SEC Form 10-Q filed by Art's-Way Manufacturing Co. Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
| | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended |
or
| | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______ to ______ |
Commission File No.
ART’S-WAY MANUFACTURING CO., INC.
(Exact name of registrant as specified in its charter)
| | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| |
| (Address of principal executive offices) (Zip Code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| | | The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ Smaller reporting company Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Number of common shares outstanding as of April 1, 2026:
Art’s-Way Manufacturing Co., Inc.
Index
Page No.
| Item 1. |
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| Condensed Consolidated Balance Sheets as of February 28, 2026 and November 30, 2025 |
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| Notes to Unaudited Condensed Consolidated Financial Statements |
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| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Item 3. |
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| Item 4. |
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| Item 1A. |
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| Item 6. |
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PART I – FINANCIAL INFORMATION
ART’S-WAY MANUFACTURING CO., INC.
Condensed Consolidated Balance Sheets
| (Unaudited) | ||||||||
| February 28, 2026 | November 30, 2025 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Receivables, net | ||||||||
| Inventories, net | ||||||||
| Cost and profit in excess of billings | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant, and equipment, net | ||||||||
| Assets held for lease, net | ||||||||
| Deferred income taxes, net | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Customer deposits | ||||||||
| Billings in excess of cost and profit | ||||||||
| Income taxes payable | ||||||||
| Accrued expenses | ||||||||
| Line of credit | ||||||||
| Current portion of finance lease liabilities | ||||||||
| Insurance premium finance liability | ||||||||
| Current portion of long-term debt | ||||||||
| Total current liabilities | ||||||||
| Long-term portion of finance lease liabilities | ||||||||
| Long-term debt, excluding current portion | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Notes 8, 10, 11 and 14) | ||||||||
| Stockholders’ equity: | ||||||||
| Undesignated preferred stock - $ par value. Authorized shares on February 28, 2026 and November 30, 2025; issued and outstanding shares on February 28, 2026 and November 30, 2025. | ||||||||
| Common stock – $ par value. Authorized shares on February 28, 2026 and November 30, 2025; issued on February 28, 2026 and on November 30, 2025 | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Treasury stock, at cost ( shares on February 28, 2026 and shares on November 30, 2025) | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
| See accompanying notes to condensed consolidated financial statements. |
ART’S-WAY MANUFACTURING CO., INC.
Condensed Consolidated Statements of Operations
(Unaudited)
| Three Months Ended |
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| February 28, 2026 |
February 28, 2025 |
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| Sales |
$ | $ | ||||||
| Cost of goods sold |
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| Gross profit |
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| Expenses |
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| Engineering |
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| Selling |
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| General and administrative |
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| Total expenses |
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| Income (loss) from operations |
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| Other income (expense): |
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| Interest expense |
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| Other |
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| Total other income (expense) |
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| Income (loss) before income taxes |
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| Income tax expense (benefit) |
( |
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| Net income (loss) |
$ | $ | ( |
) | ||||
| See accompanying notes to condensed consolidated financial statements. |
| Condensed Consolidated Statements of Stockholders' Equity |
| Three Months Ended February 28, 2026 and February 28, 2025 |
| (Unaudited) |
| Common Stock |
Additional |
Treasury Stock |
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| Number of |
paid-in |
Retained |
Number of |
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| shares |
Par value |
capital |
earnings |
shares |
Amount |
Total |
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| Balance, November 30, 2024 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
| Stock based compensation |
( |
) | ||||||||||||||||||||||||||
| Net loss |
- | ( |
) | - | ( |
) | ||||||||||||||||||||||
| Balance, February 28, 2025 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
| Common Stock |
Additional |
Treasury Stock |
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| Number of |
paid-in |
Retained |
Number of |
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| shares |
Par value |
capital |
earnings |
shares |
Amount |
Total |
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| Balance, November 30, 2025 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
| Stock based compensation |
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| Net income |
- | - | ||||||||||||||||||||||||||
| Balance, February 28, 2026 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
| See accompanying notes to condensed consolidated financial statements. |
| Condensed Consolidated Statements of Cash Flows |
| (Unaudited) |
| Three Months Ended |
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| February 28, 2026 |
February 28, 2025 |
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| Cash flows from operations: |
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| Net income (loss) |
$ | $ | ( |
) | ||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
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| Stock based compensation |
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| Decrease in obsolete inventory reserves |
( |
) | ( |
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| Gain on disposal of property, plant, and equipment |
( |
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| Depreciation and amortization expense |
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| Amortization of cloud computing implementation costs |
