Art's-Way Manufacturing (ARTW) 6 Oct 172017 Q3 Earnings call transcript

Good morning, ladies and gentlemen. Today is October 6, and welcome to the Art’s Way Manufacturing Quarterly Investor Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Your call leaders for today’s call are Marc McConnell, Chairman of the Board of Directors of Art’s Way Manufacturing; Carrie Gunnerson, CEO and President of Art’s Way Manufacturing. I’ll now turn the call over to Ms. Gunnerson.

begin. may You

just statements. I’m start reading by Good going forward-looking our morning. to

You statements of call some should that note the considered statements. may forward-looking made be this during

to not Forward-looking but of operations. growth limited our results market to, and statements future position, are statements include, for strategies relating

periodic materially and and in to Forward-looking may inherently does economic reports and of sales Art’s to With risks the Commission. products, general subject Exchange over Way’s and competitive Securities risks such undertake call as Art’s and statements. statements Marc. on difficulties manufacturing, and file from described marketing with and are conditions, uncertainties other factors, delays that, Actual to results uncertainties the I’ll update not Art’s differ its forward-looking in development, results hand anticipated Way Way

thank call. Yes, quarter third welcome I to like you. to you our all would earnings

to improved to about questions I’ll are start As we've have. ways you been the you’ve may quarter still forward we And the all to prior presentation. answering it about that that to and you And for have seen go. let had are what over even with results though that looking we're talking Carrie much we've experiencing any that, excited

with Marc. I'm going you Thank you, from to giving consolidated information financials. start the some

since increase quarter quarter consolidated second an X%. the $XXX,XXX of in strongest the it’s third revenues year; or quarter Our was were $X,XXX,XXX $X,XXX,XXX compared of prior to This XXXX. our

a quarter discontinued the with and of about our would and Midwest, bank debt business local economy September be of our in Bank we our income that And this we is with of prior first Midwest them. shift year, $XX,XXX have On positive to profitable our year, feel $XXX,XXX. Our Bank compared a this understands relationship with Ag loss really U.S. the relationship for the XXXX. as of second $XXX,XXX before tax XXth the Bank. was since quarter again quarter we did and well the restructure a very

our will over XX%, and improve service greatly for will agreement liquidity; loan us. our annual debt loan reduce new it more covenants establishes favorable far Our by

to have combined business. on more one and million. and facilities total our the simplify $X.X still in are more Union, a We continue facilities focus one key operations of two our Dubuque, Iowa. market, and West We bring listed Those two in for Iowa to

liabilities Our inventory decreasing levels we in fourth significant expect are quarter. see current decline to and a in the

a $X,XXX,XXX the which long-term us beet debt the quarter through Revenues agreement also we -- move a prior to going equipment, were pass segment our anticipate our $XXX,XXX move Sales liquidity. on accounts to we the not $X,XXX,XXX it’s in for payables compared harvester a to I due and current year manufacture, bank did Our decline $XX,XXX. we to will self-propelled of were am the quarter. of now. for liability product for the agricultural us, new allow in improved decrease to to debt distribute, from or our down is just

Way Art’s just were products, adjust produced up So if or sales the $XXX,XXX you sales for actually XX%. our

only adjust harvesters, are sales and numbers. Our products are eliminate or our or produced X% Way the second sales over a only a $XX,XXX,XXX self-propelled year-to-date compared X%. $XXX,XXX year-to-date if down That quarter $X,XXX,XXX. of decrease is $XX,XXX,XXX, or Again X% improvement you the Art’s for beet to year-to-date the out

accompanied have early We program, just price order our some increases. released with

year December. for our as typically the the Our early calendar the schedule with and coming production in program program plans helps order year and backlogs, us very we end set high ends

consistent be this with that prior expect years. We will program

a our significant our floor had second the $XXX,XXX have gross products of and products the declined margins a we products we’re impacted a and margins. time, this the and are time. pickup margins first and gross market product they we move a products been products next that through our were strong gain at for will in trying mix, on quarter, an increased delivering our traditional margins or Ag for we for Our share backlog XXX%. numbers, fourth the producing margins fairly hitting shift up lot margins adjusting saw have and to them. product and anticipate new year shop proven the In of compared by increase is and favorable do third just on which significantly. year. have Those last with going gross gross The through shift R&D the now factory we we as pricing our and with These Based products backlog our back in to in the slimmer anticipate been our more field quarters, to

