ARTS WAY MANUFACTURING CO INC

Current report

Our consolidated corporate sales from continuing operations for the three- month period ended February 28, 2026 were $ 6,640,000 compared to $5,141,000 during the same period in fiscal 2025, an increase of $1,499,000, or 29.2%. Consolidated gross margin for the three months ended February 28, 2026 was 28.8% compared to 29.1% for the same periods in fiscal 2025.

Current report

Sales in our Agricultural Products segment during the first quarter of fiscal 2026 were $3,754,000 compared to $2,948,000 during the same period of fiscal 2025, an increase of $806,000, or 27.3%. We have experienced increased demand this quarter, as compared to the same period in 2025, with increased sales on grinder mixers, manure spreaders and bale processors. While row crop commodity prices have increased from their lowest point in 2024, they remain substantially below the peak levels experienced in 2022. The slight increase in commodity prices and product availability did, however, lead to improved results for the first quarter of fiscal 2026. Livestock prices remained elevated through Q1 of fiscal 2026 and are driving most of the demand for our agricultural products as a large portion of our customer base raises livestock and row crops. Sugar beet prices declined in the first fiscal quarter of 2026 and we are expecting less demand for our sugar beet equipment for the remainder of fiscal 2026. To offset some of the anticipated decrease in demand, we are deploying a product specialist into our primary beet territory to drive new customer activity and technological development as we unveil a new product in that market for fiscal 2026. Our fall early order program ended with a 62% increase in orders on our non beet equipment, while our beet orders were down 63%. Overall order book from the early order program was up 11%, which leads us to believe the agricultural market is entering a recovery despite continued increasing input costs. Gross margin for our Agricultural Products segment for the three-month period ended February 28, 2026 was 34.5% compared to 26.7% for the same period in fiscal 2025. The margin increase is due primarily to the mix of products sold in Q1 of fiscal 2026. Our grinder mixer sales were up $909,000 year-on-year and was our most profitable product line for the first quarter of fiscal 2026. We continue to carry strong grinder mixer backlog into the second quarter of fiscal 2026 and foresee steady shipments in the second quarter of fiscal 2026.. Steel prices continued to rise in the first quarter of fiscal 2026 and will challenge our strong first fiscal quarter margins. Rising fuel prices in fiscal 2026 could negatively affect demand if it has a large impact on farmer's input costs and

Current report

Our first fiscal quarter sales in our Modular Buildings segment were $2,886,000 compared to $2,193,000 for the same period in fiscal 2025, an increase of $693,000, or 31.6%. We carried strong modular building backlog into fiscal 2026, unlike a year ago, which drove the revenue increase this year. We experienced continued strong demand for our buildings on both the livestock and research sides in the first quarter of fiscal 2026. Current backlog is expected to carry us well into the third quarter of fiscal 2026, which is somewhat unusual given the sales life cycle in our Modular Buildings segment. Our leads remain abundant and we continue to be optimistic about the future prospects and continued success of this business segment. Gross margin in the Modular Buildings segment for the three- month period ended February 28, 2026 was 21.3% compared to 32.3% for the same period in fiscal 2025. Our margin decrease in the first fiscal quarter of fiscal 2026 is due to the selling of a warrantied agriculture modular building at cost and project overages on site work while completing current contracts.

Current report

Consolidated engineering expenses from continuing operations were $107,000 for three months ended February 28, 2026 compared to $85,000 for the same period in fiscal 2025. The increase in engineering expenses is related to additional research and development costs incurred in 2026 as we made product changes that we felt could drive more sugar beet product demand. Engineering expenses as a percentage of sales were 1.6% for the three months ended February 28, 2026, compared to 1.7% for the same period in fiscal 2025.

Current report

Consolidated administrative expenses from continuing operations for the three- month period ended February 28, 2026 were $1,038,000 compared to $1,059,000 for the same period in fiscal 2025. Administrative expenses as a percentage of sales were 15.6% for the three months ended February 28, 2026, compared to 20.6% for the same period in fiscal 2025. Administrative expenses have decreased slightly in fiscal 2026 despite the increase in sales as we have not replaced overhead cut in previous years. We continue to be conscious of adding additional overhead while market conditions are still slow in the Agricultural Products segment.

Current report

Net income (loss)

Current report

Consolidated net income was $196,000 for the three-month period ended February 28, 2026, compared to net loss of $56,000 for the same period in fiscal 2025. We are reporting positive operating results in both of our business segments through the first quarter of fiscal 2026. The small uptick in the agricultural market coupled with cost cutting procedures enacted in fiscal 2024 in the Agricultural Products segment has stabilized our operating result to prepare us for a future uptrend in the agriculture cycle. We continue to focus on remaining competitive with pricing, features and availability to ensure we are considered for retail opportunities. Our Modular Buildings segment's success is expected to continue as solid leads make their way to our sales team.