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| Increase (decrease) in allowance for expected credit losses - receivables |
( |
) | ( |
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| Deferred income taxes |
( |
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| Changes in assets and liabilities: |
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| (Increase) decrease in: |
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| Receivables |
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| Inventories |
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) | ( |
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| Cost and profit in excess of billings |
( |
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| Other assets |
( |
) | ( |
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| Increase (decrease) in: |
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| Accounts payable |
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| Billings in excess of cost and profit |
( |
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| Customer deposits |
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| Income taxes payable |
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| Accrued expenses |
( |
) | ( |
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| Net cash provided by (used in) operating activities |
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| Cash flows from investing activities: |
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| Purchases of property, plant, and equipment |
( |
) | ( |
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| Net proceeds from sale of assets |
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| Net cash used in investing activities |
( |
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| Cash flows from financing activities: |
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| Net change in line of credit |
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| Principal payments on finance lease obligations |
( |
) | ( |
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| Principal payments on financed insurance premiums |
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) | ||||||
| Repayment of term debt |
( |
) | ( |
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| Repurchases of common stock |
( |
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| Net cash provided by financing activities |
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| Net increase in cash |
( |
) | ||||||
| Cash at beginning of period |
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| Cash at end of period |
$ | $ | ||||||
| Supplemental disclosures of cash flow information: |
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| Cash paid during the period for: |
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| Interest |
$ | $ | ||||||
| Income taxes |
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| Supplemental disclosures of non-cash operating activities: |
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| Financed insurance premium (other current assets) |
$ | $ | ||||||
| Amortization of operating lease ROU assets (included in other assets) |
$ | $ | ||||||
| See accompanying notes to condensed consolidated financial statements. |
Notes to Unaudited Condensed Consolidated Financial Statements
| 1) | Description of the Company |
Unless otherwise specified, as used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” “Art’s-Way,” and the “Company” refer to Art’s-Way Manufacturing Co., Inc., a Delaware corporation headquartered in Armstrong, Iowa, and its wholly owned subsidiaries.
The Company began operations as a farm equipment manufacturer in 1956. Since that time, it has become a national manufacturer of agricultural equipment. Its principal manufacturing plant is located in Armstrong, Iowa.
The Company has organized its business into operating segments. Management separately evaluates the financial results of each segment because each is a strategic business unit offering different products and requiring different technology and marketing strategies. The Agricultural Products segment manufactures and sells farm equipment and related replacement parts under the Art’s-Way Manufacturing label and private labels. The Modular Buildings segment manufactures and installs modular buildings for animal containment and various laboratory uses.
| 2) | Summary of Significant Accounting Policies |
Statement Presentation
The foregoing condensed consolidated financial statements of the Company are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s financial position and operating results for the interim periods. The condensed consolidated financial statements should be read in conjunction with the condensed financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2025. The results of operations for the three months ended February 28, 2026 are not necessarily indicative of the results to be expected for the fiscal year ending November 30, 2026.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the three months ended February 28, 2026. Actual results could differ from those estimates.
Allowance for Credit Losses
The Company uses aging categories to estimate expected credit losses on trade receivables. The Company considers the following factors in its analysis: historical loss experience, forward-looking macroeconomic factors, company credit risk including previous delinquencies, disputed amounts, and the intent and ability to pay. The Company's typical credit terms are Net 30, however, it also offers terms up to 360 days on floor plan units. The Company considers trade receivables greater than 30 days past due, but is not required to disclose past due receivables with an original term less than one year. The Company performs additional analysis monthly on amounts over 90 days past due to determine collectability. The Company has assigned expected credit loss percentages based on where the asset falls in the aging schedule. The Company's actual credit losses have been low compared to historical allowance estimates. The Company has considered the current interest rate environment and the recent decline in the agricultural commodity market and believes its method of estimating a higher than historical loss percentage to be an adequate estimate of actual expected losses.
The Company carries contract assets related to its Modular Buildings segment in the form of costs and profit in excess of billings. These contract assets are typically converted to trade receivables in 30 to 90 days, depending on contract terms, and are due 30 days or fewer from the billing date. Because these contract assets are typically converted to receivables and collected in less than a year, consideration for these contract assets has been included in the expected credit loss model for trade receivables.