in they are over increase on Our really engineering supporting that our We significant products. a however is been years for few in are for have engineering level year, that to expenses expenses up. quarters, efforts comparison the been focused up XX% those have last we prior last believe R&D us, but

the in we in to and first sales We quarter years. quarter season facility comparable be so inventory do an will are that fourth us sales next believe the past in through blower complexity of We sell with associated and that [indiscernible] our do lease that’s of enable a up were have to enough We We a year are end. worth finished had the our that line discontinuing have the Canada. line and produced product the our our in having facility the coming that a there and income to announced we Agro winter not snow in have Canada. come fashion that rented Trends to goods

minimize quarter we a for shift before to efforts quarter tax of million, $XX,XXX Our tax of loss will continue $X just income a year, quarter. third loss over loss that the the $XXX,XXX. $XXX,XXX have the compared before was fourth of a Year-to-date still we of our over last to in

bringing anticipated, so levels XX, were produce we new we over significantly lower were Our quarter moved year-end. Those to our second saw had increased we up a through much XXXX in that factory as in over in inventories rise inventory products. the than -- inventory inventory November inventories the had fairly

So X.X%. coupled We of moving inventories did. into and turn the a in goods quarter further dropped push values to bulk in inventory third X.X% quarter. reduction the whole with inventory slow anticipate that year-end over reductions second sales in We of And in the some them quarter. the reduction our saw in inventory the third a a of did or both move our over fourth quarter of

for segment. $XXX,XXX. to increased up $X,XXX,XXX. to from XX% $X,XXX,XXX our sales $XXX,XXX Sales to there the Metals quarter Next, I'm going move to Year-to-date are from Ohio XX%

September of year-to-date. have is and really XX% Director it. the He margins our side Our manage gross fruits the a specifically does going the after markets have the the from trying we improved pay-off a side new point. seeing to of This XX% of well in that area specialty at being hired tied the XXXX gas on risks us products. for Sales. tied we XXXX, oil to side sales increasing are key to with not and his this specialty is of our in He labors industry was also to In known very standard

and an throughout that of the specialty anticipate we So we increases on the line seen have continued sales specialty year. in increase in side XX% specifically

third to $XX,XXX quarter loss Our the for income was operations from year. compared prior of in the a $XX,XXX

Our from year-to-date $XXX,XXX of is $X,XXX to year. compared income the loss operations prior a in

but Texas their to we year. were impacted largest of a prior we at of their We Houston, were in have really quarter to work. the located year were and that before that is compared finalize one customers the $XX,XXX an the $XX,XXX as a able in a flat have be the in our fourth basis did to in our tax production for third due sales three the to quarter not their negotiations on out contract do will hurricane. they be do anticipate to want see impact point disruption income due and Our place operations probably We loss term. the We our quarter-to-quarter employees new union quarter not to the quarter, was able that with during in

going $XXX,XXX and dairy market the of XX%. compared a sales Scientific. compared decline $XXX,XXX, significantly were to the to decline $X,XXX,XXX Way still to Next a Art quarter Year-to-date $X,XXX,XXX, sales quarter our in to I'm The for were is the Sales for decrease XX%. impacting for move of both year-to-date.

have for able secure two held we buildings We inventory. in that to leases have our been

third placed quarter. fourth the were go leases in other was service into those into service quarter and will the of the in One

the just in the One Ag purchase a other year. at briefly, of go those $X,XXX,XXX of the over lease I want our previous option to XX years was with $XXX,XXX financing backlog an backlogs just current month for compared and a is straight to sector, three was lease.

Metals for or Total at a So to again the of $X,XXX,XXX $XXX,XXX Ohio to year, $XX,XXX backlogs their Ohio, $XX,XXX year. that's XXX%. in backlog prior increase is currently $XXX,XXX increase are or the $X,XXX,XXX XXX%. compared an prior in at compared In

lion third So is up quarter share The Ag $XXX,XXX a us. that of quarter believe XX%. for of good the that was increase obviously sector. the total the the are in We backlogs

by more Our our sales us our will are debt new place. This reducing lending and new service levels products agreement new have we field, much in a the requirements. in are agreement our improving performing well increasing liquidity allow flexibility,

a turned have corner here. we that optimistic cautiously are We

to focus new in on the market. continue We relevant being and products

focus customer image quality. Our continue to and be us dealer service through for and our relations a

stronger that continue backlog comparison year Our program. and we in order to trend numbers are to last anticipate through early our much

