Art's-Way Manufacturing (ARTW) 30 Mar 182018 Q1 Earnings call transcript

Good morning, ladies and gentlemen. Today is March 30th, and welcome to the Art’s Way Manufacturing First Quarter 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, 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

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

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

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

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

to in being appreciate all Yes. the call, calling today. I’d interested like you welcome in to you

You’ve things our good that for our a things and of first in positive we’ve of talking the by And but got the progress, we as results we going lot will earnings about quarter. impacting good got be a P&L have lot significantly really signals, is evidenced on, call. all reviewed the still

in I’ll end. to turn go more to some the So, specifics talk will Carrie of and through it the

to start our right. you, I’m going Marc. All for over some Thank of our by going information entities. consolidated

revenues of or XX%. XXX,XXX for year-to-date were the increase an X,XXX,XXX, quarter consolidated the Our and in first year, compared to prior X,XXX,XXX

business. simplify market We year-end, to for continued and key had our At to two bring focus on sale. more we operations facilities the our

used down of property will million our the just pay Dubuque yesterday have debt. be $X.X We and on the for proceeds sale closed to

X,XXX,XXX. and West is in Union for property is currently listed sale out Our build

priority below November Having as the have third continue our our levels that, be debt increase reduced and but be XXXX. as we second we priority through anticipate XX, as the we we reductions our inventory As a inventory said move we our will quarter, been stated, ours, should of of will do that have XXXX conclude move to and our quarter. through

segments. all Our backlogs strengthened across have

revenue were year For quarter an or to products, year-to-date the the prior $XXX,XXX increase $X,XXX,XXX XX%. of our our and or agricultural compared for $X,XXX,XXX in

order early to this years. dealers and participating was more had we compared Our prior program year success a

the on side. ag backlog Our

We’re sitting -- in the to for ag, at currently $X,XXX,XXX compared sitting year. at we’re prior $X,XXX,XXX

for However, if year’s longer look you no Way it beet number equipment $X,XXX,XXX. to in numbers, adjust backlog Art’s those last and self-propelled number for harvesting the bring been that down would International

were Art’s in about Art’s than you products produced course up when the products of and been the there. self-propelled have for Way margins beet And really harvesters XX% associated with year-on-year. looking would number those we are So, compare the with the at higher products, backlog produced Way

being last push for gross quarter XX% accounts X% Our were our the of XX% down to margin year. compared to approximately bring inventory at

productivity rates February. staff struggle and December, development did by did of to but improvements end Our in lean increase the due

really struggling, on time As be were products into we the floor. productivity schedule and quarters, making improvements the should our second the new our rate year-on-year has the last year first stabilized production the third shop significant, out and in as progress we for

really significantly help comparison more should in those to a bit year last with So being familiar this product year. little

traditional at to to and increased us, we’re units JRXX. and a introduce meet demand have is going been the their These be And products. designed, for to our grinder JRXX The for of the are And XX the move is are were we Art’s that to both Scientific, and anticipate new two the into they heaviest production. new not bushels, sales very, Farm them an said $XXX,XXX Having to did organic marketing bushels. with having we available. At labor compared And XX [ph] as the Way couple we’ve one other they had that, farmers products, new these this have throughout countries. quarter of developing direct our the Louisville issues have other products, line. pretty In our we quarter increase $XXX,XXX, XX%. We excited production products February, the for to do product however, and customers Show. are we’re very increased new new grinders, similar

secured went levels we which those the had we’re picked and buildings pretty lease go about in customers had Two to we adding definitely the buildings results, our and that And have do on direct through we We year-end as financing see driving we numbers in in be quarter, to talked we that XXXX up. today. the finished we We we we five contracts signed, backlog in were when anticipate would two first second been until rental site year. quarter, to have labor first while and contracts that these Sales of how been projected reporting the that have revenues stack. increase did of the met of that the needed our have to inventory prep. impacted our due stated not for aggressive deals. increased the have productivity time that we our move have Back up goods sales the February, half to been in

$XXX,XXX. at bears backlog Our

compare last year’s that it’s X% you higher. If about numbers,

produced $XXX,XXX for ag to our include due not need does really buildings lease for bit of In are little that number a be XXXX, market conditions. to buildings struggled that backlog projects differently. that accounted However,