Recently Issued Accounting Pronouncements
Accounting Pronouncements Not Yet Adopted
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements (“ASU 2023-06”), to clarify or improve disclosure and presentation requirements of a variety of topics and align the requirements in the FASB ASC with the SEC’s regulations. The amendments in ASU 2023-06 will become effective on the date the related disclosures are removed from Regulation S-X or Regulation S-K by the SEC, and will no longer be effective if the SEC has not removed the applicable disclosure requirement by June 30, 2027. Early adoption is prohibited. We are currently evaluating the impact of ASU 2023-06 on the Company's consolidated financial statements and disclosures.
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures". The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The requirements will be effective for annual periods beginning after December 15, 2024. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. The Company is currently evaluating the potential effect that the updated standard will have on its financial statement disclosures.
| 3) | Disaggregation of Revenue |
The following table displays revenue by reportable segment from external customers, disaggregated by major source. The Company believes disaggregating by these categories depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.
| Three Months Ended February 28, 2026 | ||||||||||||
| Agricultural Products | Modular Buildings | Total | ||||||||||
| Farm equipment | $ | $ | $ | |||||||||
| Farm equipment service parts | ||||||||||||
| Modular buildings | ||||||||||||
| Modular building lease income | ||||||||||||
| Other | ||||||||||||
| $ | $ | $ | ||||||||||
| Three Months Ended February 28, 2025 | ||||||||||||
| Agricultural Products | Modular Buildings | Total | ||||||||||
| Farm equipment | $ | $ | $ | |||||||||
| Farm equipment service parts | ||||||||||||
| Modular buildings | ||||||||||||
| Modular building lease income | ||||||||||||
| Other | ||||||||||||
| $ | $ | $ | ||||||||||
The Company offered floorplan terms in its Agricultural Products segment during its Fall of 2024 and 2025 early order programs to incentivize customers to stock farm equipment on their lots for fiscal 2025 and fiscal 2026. Floorplan terms allow customers to pay the Company at the earliest of retail date or up to 360 days. This program can have an effect on the timing of the Company’s cash flows compared with historical cash flows.
On February 28, 2026, the Company had approximately $
| 4) | Receivables |
Receivables are shown net of allowances for expected credit losses. Expected losses are recorded in administrative expense at the time of receivable recognition.
The activity related to expected credit losses for the three months ended February 28, 2026 and three months ended February 28, 2025 was as follows:
| Three Months Ended | Three Months Ended | |||||||
| February 28, 2026 | February 28, 2025 | |||||||
| Balance, beginning | $ | $ | ||||||
| Provision charged to expense | ( | ) | ( | ) | ||||
| Less amounts charged-off | ||||||||
| Balance, ending | $ | $ | ||||||
| 5) | Contract Receivables, Contract Assets and Contract Liabilities |
The following table provides information about contract receivables, contract assets, and contract liabilities from contracts with customers included on the Condensed Consolidated Balance Sheets.
| February 28, 2026 | November 30, 2025 | |||||||
| Receivables | $ | $ | ||||||
| Assets (cost and profit in excess of billings) | ||||||||
| Liabilities (billings in excess of profit and customer deposits) | ||||||||
The amount of revenue recognized in the first three months of fiscal 2026 that was included in a contract liability on November 30, 2025 was approximately $
| 6) | Net Income (Loss) Per Share of Common Stock |
Basic net income (loss) per share of common stock has been computed on the basis of the weighted average number of common shares outstanding. Diluted net income (loss) per share has been computed on the basis of the weighted average number of common shares outstanding plus equivalent shares assuming exercise of stock options. Potential shares of common stock that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted net income (loss) per share.