We over Marc, on pickup taken markets opportunity our over will these we struggled cost years, have focusing to service and customer to quality we time. recognized the call the drive operation, past turn and productivity as back few really out sales efforts entire believe and sales our you. be forward. While I'll move that pickup of we've this as the believe while

activity, higher I than the time incoming products months we've which activity as the a to about Really would time at last was after around started year tough thank order that that seem that to that toughest especially but is all quoting in active part we're us. really the actually good. lot better things see some I Okay, it experience feeling better. of also products, tough, just is orders say we And the behind at go but it we quarters, forward better mean a things margin already that are ago this a the of quarter lot had that we than were previous more we struggle this And year. in great the in sentiment a the ahead, think a you. I stuff are in our was of time is got the ago deal marketplace been last year the

got we couple that to undertaking and we've starting over and and I some our the of been the last of improve backlog we've some of work we're to So the business see from think benefits simplify years. finally continue efforts to of

Our remain our improve very positioning important all product. balance returns high and normal and long-term when highest all priorities have business market I things been very business a focus customer product lead more quality, service to great and of for And they have our ourselves for from inventory to well keep developing us standpoint sheet reduce to circumstances. to to these think

some think and we're things still improve pretty think start that the challenged. to a we While market just as benefit geared to I greatly it's And maybe little ourselves getting bit. better

glad be to that, questions. So, I’d take with any

question first your SER Sam Management. comes question. Please Our Instructions] Rebotsky [Operator state from Asset from

Yes, Carrie Marc. and good morning

Good morning.

an that also fourth Marc, in were you were does year $X.X will improvement. in indicate of be expect the be you fourth profitable quarter improvement, fourth the million million indicated and sales sales you will quarter profitable where quarter have sort to range, the to the you current good this $X you last It's quarter. an had

in we've that chance last months of was last were sure quarter saw levels some positive year. just a for we than year's mean ever tremendous quarter terrible. the we've that got and it. think just improvement at fourth we EBITDA of And fourth should think I I lower the seen sales in And over that have I quarter,

a lower third So would time at and year what just our all expect of was certainly is thing. the a think our year revenue when cost the better we early ago. year this a than ago. on make kind much, activity sales that is is that we to the it's our having of during really prediction, comparatively it quarter I with that than what we it ago, time think just think say, and don't to products all. that I really this was much year level it but But which just better done. things I it at that expect year shipped Basically income But had time be good side to because don't a of be point it's we par net quarter to will on structure of than

that buildings do Well the as held sounds facilities? And for good. going closure as soon, we far expect these on with what's sale,

we're a anything don't prospects, in to have not promise be wire working cases to of have would signed don't it's all much some but both in the Well really have actively very kind report. it is contract, And until in the bank and there.

Okay.

our that represents half So borrowings. hard and that of working we're

to So sell quite we're it us those. when will be significant able to

Okay.

improvement the that do you been see appears And or achieve what that improvements the some attribute do you want the helping to in turnaround you achieve. director sales Or you do to attributable so significant you what to? see has it new industry is

director So to, sales we Arts years Manufacturing a sales the was going nearly for specifically. that two that new ago. referred director Way Carrie And have back new Ohio for

And would us kept stay particularly year. than did. we developing sales And be but worse. I new those give degree they’re part our some levels certainly it for hadn't that that a it's think think wonderful, during numbers not if worse that progress much mean the be they new us even products think would of on I efforts helped are we is the relevant products I what's year that helping I are us. of the revenue and

for actively sure. marketplace, completely doesn't things I really I of the overall think or for it’s as market, what why I far the And too as but anyway some of explain So better been doing recent sentiment we've some of the much a better able think last with of don't were think at that question, in is are the certainly third than we dealers it that quarter and last And products do the versus year. lot in offer more to end last without year product has they earlier were But year. to weren't year. the quoting

the sounds Continue That luck. good. improvement. Good

Sam. you, Thank

question [Operator from state your Instructions] Investment. question. Our from Miller Please Frontier comes next Roger

morning. Good

morning. Good

more on the speak on and you going market Can modular is there? what

Well obviously -- it they our great are weren't -- is down been have year-over-year and sales ago. year