Current report

Our primary source of funds for the three months ended February 28, 2026 was cash generated by operating activities including profitability and the increase of customer deposits and accounts payable as we incurred costs on construction contracts. We expect the collection of accounts receivable, progress on construction contracts and reduction of inventory to be primary sources of cash for the remainder of fiscal 2026. We expect our primary cash needs for the remainder of the fiscal year to be tied to operating expenses and retirement of debt.

Previous report

Our consolidated corporate sales from continuing operations for the three- and nine-month period ended August 31, 2025 were $ 6,432,000, and $17,910,000, respectively, compared to $5,876,000 and $18,329,000, respectively, during the same periods in fiscal 2024. For the three months ended August 31, 2025, we saw a sales increase of $556,000, or 9.5%, from the same period in fiscal 2024. For the nine months ended August 31, 2025, we saw a sales decrease of $419,000, or 2.3%, from the same period in fiscal 2024. Consolidated gross margin for the three and nine months ended August 31, 2025 was 27.5% and 29.7%, respectively, compared to 28.9% and 27.7%, respectively, for the same periods in fiscal 2024.

Previous report

Our 2025 third fiscal quarter sales in our Agricultural Products segment were $2,983,000 compared to $2,988,000 during the same period of fiscal 2024, a decrease of $5,000, or 0.2%. For the nine months ended August 31, 2025, our sales in the Agricultural Products segment were $9,956,000 compared to $11,779,000 during the same period of fiscal 2024, a decrease of $1,823,000, or 15.5%. We have experienced decreased demand for the last six fiscal quarters due to difficult agricultural market conditions highlighted by high interest rates, increasing input costs and low row crop prices. Although our inventory decreased from heightened levels in fiscal 2024, many dealers are still sitting on inventory from other equipment manufacturers, which hampers our ability to get these dealers to stock more of our equipment. We believe product availability will be key for the next two fiscal quarters to capitalize on retail opportunities and year end tax buying. Strategically, we are continuing to build inventory through our fiscal year end despite low demand in order to be responsive to farmers; needs this fall. Livestock prices, predominately cattle, continue to be at all-time highs in fiscal 2025 and have driven strong grinder mixer sales activity thus far in fiscal 2025. We expect cattle farmers to have strong earnings in 2025 and we could potentially see retail opportunities in an attempt to offset tax liability prior to the calendar year-end. The agriculture market is highly cyclical, and we believe this is the bottom of the cycle. We anticipate that conditions will start to improve in the next 9 to 15 months in our market. Our efforts in fiscal 2024 to right-size our production and administrative staff has reduced our operating expenses which is aiding in our efforts to weather the bottom of the cycle. Our fall early order program starts in October and runs through January 15th. Gross margin for our Agricultural Products segment for the three-month period ended August 31, 2025 was 18.3% compared to 27.2% for the same period in fiscal 2024, while our gross margin for the nine-month period ended August 31, 2025 was 24.4% compared to 27.8% for the same period of fiscal 2024. The sales decreases for the three- and nine- months periods ended August 31, 2025 compared to the same periods in fiscal 2024, resulted in less variable margin to cover our fixed costs comparatively while inflationary forces also negatively affected our gross margin. Steel prices began to rise in February 2025 due to tariff uncertainty and infrastructure projects that impacted domestic demand. While steel prices have dropped from their peak in April 2025, we have not seen them return to 2024 levels. We are also paying higher prices from tariff charges for imported products, which is negatively affecting our margin. We are exploring reshoring options for these items in an attempt to reduce the gross margin impact. We expect to pass on a 3-5% price increase to our customers with our fall ea…

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Previous report

Our third fiscal quarter sales in our Modular Buildings segment were $3,449,000 compared to $2,888,000 for the same period in fiscal 2024, an increase of $561,000, or 19.4%. Our Modular Buildings segment sales for the nine months ended August 31, 2025 were $7,954,000 compared to $6,550,000 for the same period of fiscal 2024, an increase of $1,404,000, or 21.4%. Consistent execution on our backlog by our project managers and production team has driven sales up approximately 20% for the quarter and year to date ending August 31, 2025. We continue to grow our reputation with impactful projects in the custom research and laboratory fields in fiscal 2025. Quoting activity and custom build inquiries continue to remain strong as we cross into Q4 of fiscal 2025, despite earlier concerns about a pullback of governmental grants and funding. In Q1 of fiscal 2025, we brought on a Director of Business Development and Sales who replaced our then-serving President and Director of Sales. Our outgoing President and Director of Sales is working part time as a consultant moving forward to maintain customer relationships. With the additional sales help we are exploring new markets where our custom buildings can offer competitiveness to the marketplace including but not limited to: datacenters, wastewater treatment facilities, petroleum and mining analysis labs, chemical production and transportation offices. Gross margin in the Modular Buildings segment for the three- and nine-month period ended August 31, 2025 was 35.4% and 36.4%, respectively, compared to 30.7% and 27.5%, respectively, for the same periods in fiscal 2024. We continue to see strong margins in this segment from increased workforce proficiency and software improvements, which have improved our data analytics and ability to remain within budgeted costs.

