Art’s-Way(ARTW) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements The company's unaudited financial statements show a shift to net income, driven by an Employee Retention Credit refund, despite a slight decrease in total assets Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | May 31, 2025 | November 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Total current assets | $13,287,649 | $13,124,309 | +1.2% | | Total assets | $20,879,320 | $21,240,684 | -1.7% | | Total current liabilities | $4,882,108 | $6,632,493 | -26.4% | | Total liabilities | $7,256,561 | $9,146,861 | -20.7% | | Total stockholders' equity | $13,622,759 | $12,093,823 | +12.6% | Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric | Six Months Ended May 31, 2025 | Six Months Ended May 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Sales | $11,477,645 | $12,453,663 | -7.8% | | Gross Profit | $3,556,286 | $3,380,277 | +5.2% | | Income (loss) from operations | $513,138 | $(211,313) | N/A | | Net Income (Loss) | $1,426,313 | $(498,380) | N/A | - The company's business is organized into two operating segments: Agricultural Products (farm equipment) and Modular Buildings (animal containment and laboratory uses)[20][21] - The company recognized a significant Employee Retention Credit (ERC) refund of $1,620,103 in other income during the six months ended May 31, 2025, which was a primary driver of profitability[27][28] Revenue by Segment and Source Total revenue decreased by 7.8% year-over-year, driven by a decline in Agricultural Products partially offset by strong growth in Modular Buildings Revenue by Segment (Six Months Ended May 31) | Segment | 2025 Revenue | 2024 Revenue | YoY Change | | :--- | :--- | :--- | :--- | | Agricultural Products | $6,973,000 | $8,792,000 | -20.7% | | Modular Buildings | $4,505,000 | $3,662,000 | +23.0% | | Total | $11,478,000 | $12,454,000 | -7.8% | - Within the Agricultural Products segment, farm equipment sales fell from $7.5 million to $5.3 million year-over-year, while Modular Buildings sales grew from $3.5 million to $4.3 million[37] Earnings Per Share (EPS) The company reported a significant turnaround in profitability, with diluted EPS from continuing operations reaching $0.28 for H1 2025 Net Income (Loss) Per Share - Diluted | Period | Six Months Ended May 31, 2025 | Six Months Ended May 31, 2024 | | :--- | :--- | :--- | | Continuing Operations | $0.28 | $(0.09) | | Discontinued Operations | $0.00 | $(0.01) | | Net Income (Loss) per Share | $0.28 | $(0.10) | Debt and Financing The company maintains a renewed $4.0 million revolving line of credit and was in compliance with all bank covenants as of the last measurement date - The company renewed its revolving line of credit, reducing principal availability to $4.0M and negotiating a 75 basis point interest rate reduction, with an outstanding balance of $1,062,437[51][90] - The company must maintain minimum monthly working capital of $4.0 million and a minimum debt service coverage ratio of 1.25, and was in compliance as of November 30, 2024[56] Segment Performance The Modular Buildings segment generated significant operating income, while the Agricultural Products segment recorded an improved but still negative operating loss Segment Performance (Six Months Ended May 31, 2025 vs 2024) | Segment | Metric | 2025 | 2024 | | :--- | :--- | :--- | :--- | | Agricultural Products | Revenue | $6,973,000 | $8,792,000 | | | Income (loss) from operations | $(428,000) | $(584,000) | | Modular Buildings | Revenue | $4,505,000 | $3,662,000 | | | Income from operations | $941,000 | $373,000 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the sales decrease to a challenging agricultural market, offset by strong performance in Modular Buildings, with profitability boosted by a tax credit - The Agricultural Products segment sales decreased 20.7% in H1 2025 due to weak row crop prices and high interest rates, though management believes the market is at a cyclical bottom[80] - The Modular Buildings segment sales increased 23.0% in H1 2025, with gross margin improving to 37.2% from 25.0% due to strong demand and efficient project execution[81] - Administrative expenses decreased year-over-year due to non-recurring 2024 early retirement incentives and reduced administrative headcount costs[85] - The consolidated order backlog decreased 39.3% to $4.7 million, with declines in both the Agricultural (-36.0%) and Modular Buildings (-39.9%) segments[88] - The primary source of liquidity in H1 2025 was cash from operations, significantly boosted by net proceeds of approximately $1.46 million from the Employer Retention Credit refund[89] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Art's-Way Manufacturing Co, Inc is not required to provide the disclosures under this item - The company is exempt from this disclosure requirement as it qualifies as a smaller reporting company[92] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective, with no material changes in internal controls during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of May 31, 2025[94] - No changes occurred during the period that have materially affected, or are reasonably likely to materially affect, the company's internal controls over financial reporting[95] PART II – OTHER INFORMATION Legal Proceedings The company reports that it is not currently a party to any material pending legal proceedings - As of the filing date, the company is not involved in any material pending legal proceedings[97] Risk Factors As a smaller reporting company, Art's-Way Manufacturing Co, Inc is not required to provide the disclosures under this item - The company is exempt from this disclosure requirement as it qualifies as a smaller reporting company[98] Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any of its common stock during the second quarter of fiscal 2025 - There were no purchases of the company's common stock during the second quarter of fiscal 2025[99] Other Information No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the first half of fiscal 2025 - No director or officer adopted or terminated any "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the six months ended May 31, 2025[102] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO/CFO certifications and iXBRL formatted financial statements