better even -- half year I to the struggle, our to was of I things is question we been quite we So really off the scientific start. like since feel ago. year without but like we've continue and had feel that the first about for And got with time, rough have a slow backlog

of the And so sort and But not for And up of we're to overall a do dead that doing in it's marketplace couple have helps it's as set lot sales of some mean the and inventory gotten active story that and you’ve opportunity the business to difficult see heard it haven’t continue the before if lot old is didn’t, same from a is and an be it’s of we we of but long us have over finding and a a of -- sure. I really activity so lot address from good. us building cycle inventory we out would leases that's and pleased hump thing. opportunity really remain kind we and very way we it's either of yet, not great in certainly of it. really we certainly some

simplify be someday effort having our see we’re them worth and we that because You’ve plenty business we there’s the we developing. heard and and activities in or about there that building talk I worth are being category see about clearly. businesses in put don’t opportunity don’t us we’re to all, them. wanting or it to that don’t don’t in be not good And result than at much scientific that being would have the I to to there if don’t it, yet brag

into to scientific? sell or you once invest Well May least more one, might buildings want you suggest the I at

Yes, I certainly to would love expand…

you say ought personnel for maybe one. side can’t that, do I but Obviously to

a the mean - or is that that’s that in equipment driven of I Yes, a lot lot facility by respect. that’s it, requires and of one investment isn’t really have not businesses we anything there that

a the build willing continuing more that’s more is the it So of build marketing, operational than investment to incur, out lot to out you’re expense team, sales hard that force, the asset.

last we of we but And that have hard market, times particularly a of think of overall of during us some to And accelerate helps going Ag that. the this the have couple I do certainly been make with coming to strained, with years to in been more been I doing it’s being for some that, being so so probably think that. to bigger these But that finances difficult our and us we very impact Scientific. are out have accelerate with tough

expound like to on Ohio you would Metals. And

sales, You what are include, would talking about that what specialty industries?

to I in that cutting are an some Ohio that of see A a kinds where think business by or you them making aluminum brought And the requiring up And business with and are things, focused things he sort and is market and a metals lot but customers had lot been of really places industry but for are always goes is that end machining all specifically a been of but bigger, it the guess need and for the machining, a titanium rattle business. the and bit can’t where we large from there on bit the industry I been with all quite other other improving of the September aerospace, of limit, way, some and is surface. and we cutting a is and And more type; have it That’s precision might optimized widespread. good and other saw in a years, actually it it. impact cash get it’s off, all and it machining that of titanium automotive of number ‘XX is pretty type, more has some under hard Metals lot of these of he on piece quite and if in that is it’s sky a it investment to I go more all that automotive. we flowing manager business opportunity new sales in

So that’s been very good.

improving. really are margins The

Yes, they are.

mean I that’s improvement. Metals, Ohio In substantial

right. That’s

there increase on And and should company. if revenue you a bottom-line an as have your impact it

yes. That’s right,

increase, price continue business So Due commodities. the but nothing Ag correct? to dramatic, will to the of

think until dramatic don’t be have. I they can real it than change commodities materially more

think, was two some to years. can you for the that's have feedback of that of years. kind I buying a activity been something replacement, off we always money. it had spend there to just they from off because much put needed to really have activity we the reasons. that got using a point replace. a feel of dealers equipment and some of necessity put what And purchasing simple, for and of up. done last reasons equipment, using more to or for is And and -- historically happening, now get the for two be something some you tax three been and And the tax that's for has years to just seems new they lot of spend a just because while And of and lot farmers the for at And couple year keep the out need of after some money the hasn't

beet your in were of it harvesters now quite a correct? sales than in-house like past, looks rather your the those bit sales So, primarily

I are wasn't a units. extremely mean, dollar it percentage they As high, big

are for difference the that of as and two terms But selling what up Carrie producing higher. and between selling we actually selling so in that's sure. said And one shows

forward can next year beyond anything Going the the you quarter, fourth predict into there?

