Art’s-Way Manufacturing Co., Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended August 31, 2026; filed October 13, 2026. The company manufactures agricultural equipment and modular buildings through its Agricultural Products and Modular Buildings segments. Financial statements are unaudited.
Financial results
| Metric | Three months ended Aug. 31, 2026 | Three months ended Aug. 31, 2025 | Nine months ended Aug. 31, 2026 | Nine months ended Aug. 31, 2025 |
|---|---|---|---|---|
| Sales | $5.62 million | $6.43 million | $20.11 million | $17.91 million |
| Gross profit | $1.66 million | $1.77 million | $5.60 million | $5.32 million |
| Gross margin | 29.6% | 27.5% | 27.9% | 29.7% |
| Operating income (loss) | ($70,000) | $345,000 | $547,000 | $858,000 |
| Net income (loss) | ($140,000) | $254,000 | $230,000 | $1.68 million |
| Diluted EPS | ($0.03) | $0.05 | $0.04 | $0.33 |
| Operating cash flow | Not presented quarterly | $1.85 million | ($15,000) |
Quarterly sales declined 12.7% year over year, while nine-month sales rose 12.3%. Nine-month net income fell substantially; the comparable 2025 period included approximately $1.15 million of Employee Retention Credit proceeds net of preparation fees and tax. Nine-month 2026 operating cash flow benefited from increased customer billings in excess of contract costs, while receivables absorbed $2.84 million of cash.
At August 31, 2026, cash was $2,855; current assets were $17.29 million and current liabilities $10.13 million, for working capital of approximately $7.16 million. Total assets were $26.21 million and total liabilities $12.51 million. The company had $3.65 million outstanding on its $4.0 million revolving credit line, with $355,000 available. Term debt was $2.36 million and finance lease liabilities $473,000. Capital expenditures were $1.84 million for the nine-month period.
Segments and material changes
- Agricultural Products: Revenue increased 2.7% in the quarter to $3.07 million and 12.4% year to date to $11.19 million. Nine-month gross margin improved to 28.4% from 24.4%, but the segment reported a $697,000 operating loss. Management cited stronger grinder mixer, manure spreader, and bale processor demand, partly offset by weaker sugar beet equipment demand.
- Modular Buildings: Quarterly revenue declined 26.0% to $2.55 million, while nine-month revenue increased 12.1% to $8.92 million. Nine-month gross margin decreased to 27.2% from 36.4%; management attributed the decline to a warrantied building sold at cost, project overruns, and prior-year contingencies that did not recur. The segment recorded $1.24 million of nine-month operating income.
- Consolidated expenses increased year over year: nine-month selling expense was $1.29 million, engineering expense $300,000, and general and administrative expense $3.46 million. Management cited higher commissions and advertising, product development, professional and legal fees, and early-retirement costs.
Outlook, risks, and contingencies
- Backlog as of October 6, 2026 was $19.08 million, versus $3.60 million a year earlier: $17.43 million in Modular Buildings and $1.64 million in Agricultural Products. Management said modular backlog was expected to support revenue through fiscal 2027 and described it as a segment record. Backlog may be reduced by cancellations or dealer discounts and is not assured future revenue.
- Management expects receivable collections, progress on construction contracts, and inventory reduction to be key cash sources for the rest of fiscal 2026. It believes financing is sufficient for operations and debt payments over the next 12 months; no specific revenue or earnings guidance is provided.
- Management cited a weak agricultural outlook, modest row-crop prices, rising input costs, steel and oil price increases, seasonality, supplier availability, tariffs, interest rates, and access to financing as risks. The filing cites steel increases of more than 31% in one discussion and more than 39% in another.
- The $4.0 million line of credit matures March 30, 2027 and bears interest at one-month SOFR plus 2.6%, subject to a 5.0% floor. Loan terms include a $4.0 million minimum monthly working-capital requirement and a minimum debt-service-coverage ratio of 1.25 with 0.10 tolerance. The filing reports covenant compliance at November 30, 2025; the next annual measurement date is November 30, 2026. The company also had a $500,000 reserve credit line, which management said was paid off with operating cash flow.
- On October 5, 2026, after quarter-end, the company entered a $956,000 term loan for a fiberoptic laser and crane system. The loan has an initial 6.65% rate for 60 payments, then a variable rate, and is a subsequent event rather than August 31 debt.
- The company is pursuing litigation alleging trade-secret misappropriation related to competing grinder-mixer products. It seeks more than $2.0 million in damages, as well as other relief; the matter remains pending. The filing does not quantify any expected recovery.
Important facts for investors to verify
- Whether the record modular-building backlog converts to revenue on expected timing and margins, and the extent of cancellation or discount risk.
- Receivable collection timing, including approximately $665,000 of floor-plan receivables more than 30 days due, and the company’s ability to reduce inventory.
- Liquidity and covenant headroom, particularly around the November 30, 2026 measurement date and the March 2027 credit-line maturity.
- Actual cost and operational benefits of the new laser and crane equipment, including the post-quarter $956,000 loan and its interest terms.
- The effect of steel, oil, agricultural-market conditions, legal costs, and the pending trade-secret litigation on results and cash flows.
- The filing’s different stated steel-price increases and the prior-year ERC benefit when comparing earnings.