Art’s Way Manufacturing (Nasdaq: ARTW) reported consolidated sales of $6.5 million, up 17.5% vs. the same period a year earlier, in its fiscal third quarter ended Aug. 31, 2020. Sales during the first 9 months of the year were $16.9 million, up 10.2% year-to-date compared with the first 9 months of the previous year.
The company manufactures and distributes equipment serving agricultural, research and steel cutting industries.
“The three month increase in sales is due to increased sales from our agricultural products and modular building segments while our tools segment showed a decrease in sales for this period. All three segments showed increased sales for the 9 months ended Aug. 31, 2020,” the company said.
In a press release, Art’s Way management said, “Our third quarter sales in our agricultural products segment were $3,671,000 compared to $3,194,000 during the same period in fiscal 2019, an increase of $477,000, or 14.9%. Our year-to-date agricultural product sales were $9,695,000 compared to $9,441,000 during the same period in fiscal 2019, an increase of $254,000, or 2.7%.
“At the end of our first quarter of fiscal 2020, our sales were up 13.1% in the agricultural products segment from the prior year. We were on track for a strong year and then the COVID-19 pandemic hit, which decreased our sales 15.6% in the second quarter of fiscal 2020 compared to the second quarter of fiscal 2019. Our third quarter provided another strong sales showing with an increase of 14.9% over the third quarter of fiscal 2019. We attribute the increased sales success to gained market share for our dump box product line and improved design of our manure spreader line. The addition of key employees to our sales and marketing team over the past year has also contributed to our recent sales success.
“Gross margin for our agricultural products segment for the 9 month period ended Aug. 31, 2020 was 21.3% compared to 15.7% for the same period in fiscal 2019. Our increased gross margin in fiscal 2020 reflects continuous improvement initiatives enacted in fiscal 2019 that have increased our workforce efficiency. Another contributing factor was our ability to increase our standard gross profit margin by 5% through price increases, strategic product offerings and product eliminations.”
Net Loss: Consolidated net loss was $424,000 for the 3 month period compared to net loss of $289,000 for the same period in fiscal 2019. “Our consolidated net loss for the 9 months was $1,663,000 compared to $1,251,000. Despite the increased net loss for the 3 and 9 months we did show substantial operational improvement. Our sales were up for the 3 and 9 months in all three of our segments. Our gross profit as a percentage of sales was up 5.8% and 5.6% for the 3 and 9 months, respectively, in our largest segment, agricultural products.
“While we did report an increased net loss for the year, we did incur large, mostly non-recurring administrative expenses including approximately $133,000 of recruitment expense for management recruitment, dual management salaries of approximately $68,000 as we transitioned our chief executive officer and director of materials positions, approximately $54,000 for the implementation of our OEM customer's product line in the tools segment and additional expense of $280,000 that includes stock granted to new management staff, payout of employment agreements and bonus accruals for incentives offered by the Compensation Committee of the Board for fiscal 2020 targets.
“We also had $197,000 of pandemic-related expense related to employment rewards for keeping our operations running safely during the COVID-19 pandemic. The additional COVID-19 expenses were offset with the award of a Paycheck Protection Program loan of approximately $1.2 million that we believe will be fully forgiven. We are pleased with the strides we have made operationally and don't believe the bottom line accurately reflects the company's achievements over the past few years. Without the additional non-recurring administrative expenses, we would have shown significant bottom line improvement for the 9 months ended Aug. 31, 2020 compared to the same period in fiscal 2019.”
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