the started obviously, visibility That's writing our some and say really period. order alluded Carrie we that order we're hard program to early is further get when in out to to

till you not that end the really it's that. so picture good get And a of

money. better lower hard to it's us say sentiment and the to products go All ultimately But respect, our building could will demand -- revenue really have suggest year at those year be for for So, this would simpler say. we the next will do to the tell business and for cost level projects easier I time. we needed than basis that for and be not be just be lower It for the that things in would for to to our year to into to be probably the as first but several we tale. would have well new make

sell to debt quarter possibly, you the once used two these pay that to be down So, that was primarily was is or buildings what going I next hearing? over

new what service line our is yes, probably That be fix, of loans or the some part lower. could we we debt do, with pay-off of debt aim lot a pay-off to would the is or but service coverage our

capital, were last we've we a so will but in lot come did stuff And invest the I'm debt strategic even though I And in don't of not trying crazy there but to of the debt not that being load in for so get to lot over because for down will expenditures some ultimately years not it’s that had the ultimately still debt feature. that And all of business I shrink more zero lower think get we that. product and in distant just couple we operate think to to am done leveraged. But up we of of we too on deploy close be things as and we cyclical pressure for need have we'll looking growth think having reinvested this haven’t have careful be that what could I in yes a rather CapEx opportunity less is with inventory But obvious that I to than And possible. wise much development reasons. as sure. little to to

bank, are is of U.S. correct? you out So completely that

Yes.

interest they the And same your how lowered, or…? were interest about payments they rate, the about but maintain were

with U.S. bank. the we what to close very were end paying rates towards Interest

our last times plus. year a So the couple raised rate U.S. had over the of bank

and of whole. Most because of factor the of going a rates that up likely some interest risk was as the because

we get waiver an Well, them yes, needed anything it jack an or anything for and that did. they to or to like a when amendment opportunity that's or and

I'm That's business. pretty sure… standard to our

that's Yes, right.

you would say treating weren’t a preferred as that. They I customer

They that while ago. stop doing a

But you are not alone.

Right.

time you shift have the by that are the some seems pretty larger direction It is the taking, regional at way. personal concern present the this? gotten is My the experience like banks of of

Yes.

all that that’s Metals, far surprising yet Well, for allowing would gone have it’s Thank and you but thought me had bad down with environment today. I very sometime be very close in speak that pleased you I always am difficult. and to this I guess would with to how you maybe Canada. too that Ohio the margins that’s at had considering I blossom,

a on could little hit bit. I just Well, that

-- snow good -- they business or what blowers I money, think you but snow a between like guess you and I that could XXX I it’s can’t was like the be obviously blowers and think think weather, year, is can’t to Canada make build bad really so did year X,XXX. the any that it hard that just difference long-term a

return all add there in a does entity, it a it’s up can’t somewhat or cash worth are four a risk a has my tolerance you followed difficult, those be fit my it reward, by to to the I that it the bad profile putting risk be risk that And Canadian the things we commodity, with of it’s that, have and to of of it’s in what seem by us. good is tie that towards resources our and risk standpoint, seem together ones. of Canada, -- doesn’t the kind lot worth do doesn’t And and so So it and just business didn’t much seems so complexity kind it that better profile. inventory doesn’t goes that think fact a it from a be of guess wasn’t didn’t ourselves the worth it margins -- all to for three help things better And fit and right and that. seem lot just for year just return the you are we simplifying one

there business purchasing there? that up in interest someone Was any

we other to too, we working Yes, be there are on value. surface but that that we announcing maximize think are people the working it may on to that. by And try

They right, parts and have take may inventory the would for and you what still I whatever not? employees imagine,

to They but announce. I have don’t may, anything

So to be million. buys it, dealer is we supply it’s to where up will it with they but But of we will I inventory out. turn do blowers, sure, over and end that to trying we want thing. or continue on selling we $X may also how depends to plays dollars kind with lot not I snow it But distribute network, maximize will it’s a we the and there value am to inventory continue it through buyer see guess that what whoever our and with just we that agreement possible and have there of a lot of

the So snow cost? what does average blower

I don’t average… the know

for? sale even is wise, or wholesale retail selling the mean I what you what

higher a lot $X,XXX, that A of that, mean in but lot of $X,XXX, that it, some is it’s there range. are I than $X,XXX, $X,XXX,

So farmers? on not great the a it’s expense

No, not. it’s

thank Okay, well you then.

Yes, thank your questions. for you

are questions. further At this no time there

some look to about talking in to yet, next place to Okay. Well everyone support we where And participating for that have the you call. but and in you forward thanks will improvement, brag will the thank I Thank have earnings block the that high appreciate don’t all future. but interest we to keep pleased we We realize in and your we the the have obviously to call for are we building in questions putting we very had. much.

for you attending. today's Thank call. conference This concludes