Metal, $XXX,XXX year. division a sales seen $XXX,XXX ago year year-to-date through definitely this to compared increase year At buildings the we X%. to an in of already an Ohio ag and or the that for quarter to and Tool increased have We Carbide forward go look as our uptick the continuing

specialty to of the We continue the in department, standard the business. to focus our and growth peaks valleys side offset order of in

have business XX% of side the on increases this seen We year-on-year. of

our at taking hold So, efforts definitely Metal. are Ohio

our And about We income year-on-year. operating expenses before is our XX% XX%. taxes have reduced up by there

about sales. lower it’s X.X% have still of However, it’s than we like; at would

but and viewing development, breaking definitely more some yet. it even customer investment our as do are we an conclusion, product future. have In continue there we new to service, in we our focus on So, quality

on simplifying reducing The both our reduce focus our of Dubuque expenses. and resources. sale will has Our our and the debt inventory cash further carrying freed management and property up business

We to focus being new will market our space. on continue products and relevant in

Marc, our Our quality, backlog our call focusing and you. back to drive business. and to balance With to our comparison and our operations in productivity customer numbers the past turn over the stronger that image, are continue while efforts year, of market have last continue we sheet we cost conditions strengthen year, I’ll Despite on to out core the our to we strengthen overall and business. that our believe business improved and service

you very Thank much. Okay.

a good positive lot are So, as you’ve signs. heard. of There

industry We now from good overall, resources revenue lot some efforts. sales are and each dealers up in see that building customer our see feel and we significantly, to up the in the otherwise. pleased to able of picking backlog we’re And and simplified feedback is them of to like really our again, a units, significantly, publications pushing the to momentum are give

continue work as future. a Carrie things they inventory tied significant ahead impact number continue to cash addressing that’s these sheet on quarters that’s good. will and in is working of up our non-strategic the a balance of may some that not to be on to free the of we the inventory. we continue So part things touched in our items, in margins through up and And

there. we’re anyway, So, real progress making

directly. now. has far that As things of Everyone are are us that affecting a very lot in heard the as right steel our and the world outlook, interesting tariffs, going us on impacts about

industry, that but be in very that robust it, the immediate going raising going out to up. everything and time doing here we’re a inevitable. go think. impact -- at fortunately, to to for big we’ve studying strong may products the on a market been we is And are And time it’s weeks, realized a our that that whole customers. roll conditions our it’s yet. desperate is fact have not a we that to of that few the So, when the days are It’s gotten past I about and haven’t for of deal, And prices the at kind price our and backlog

also any are that tariff for about on. concern an addressing soybeans is head pork, The concern or but a may for retaliatory the actions we the be very whether is demand other could by it’s So, opportunity. issue And bigger impact which it countries possible.

There’s to in attitude meantime, it’s it’s our of So, and impacted industry of could favorable X%. I of have this when But, all it really popped -- out lot are for over all went kinds the how that our all shake good At somewhat think commodities the up in and a corn kind going really and is positively, direction. plantings same, negatively, all following the up. these done. wait closely. place people going a in is happening, about pricing -- plant a be of Yesterday, what’s we’re the indicators things negotiating reduced industry see

with expecting hurt predict Mainstreet we So, us. we say, our on are out. play to of And pretty that. very strong on we of year’s dealer bad very and in We is the were different near other terms much improving. mixed some improving year. prices quarter pushed signals more the Rural performance commodity a this out circumstance let Index second and have got and out very, into positive sentiment the hand, was product lot see and and second. we of there. farmer of quarter of tariffs improving, profitability we’ve we had And really, lot In have second for third shipments the difficult a of sitting I’d we have that sense quarter. as We the feel kind associated being uncertainties and term, are a where for are the like that new going. things to P&L the it’s Remember, last backlog, third with those that But a stability things

product difficulty of not a and is building that improving, or is our backlog have efficiencies As much Carrie of higher said, margin. productivity the new things and our we and products lot mix it’s

quarter quarter a would factors we well. as those things the all to better cause us and in So, think third are that should have second

