Consolidated net sales totaled $24,965,000 for the 2021 fiscal year, which represents a 11.4% increase from consolidated net sales of $22,409,000 for the 2020 fiscal year.
Agricultural Products segment’s net sales for the 2021 fiscal year were $16,826,000 compared to $13,085,000 during the 2020 fiscal year, an increase of $3,741,000, or 28.6%. The sales increase is attributable to favorable agriculture market conditions as commodity prices hit 5 year highs. The company saw increased demand for grinder mixers, manure spreaders and beet harvesting equipment in fiscal 2021 and is carrying even higher backlog numbers than it saw in fiscal 2021 as it transitions to fiscal 2022.
Modular Buildings segment’s net sales for the 2021 fiscal year were $5,678,000 compared to $6,993,000 for the 2020 fiscal year, a decrease of $1,315,000, or 18.8%. The decrease in sales was attributable to a large construction project spanning the last three fiscal years that reached completion in fiscal 2021.
Tools segment’s net sales for the 2021 fiscal year were $2,461,000 compared to $2,331,000 for the 2020 fiscal year, an increase of $130,000, or 5.6%. This segment has not fully recovered from the drop in oil prices at the start of the pandemic in fiscal 2020 that flattened our sales.
Consolidated net income for the 2021 fiscal year was $213,000 compared to net loss of $(2,103,000) in the 2020 fiscal year, an improvement of $2,316,000.
Agricultural Products. Despite continued margin pressure from increasing material and component costs in fiscal 2021, Agricultural Products segment was able to combat margin erosion through multiple price increases to customers. Much of the net income improvement year on year was due to $996,000 of inventory obsolescence expense the company had in fiscal 2020 that was related to increasing reserves on product lines that the company eliminated strategically from its offering including UHC reels, Miller Pro forage boxes, rakes and augers, which was not repeated in fiscal 2021. The company also saw an 18% increase in labor output on roughly the same amount of wages in fiscal 2021 due to increased demand and better shop floor planning. The company did see an increase in selling expenses in Agricultural Products segment from a rebranding initiative that took place in fiscal 2021 and the addition of a product development manager to help drive product lines towards the needs of the customer. The rebranding initiative refreshed the Art’s Way logo, website, and literature to better fit the hard-working customers it serves. The Agricultural Products segment’s general and administrative expenses were down in fiscal 2021 as it incurred some one-time pandemic and dual salaries expense in fiscal 2020 as it transitioned two members of senior management.
Modular Buildings. In Q2 of fiscal 2021, the company completed a large construction contract that was negatively affecting profitability. The execution of new contracts with higher quality margins helped improve the company's bottom line in fiscal 2021. While the commission expense rose in fiscal 2021 due to increased agricultural building sales and demand, the company saw an overall decrease in operating expenses from decreased bonus expense, one-time pandemic expense in fiscal 2020 and reduced corporate allocation expense which also led to net income improvement.
Tools. The Tools segment was the only segment that did not record profitability in fiscal 2021 with a net loss of approximately $(155,000). Backlog has remained steady and strong since the pandemic. Like the majority of businesses in current economic conditions, Art's Way is having trouble maintaining a skilled workforce but has taken steps to increase automation to lessen this burden. The company did see a significant drop in operating expenses from fiscal 2020 including deceased bonus expense, corporate allocation expense and OEM implementation costs in fiscal 2021.
President and CEO of Art’s Way, David King, reports, “Our dedicated team members continued to deliver exceptional performance in Q4 of fiscal 2021 leading to positive results. We overcame ongoing challenges with the supply chain, skilled labor shortages and the impacts of COVID-19 to deliver to our customers. While supply chain constraints are expected to continue for the foreseeable future, our team continues to work closely with suppliers to mitigate disruptions.
"We were very pleased to see continued operational efficiency gains from our ongoing efforts to become leaner as a manufacturer. Investment in capital equipment and automation with positive ROI across all three business segments is strengthening our position moving forward.
"The new year is off to a robust start as we are experiencing one of the largest backlogs in company history. Strong commodity prices and favorable farm income are creating strong demand for the Agricultural Products segment while improved oil prices continues to add to Tools segment backlog. Paired with increased interest in modular buildings, we are optimistic for another very successful year.”
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