Basic and diluted net income (loss) per share have been computed based on the following as of February 28, 2026 and February 28, 2025:
| For the Three Months Ended | ||||||||
| February 28, 2026 | February 28, 2025 | |||||||
| Numerator for basic and diluted net income (loss) per share: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Denominator: | ||||||||
| For basic net income (loss) per share - weighted average common shares outstanding | ||||||||
| Effect of dilutive stock options | ||||||||
| For diluted net income (loss) per share - weighted average common shares outstanding | ||||||||
| Net Income (loss) per share - Basic: | ||||||||
| Net income (loss) per share | $ | $ | ( | ) | ||||
| Net Income (loss) per share - Diluted: | ||||||||
| Net income (loss) per share | $ | $ | ( | ) | ||||
| 7) | Inventory |
Major classes of inventory are:
| February 28, 2026 | November 30, 2025 | |||||||
| Raw materials | $ | $ | ||||||
| Work in process | ||||||||
| Finished goods | ||||||||
| Total Gross Inventory | $ | $ | ||||||
| Less: Reserves | ( | ) | ( | ) | ||||
| Net Inventory | $ | $ | ||||||
| 8) | Accrued Expenses |
Major components of accrued expenses are:
| February 28, 2026 | November 30, 2025 | |||||||
| Salaries, wages, and commissions | $ | $ | ||||||
| Accrued warranty expense | ||||||||
| Other | ||||||||
| Total accrued expenses | $ | $ | ||||||
| 9) | Assets Held for Lease |
Major components of assets held for lease are:
| February 28, 2026 | November 30, 2025 | |||||||
| Modular Buildings | $ | $ | ||||||
| Agricultural Products equipment | ||||||||
| Total assets held for lease (net) | $ | $ | ||||||
There were approximately $
| 10) | Product Warranty |
The Company offers warranties of various lengths to its customers depending on the specific product and terms of the customer purchase agreement. The average length of the warranty period is year from the date of purchase. The Company’s warranties require it to repair or replace defective products during the warranty period at no cost to the customer. Product warranty is included in the price of the product and provides assurance that the product will function in accordance with agreed-upon specifications. It does not represent a separate performance obligation under ASC 606. The Company records a liability for estimated costs that may be incurred under its warranties. The costs are estimated based on historical experience and any specific warranty issues that have been identified. Although historical warranty costs have been within expectations, there can be no assurance that future warranty costs will not exceed historical amounts. The Company periodically assesses the adequacy of its recorded warranty liability and adjusts the balance as necessary. The accrued warranty balance is included in accrued expenses as shown in Note 8 “Accrued Expenses.” Changes in the Company’s product warranty liability for the three months ended February 28, 2026 and February 28, 2025 are as follows:
| Three Months Ended (Continuing Operations) | ||||||||
| February 28, 2026 | February 28, 2025 | |||||||
| Balance, beginning | $ | $ | ||||||
| Provision charged to expense | ||||||||
| Less amounts charged-off | ( | ) | ( | ) | ||||
| Balance, ending | $ | $ | ||||||
| 11) | Loan and Credit Agreements |
Bank Midwest Revolving Lines of Credit and Term Loans
The Company maintains a $
The Company carries a $
The Company carries a term loan with Bank Midwest in the amount of $
In connection with the Line of Credit, the Company and Art’s-Way Scientific, Inc. each entered into a Commercial Security Agreement with Bank Midwest, dated September 28, 2017, pursuant to which each granted to Bank Midwest a first priority security interest in certain inventory, equipment, accounts, chattel paper, instruments, letters of credit and other assets to secure the obligations of the Company under the line of credit. Art’s-Way Scientific, Inc. also agreed to guarantee the obligations of the Company pursuant to the Line of Credit, as set forth in a Commercial Guaranty, dated September 28, 2017.
The Term Loan and Roof Loan are secured by a mortgage on the Company’s Armstrong, Iowa and Monona, Iowa properties. Each mortgage is governed by the terms of a separate Mortgage, dated September 28, 2017, and each property is also subject to a separate Assignment of Rents, dated September 28, 2017.
If the Company or its subsidiary (as guarantor pursuant to the Commercial Guaranty) commits an event of default with respect to the promissory notes and fails or is unable to cure that default, Bank Midwest may immediately terminate its obligation, if any, to make additional loans to the Company and may accelerate the Company’s obligations under the promissory note. Bank Midwest shall also have all other rights and remedies for default provided by the Uniform Commercial Code, as well as any other applicable law and the various loan agreements. In addition, in an event of default, Bank Midwest may foreclose on the mortgaged property.