Previous report

Consolidated engineering expenses from continuing operations were $87,000 for Q3 of fiscal 2025 compared to $79,000 for the same period in fiscal 2024. For the nine months ended August 31, 2025, consolidated engineering expenses were $257,000 compared to $346,000 for the same period in fiscal 2024. The decrease in engineering expenses is related to the reduction in our engineer headcount at the beginning of fiscal 2024. We expect to add a product development manager to our team as we find the right candidate to fit our business in an attempt to bolster our product offerings. Engineering expenses as a percentage of sales were 1.4% for the nine months ended August 31, 2025, compared to 1.9% for the same period in fiscal 2024.

Previous report

Consolidated administrative expenses from continuing operations for the three- and nine-month period ended August 31, 2025 were $983,000 and $3,071,000, respectively, compared to $1,087,000 and $3,550,000, respectively, for the same periods in fiscal 2024. Administrative expenses as a percentage of sales were 17.1% for the nine months ended August 31, 2025, compared to 19.4% for the same period in fiscal 2024. Administrative expenses decreased year-over-year primarily due to early retirement incentives we offered to help right-size our workforce in Q1 of fiscal 2024, which was not repeated in fiscal 2025. We also reduced administrative headcount including our Chairman of the Board stepping in to fill our Chief Executive Officer role in Q4 of fiscal 2024, which positively impacted administrative expenses in fiscal 2025 versus fiscal 2024. Cloud computing expenses related to upgrading an enterprise resource planning system in the Agricultural Products segment was fully amortized in Q2 of fiscal 2025, and has reduced our administrative expenses in fiscal 2025 and is expected to continue to do so comparatively in fiscal 2026.

Previous report

Net income (loss) from continuing operations

Previous report

Consolidated net income from continuing operations was $254,000 for the three-month period ended August 31, 2025, compared to net income of $2,000 for the same period in fiscal 2024. Our consolidated net income from continuing operations was $1,680,000 for the nine months ended August 31, 2025, compared to net loss of $427,000 for the same period in fiscal 2024. Our operating results are improved in both reportable segments year on year, despite the decrease in sales for our Agricultural Products segment. Cost cutting procedures enacted in fiscal 2024 in the Agricultural Products segment has stabilized our operating results while the agriculture market waits for a rebound. We remain focused on maintaining our agricultural product reputation and price competitiveness to ensure our brand endures the current slowdown. We have identified some existing product line opportunities to capitalize on in fiscal 2026 that we believe help drive up our sales even in a downtown. We believe, this segment will be poised to capitalize and provide profitability when markets do improve. Our Modular Buildings segment continues to perform with solid operating income and near record sales. We expect continued success in the Modular Buildings segment as leads continue converting to contract. Our consolidated net income from continuing operations for the nine months ended August 31, 2025 also benefited largely from the receipt of Employee Retention Credit refunds in the approximate amount of $1,154,000 including interest, net of consulting fees to prepare credit and tax study and net of tax.

Previous report

Our primary source of funds for the nine months ended August 31, 2025 was cash generated by financing activities, mainly the use of our line of credit. Our line usage increased as we fulfilled obligations on our contracts in progress in the Modular Buildings segment; moving from a position where we were overbilled by approximately $1,715,000 at November 30, 2024 to our position at August 31, 2025, underbilled by approximately $307,000. Our line usage is also up due to increasing inventory in the Agricultural Products segment as we build stocking inventory to be responsive to end user needs. With equipment dealers not in a position to stock, we need to be able to react to retail opportunities quickly. We received a cash boost in Q2 of fiscal 2025, receiving net proceeds of approximately $1,461,000 from Employer Retention Credit refunds. Collection of accounts receivable and an increase in accounts payable drove cash in for the nine months ended August 31, 2025. We also had operating income from continuing operations of approximately $858,000 for the nine months ended August 31, 2025 with approximately $687,000 of non-cash reconciling items. We expect progress on construction products to be a major generator of cash and line of credit usage to remain steady for the remainder of fiscal 2025. We expect our primary cash needs for the remainder of the fiscal year to be inventory increases in the Agricultural Products segment and capital needs including fixing a portion of our roof and equipment that increases our production efficiency.