Armstrong, Iowa — Art's Way Mfg. Co., a diversified, international manufacturer and distributor of equipment serving agricultural, research and steel cutting needs, has announced its financial results for the fourth quarter and fiscal 2019.
Consolidated Net Sales Increase 16%
Consolidated net sales for continuing operations totaled $22,889,000 for the 2019 fiscal year, which represents a 16% increase from consolidated net sales of $19,727,000 for the 2018 fiscal year. The Agricultural Products segment's sales revenue for the 2019 fiscal year was $13,508,000 compared to $14,344,000 during the 2018 fiscal year, a decrease of $836,000 or 5.8%. The company saw decreased demand for portable feed equipment in the 2019 fiscal year. Continued struggles in the dairy market, coupled with market shifts to large cattle operations from the traditional small cattle farmer also contributed to this decrease. Additionally, the company also saw a decrease in sales of UHC reels year-over-year due to a loss of a primary reel customer after a strategic decision to not offer customer discounted prices at unfavorable margins. Moreover, OEM blower revenue in the 2018 fiscal year was not repeated in the 2019 fiscal year as the company's OEM blower customer elected not to purchase any blowers from in 2019 due to slow-moving inventory on dealer lots relating to poor agricultural market conditions. While the company saw decreased demand in the above product lines, the company also saw increased demand in dump boxes, land maintenance equipment, bale processors and beet equipment.
Despite these challenges, the 2019 fiscal year ended with the strongest fourth quarter for the company since the 2014 fiscal year. At the end of the third quarter of the 2019 fiscal year. the company's year-to-date sales in the Agricultural Products segment were down 18.4% year-over-year. The company ended the 2018 fiscal year with only a 5.8% decrease year-over-year. The company's Agricultural Products segment's sales for the fourth quarter of the 2019 fiscal year were up 59% over the fourth quarter of the 2018 fiscal year.
The company's Modular Buildings segment's net sales for the 2019 fiscal year were $7,260,000 compared to $3,109,000 for the 2018 fiscal year, an increase of $4,151,000, or 133.5%. The company's Tools segment's net sales for the 2019 fiscal year were $2,121,000 compared to $2,274,000 for the 2018 fiscal year, a decrease of $153,000, or 6.7%.
Loss from Continuing Operations
Consolidated net loss for the 2019 fiscal year was $(1,420,000) for continuing operations compared to net loss of $(3,336,000) in the 2018 fiscal year for continuing operations, a decrease in loss of $1,916,000. The decreased loss is due to several factors. In the first quarter of the 2018 fiscal year, the company recognized a loss of approximately $298,000 from the revaluation of its deferred tax asset at the new income tax rates. The company also recognized a loss of approximately $253,000 from the liquidation of its Canadian subsidiary related to the cumulative translation adjustment in the second quarter of the 2018 fiscal year. The company recognized an impairment of approximately $216,000 on its West Union facility during the third and fourth quarters of the 2018 fiscal year which was equal to the expected loss on the sale of the property. This facility required mold remediation of $235,000 and scrapping of $67,000 of inventory, which was captured in the third quarter of the 2018 fiscal year.
The company also impaired its goodwill on its Miller Pro product line in the amount of $375,000 in the fourth quarter of the 2018 fiscal year. Moreover, in the fourth quarter of the 2018 fiscal year, management decided to place increased reserves on inventory resulting in expense of approximately $543,000. The revaluation of the company's deferred tax asset, release of its current translation adjustment, impairment of assets and inventory reserve revaluation were all one-time non-cash expenses that greatly impacted its bottom line in the 2018 fiscal year. In the fourth quarter of 2019, the company placed additional reserves of approximately $240,000 on its Universal Harvester Company inventory due to the loss of a major customer on that product line. This additional non-cash expense wiped out what would have been a profitable consolidated fourth quarter.
Comments and New CFO
Chairman of the Art's Way Board of Directors, Marc H. McConnell reports, "After a year that has been quite challenging, we are quite encouraged to see significant improvement in the fourth quarter in revenue, profitability and backlog. These outcomes are most attributable to a large ongoing project at Art's Way Scientific as well as meaningful improvement in demand for farm equipment. This improvement in demand is driven by favorable commodity prices coupled with new products being well-received by the market.
Despite continued difficulty achieving profitability for the full year, we are pleased to have reduced bank borrowings by 20%, reduced aged inventory significantly, added key members to our management team, built a recurring revenue stream via our lease business at Art's Way Scientific, introduced multiple new products, added potentially-impactful new customers, made significant operational improvements via an embrace of lean principles, enhanced customer service functions and improved product quality, among other achievements.
As we look ahead to 2020 we are pleased to have a strong backlog of work in front of us in all segments and expect that this strong demand will continue as international trade deals are finalized, commodity prices continue to rebound and a degree of certainty and stability returns to the agricultural industry at large."
Art's Way Mfg. also announced that Michael Woods has been promoted to chief financial officer effective Feb. 1, 2020. Prior to this position, Woods served as the vice president of finance for Art's Way. Woods has 8 years of experience in various financial and accounting positions, and he initially joined Art's Way in April 2016.
Woods began his career in public accounting at Brinkman and Reed, CPAs and worked at XPO Logistics. Woods graduated from Iowa State University, Ames in December 2010 with Bachelor of Science degrees in Accounting and Finance and earned the CPA designation in October 2013.