Compliance with Bank Midwest covenants is measured annually each November 30. The terms of the Bank Midwest loan agreements require the Company to maintain a minimum of $
SBA Economic Injury Disaster Loans
In June of 2020, the Company executed the standard loan documents required for securing loans offered by the U.S. Small Business Administration under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the Company’s business. One outstanding loan was executed on June 18, 2020 with a principal amount of $
A summary of the Company’s term debt is as follows:
| February 28, 2026 | November 30, 2025 | |||||||
| Bank Midwest loan payable in monthly installments of $ including interest at %, due | $ | $ | ||||||
| Bank Midwest loan payable in monthly installments of $ including interest at %, due | ||||||||
| U.S. Small Business Administration loan payable in monthly installments of $ including interest at % beginning , due | ||||||||
| U.S. Small Business Administration loan payable in monthly installments of $ including interest at % beginning due | ||||||||
| Total term debt | $ | $ | ||||||
| Less current portion of term debt | ||||||||
| Term debt, excluding current portion | $ | $ | ||||||
A summary of the minimum maturities of term debt follows for the twelve month periods ending February 28:
| Year | Amount | |||
| 2027 | $ | |||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| 2031 | ||||
| 2032 and thereafter | ||||
| $ | ||||
| 12) | Income Taxes |
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating losses.
The Company has net operating losses and tax credits that are expected to offset any 2026 fiscal year tax liability and does not expect to have significant cash tax expense in the near future.
| 13) | Related Party Transactions |
During the three months ended February 28, 2026, and February 28, 2025, the Company did recognize any revenues from transactions with a related party, and
| 14) | Leases |
The components of finance leases on the Condensed Consolidated Balance Sheets on February 28, 2026 and November 30, 2025 were as follows:
| February 28, 2026 | November 30, 2025 | |||||||
| Finance lease right-of-use assets (net of amortization in other assets) | $ | $ | ||||||
| Current portion of finance lease liabilities | $ | $ | ||||||
| Long-term portion of finance lease liabilities | ||||||||
| Total finance lease liabilities | $ | $ | ||||||
| 15) | Equity Incentive Plan and Stock Based Compensation |
On February 25, 2020, the Board of Directors of the Company (the “Board”) authorized and approved the Art’s-Way Manufacturing Co., Inc. 2020 Equity Incentive Plan (the “2020 Plan”). The 2020 Plan was approved by the stockholders on April 30, 2020. The 2020 Plan replaced the Art’s-Way Manufacturing Co., Inc. 2011 Equity Incentive Plan (the “2011 Plan”) and prior plans. The 2020 Plan added an additional
The 2020 Plan permits the plan administrator to award nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance awards, and stock appreciation rights to employees (including officers), directors, and consultants. The Board has approved a director compensation policy pursuant to which directors are automatically granted restricted stock awards of
Shares issued under the 2020 Plan for the three month periods ended February 28, 2026 and February 28, 2025 are as follows:
| For the Three Months Ended | ||||||||
| February 28, 2026 | February 28, 2025 | |||||||
| Shares issued to directors (immediate vesting) | ||||||||
| Shares issued to directors and employees (three-year vesting) | ||||||||
| Total shares issued (forfeited) | ||||||||
| 16) | Disclosures About the Fair Value of Financial Instruments |
The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties. On February 28, 2026 and November 30, 2025, the carrying amount approximated fair value for cash, receivables, accounts payable, notes payable to bank, finance lease liabilities and other current and long-term liabilities. The carrying amounts of current assets and liabilities approximate fair value because of the short maturity of these instruments. The fair value of the finance lease liabilities also approximate recorded value, as its measurement is based on discounting future cash flows at rates implicit in the lease. The rates implicit in the lease do not materially differ from current market rates. The fair value of the Company’s term loans payable also approximates recorded value because the interest rates do not substantially differ from current interest rates the Company could obtain under similar terms.
| 17) | Segment Information |
In accordance with ASC 280, “Segment Reporting," the Company’s chief operating decision maker, or CODM, has been identified as its President, Chief Executive Officer and Chairman. The CODM reviews operating results to make decisions about allocating resources and assessing performance for the entire Company and utilizes gross profit and income from operations to evaluate segment performance and allocate resources. The Company's selling, general and administrative expenses and engineering expenses are charged to each segment as incurred by each reportable segment. The Company allocates a small portion of corporate expenses from the Agricultural Products segment to the Modular Buildings segment monthly for administrative support services provided.
The Company has reportable segments: Agricultural Products and Modular Buildings. The Agricultural Products segment manufactures and sells farm equipment and related replacement parts under the Art’s-Way Manufacturing label. The Modular Buildings segment manufactures and installs modular buildings for various uses, commonly animal containment and research laboratories under the Art's Way Scientific and Evolution Modular labels.
The accounting policies applied to determine the segment information are the same as those described in the summary of significant accounting policies. Management evaluates the performance of each segment based on profit or loss from operations before income taxes, exclusive of nonrecurring gains and losses.
