Art's-Way Manufacturing Co., Inc.

Consolidated revenues for the quarter were $5.294 million versus $4.689 million last year, up $605,000 or 13%. Year-to-date revenues were $10.660 million versus $9.111 million, up $1.549 million or 17%. Management said the company had two unusual charges in 2018: about $300,000 from revaluing deferred tax assets and about $253,000 from a cumulative translation adjustment tied to winding down Canada operations. Year-to-date loss from operations improved by $307,000, or 29%. Agricultural product revenue rose 25% in Q2 to $3.936 million, with gross profit improving to 23% from 14% quarter-over-quarter and 22% versus 20% year-over-year. Scientific Q2 sales were $834,000 versus $888,000, while year-to-date sales were up 23% to $1.573 million. Ohio Metal Q2 sales were $524,000 versus $639,000, and year-to-date sales were down 6% to $1.221 million. Inventory at May 31 was $13.385 million, down $1.201 million, or 8%, from November 2017. West Union remains listed for sale at $1.5 million. For guidance, management said Q3 should be better than the first half and they would hope to turn EBITDA positive in Q3, with inventory and debt expected to come down further; they said Q4 is hard to predict because incoming orders are uncertain.

Marc McConnell said the quarter was a mixed bag: revenue improved, but profitability remained under pressure from both current conditions and carryover issues. His strategic emphasis was on long-term positioning—customer service, product development, continuous improvement, dealer network building, and simplification of the business through inventory reduction and the West Union asset sale. His tone was cautious but constructive, saying the company is in a prolonged downturn and that the team is trying to control what it can while waiting for industry conditions to improve.

Carrie Gunnerson focused on the numbers and the drivers behind them. She highlighted consolidated revenue of $5.294 million, year-to-date revenue of $10.660 million, inventory down to $13.385 million, and the two notable non-operating hits: about $300,000 from deferred tax asset revaluation and about $253,000 from foreign currency translation. She also pointed to margin pressure from inventory reduction, saying it impacted margins by about 5.9% in the quarter and about 5.3% year-to-date, while noting that price increases should help as newer orders flow through.

Analysts pressed management on steel tariffs, pricing acceptance, utilization, and the outlook for Q3/Q4. Management said they cannot quantify how much steel is imported, but costs increased across the board, with some inputs up 30% to 40%, and customers have generally accepted price increases because the whole industry is raising prices. On operations, management said they are basically running one shift with a small second shift for bottlenecks, labor is tight locally, and Q4 visibility is weak because dealers typically do not order aggressively then. Questions also covered the Ohio Metal customer loss, which management blamed on a competitive undercut rather than imports, and scientific building ideas such as solar, which management said they would review but are not actively pursuing unless customers demand it.