable variables. Other uncertainties include our customers and the decisions they make regarding their current supply chain structure, inventory levels, and overall business conditions. Management believes that our business is dependent on the farming industry for the bulk of our sales revenues. As such, our business tends to reap the benefits of increases in net farm income, as farmers tend to purchase equipment in lucrative times and forgo purchases in less profitable years. Direct government payments over the past few years and costs of agricultural production are increasing; further increases in the value of production will benefit our business, while any future decreases in the value of production will decrease net farm income and may negatively affect our financial results.

Previous wording

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, by increasing sales to other public and private sectors and by creating repeatable business opportunities.

Current wording

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, by increasing sales to other public and private entities and by creating repeatable business opportunities.

Previous wording

We have a Bank Midwest credit facility consisting of a $5,500,000 revolving line of credit, pursuant to which we had borrowed $1,928,437, with $3,571,563 remaining, as of November 30, 2024, and one term loan, which had an outstanding principal balance of $1,779,877 as of November 30, 2024. The revolving line of credit is being used for working capital purposes. We also have two Economic Injury Disaster Loans provided by the U.S. Small Business Administration with an aggregate principal balance of $315,089 as of November 30, 2024.

Current wording

We have a Bank Midwest credit facility consisting of a $4,000,000 revolving line of credit, pursuant to which we had borrowed $3,252,437, with $747,563 remaining, as of November 30, 2025, and two term loans, which had outstanding principal balances of $1,666,762 and $ 514,406 as of November 30, 2025. The revolving line of credit is being used for working capital purposes. We also have two Economic Injury Disaster Loans provided by the U.S. Small Business Administration with an aggregate principal balance of $309,261 as of November 30, 2025.

Previous wording

Our loans require us to comply with various covenants, including maintaining certain financial ratios and obtaining prior written consent from Bank Midwest for any investment in, acquisition of, or guaranty relating to another business or entity. We were in compliance with covenants in place under the Bank Midwest loans as of November 30, 2024.

Current wording

Our loans require us to comply with various covenants, including maintaining certain financial ratios and obtaining prior written consent from Bank Midwest for any investment in, acquisition of, or guaranty relating to another business or entity. We were in compliance with the covenants in place under the Bank Midwest credit facility and term loans as of November 30, 2025.

Previous wording

We believe that our current cash and financing arrangements will provide sufficient cash to finance operations for the next 12 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.

Current wording

We believe that our current cash and financing arrangements will provide sufficient cash to finance operations for the next 12 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 as necessary.