Approximate financial information with respect to the reportable segments is as follows.
| Three Months Ended February 28, 2026 | ||||||||||||
| Agricultural Products | Modular Buildings | Consolidated 1 | ||||||||||
| Revenue from external customers | $ | $ | $ | |||||||||
| Gross profit | ||||||||||||
| Operating Expense | ||||||||||||
| Income from operations | ||||||||||||
| Income (loss) before tax | ||||||||||||
| Income tax expense (benefit) | $ | $ | $ | |||||||||
| Total Assets | $ | $ | $ | |||||||||
| Capital expenditures | ||||||||||||
| Depreciation & Amortization | ||||||||||||
| Interest expense | ||||||||||||
| Engineering | ||||||||||||
| Selling | ||||||||||||
| General and administrative (G&A) | ||||||||||||
| Corporate expense (included in G&A) | $ | $ | $ | |||||||||
| Three Months Ended February 28, 2025 | ||||||||||||
| Agricultural Products | Modular Buildings | Consolidated 1 | ||||||||||
| Revenue from external customers | $ | $ | $ | |||||||||
| Gross profit | ||||||||||||
| Operating Expense | ||||||||||||
| Income (loss) from operations | ( | ) | ||||||||||
| Income (loss) before tax | ( | ) | ( | ) | ||||||||
| Income tax expense (benefit) | $ | ( | ) | $ | $ | ( | ) | |||||
| Total Assets | $ | $ | $ | |||||||||
| Capital expenditures | ||||||||||||
| Depreciation & Amortization | ||||||||||||
| Interest Expense | ||||||||||||
| Engineering | ||||||||||||
| Selling | ||||||||||||
| General and administrative (G&A) | ||||||||||||
| Corporate expense (included in G&A) | $ | $ | $ | |||||||||
| 1. | The consolidated total in the tables is a sum of segment figures and may not tie to actual figures in the condensed consolidated financial statements due to rounding. |
| 18) | Subsequent Events |
Management evaluated all other activity of the Company and concluded that no subsequent events have occurred other than the line of credit renewal and the change of terms agreements for the Company's two term loans that were signed on March 19, 2026, as discussed in Note 11 Loan and Credit Agreements, that would require recognition in the condensed consolidated financial statements.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q (this “report”) and the audited consolidated financial statements and related notes thereto included in Part II, Item 8, “Financial Statements and Supplementary Data,” as well as Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the fiscal year ended November 30, 2025. Some of the statements in this report may be forward-looking statements that reflect our current view on future events, future business, industry and other conditions, our future performance, and our plans and expectations for future operations and actions. In some cases you can identify forward-looking statements by the use of words such as “may,” “should,” “anticipate,” “believe,” “expect,” “plan,” “future,” “intend,” “could,” “estimate,” “predict,” “hope,” “potential,” “continue,” “foresee," "opportunity," or the negative of these terms or other similar expressions. Many of these forward-looking statements are located in this report under Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but they may appear in other sections as well. Forward-looking statements in this report generally relate to: (i) our expectations with respect to order backlog, future demand for products, expected product mix and resulting sales; (ii) our beliefs regarding the sufficiency of working capital and cash flows; (iii) our expectation that we will continue to be able to renew or obtain financing on reasonable terms when necessary as well as our continued positive relationship with our creditors and lenders; (iv) our beliefs regarding production capabilities; (v) our intentions and beliefs relating to our costs, business strategies, and future performance, including without limitation, the impact of cost cutting measures, process improvement measures and new product development; (vi) our beliefs that normalizing dealer equipment stock levels may positively impact future demand for our agricultural products (vii) our beliefs regarding our early order program providing a picture of future demand; (viii) our expected financial results, including without limitation, our expected results for the Modular Buildings and Agricultural Products segments; and (ix) our expectations concerning our primary capital and cash flow needs.
You should read this report thoroughly with the understanding that our actual results may differ materially from those set forth in the forward-looking statements for many reasons, including events beyond our control and assumptions that prove to be inaccurate or unfounded. We cannot provide any assurance with respect to our future performance or results. Our actual results or actions could and likely will differ materially from those anticipated in the forward-looking statements for many reasons, including but not limited to: (i) the impact of changing credit markets on our ability to continue to obtain financing on reasonable terms; (ii) our ability to repay current debt, continue to meet debt obligations and comply with financial covenants; (iii) the effect of inflation as well as general economic conditions, including consumer and governmental spending, on the demand for our products and the cost of our supplies and materials; (iv) impacts caused by fluctuating commodity prices and fluctuating farm income; (v) fluctuations in seasonal demand and our production cycle; (vi) the ability of our suppliers to meet our demands for raw materials and component parts; (vii) fluctuations in the price of raw materials, especially steel and the impact of U.S. tariff policy and retaliatory tariffs on our business; (viii) our ability to predict and meet the demands of each market in which our segments operate; (ix) the impact of future interest rate changes on our business and the demand of our products, or interest rate changes may be different than we currently expect; and (x) other factors described from time to time in our Securities and Exchange Commission filings. We do not intend to update the forward-looking statements contained in this report other than as required by law. We caution you not to put undue reliance on any forward-looking statements, which speak only as of the date of this report. You should read this report and the documents that we reference in this report and have filed as exhibits completely and with the understanding that our actual future results may be materially different from what we currently expect. We qualify all of our forward-looking statements by these cautionary statements.
Critical Accounting Policies
Our critical accounting policies involving the more significant judgments and assumptions used in the preparation of our financial statements as of February 28, 2026 remain unchanged from November 30, 2025. Disclosure of these critical accounting policies is incorporated by reference from Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended November 30, 2025.
Results of Operations
Net Sales and Cost of Sales
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.
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
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.
Expenses
Consolidated selling expenses from continuing operations for the three months ended February 28, 2026 were $437,000, compared to $350,000 for the same period in fiscal 2025. The increase in selling expenses is due to increased commissions and royalties on increased sales along with additional targeted advertising campaign expenditures. Selling expenses as a percentage of sales were 6.6% for the three months ended February 28, 2026 compared to 6.8% for three months ended February 28, 2025.
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.
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.
Net income (loss)
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.
Order Backlog
The consolidated order backlog net of discounts as of April 7, 2026 was $7,287,000 compared to $4,482,000 as of April 7, 2025, a 62.6% increase. The order backlog in our Agricultural Products segment was $2,774,000 as of April 7, 2026 compared to $2,016,000 in fiscal 2025, a 37.6% increase. Demand has remained steady throughout fiscal 2026 for our agriculture products and is much improved from a year ago due to higher row crop prices and record cattle prices. The backlog for the Modular Buildings segment was $4,513,000 as of April 7, 2026, compared to $2,466,000 in fiscal 2025, an 83% increase. Quoting activity in both the research and agriculture buildings markets have been strong so far in fiscal 2026, with further contracts expected to execute with customers we are performing design agreements for. Our order backlog is not necessarily indicative of future revenue to be generated from such orders due to the possibility of order cancellations and dealer discount arrangements we may enter into from time to time.
Liquidity and Capital Resources
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.
As of February 28, 2026, our revolving credit line had an outstanding principal balance of $3,431,937. We renewed our revolving line of credit with Bank Midwest on March 19, 2026, with a scheduled maturity date of March 30, 2027. In our most recent renewal, we negotiated an interest rate 50 basis points lower than our previous line of credit tied to SOFR to recognize expected interest rate decreases sooner. Bank Midwest's credit committee has preapproved an additional $1,500,000 of principal for the 2026 renewal, consistent with the borrowing availability of our previous line of credit, in the event we need additional funding.
We believe our current financing arrangements will provide sufficient cash to finance operations and pay debt when due during the next twelve months. We expect to continue to be able to procure financing upon reasonable terms.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a smaller reporting company, we are not required to provide disclosure pursuant to this Item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The persons serving as our principal executive officer and principal financial officer have evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period subject to this report. Based on this evaluation, the persons serving as our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of February 28, 2026. Our management has concluded that the consolidated financial statements included in this report present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
We are currently not a party to any material pending legal proceedings.
As a smaller reporting company, we are not required to provide disclosure pursuant to this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
We did not purchase any shares of our common stock during the first quarter of fiscal 2026.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Insider Trading Arrangements. During the three months ended February 28, 2026, director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ART’S-WAY MANUFACTURING CO., INC. |
|
| Date: April 13, 2026 |
By: /s/ Marc H. McConnell |
| Marc H. McConnell |
|
| President, Chief Executive Officer and Chairman |
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| Date: April 13, 2026 |
By: /s/ Michael W. Woods |
| Michael W. Woods |
|
| Chief Financial Officer |