Carrie to and load And income long-term. us doing revenue Way mentioned, to some stream leases, interestingly, but the us I with to As also out plant, momentum. to ourselves going it’s really have of Art’s level for be recurring good allows building is giving the steady think leases Scientific an opportunity we’re

speed. doing deals am five sure. than we’ve or see that I are to the years, four last really in we regularly seen more picking So, happy up much And for

on overall, terms feel market of I balance significant where the significant that for progress stand market sheet, in we like are So, each the making progress serve. we in we

mentioned, Carrie damage think to really good as a point and some and I balance doing business, lot customer probably under I we’ve our for about time, here. really this job million significantly simplify wanting to raising prior quality, to at straight. doing real a in product years been at probably were Dubuque got first we the customers. with focuses -- over our property continuous $XX lower goes will at get I of were but as to XX for big XX, we as years quality. total the be been about I going just terms million, our We development of talk how our show borrowings doing total in and were competition would profile service, the are out And get And think forward am experience time and to further sheet of as kind in it One sale is progress look in the XXXX, borrowings. $XX.X the down are million the getting starting going for there Company. And and of improvement pleased road the overall, our to efficiency struggles part yesterday, to and the we that $X have time But, a some our the we that, hitting we and industry, we bank since numbers thing on.

that been we’ve a that puts And us And very positive. now. relationship our extremely significantly got much and that’s with on And a industry. difficult a think for bought stable right footing. during the that more for good I So, our all that Company bank really time down we is

is been We for she plan have and had And circumstances due anywhere, job her go own And working a a even Company. we And where is to them would Amber that relocating, asked am negative the did beyond her CFO all our in her available but and believe on we her is, while. have to personal remain going anyway, before we of fantastic seen, place. great could with the I will have they where her with long about versus relationship Amber family people not year and to done that resigning we is circumstance progress with out were it. that feeling some I in of And to the things you better that’s we’re that department happening. get a want X-K, her I Amber year a really that in months. made and this she is asked our that’s a Murra few really other address So, relocates. have couple to manage be plan, able when succession it. I what’s And short to involved and announcing don’t A be much think impact about We’ll business. our where last for get working a thought might a pleased will that. And are have we and

nothing it’s issues, And I to any you be thought question glad I’ll about this do that time, opportunity And the But, so. that. other I questions may answer other give any have. at have to a So, might than I’d that. you

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

$X.X there morning And much sheet? quarter? everybody. progress. a how to reflected loss making happy Is seems balance or the it you’re next the be million collected, in gain like to the and holiday in that Good with Yes. was $X.X you reflected the Of a million

a had, of idea in the of Last of maybe what year to of I anticipation for reduced on the XXXX, we’d asset closer end that realize able guess we it. value

really was So, the any sale from quarter in that impact fourth XXXX.

Okay.

So…

change. was XXX,XXX Is and Carrie? that of Extent right, that

correct. That’s Yes.

on of So, there is a gain XXX,XXX the…

No.

change. fourth No. quarter in There XXX,XXX was of a and balance loss sheet

Okay.

is the So, current in to there breakeven the the quarter relative building? of a sale

correct. That’s

Okay.

see… Let’s

is The asset. big that tax deferred item

in the impact Right. -- have changes much tax the the asset, the to and deferred How that current much quarter? in law did tax how that

was That close to $XXX,XXX.

ending a even loss in or break the quarter year? improvement Okay, to May a XX, talk had and okay. XXXX, you Do you we last about quarter. to next And in you $X.X show what million the compared profit showed expect

that be that think to here. But think it play I There it quarters out still be I positive. will will are positive.

the or that is assets the the that what this the of price to. that -- the improving, you’ve milk you’re have, and selling? at Okay. cut And for basically, you And buildings need that point improving all you expenses farms not the on improvement impact farm is having

that kind Well, is really, this bit a in little still maybe so and scared. month shaking people price XXX but growers, of cancellation [ph] Dean I’ve and seen say made there. of the cut things concern contract milk, of improvement, play industry them at some or the the notified help. high there that’s And of a it’s not up major a player oversupply or long-term, the pretty ago very in But fact And dairy is a Foods good. will

looking markets them, was remain more But, calves specifically actually weak. dairy there really gets be there in attention for into that issue the to that more to the we’ve bigger buildings be to markets that. and demand ag as a is during markets fact where starts -- ag of to sell it solutions on winter. impact solution and would And the an have dairy the that. growers’ in mortality I the the in scientific very dairy uptick the rough And it was far had are seems think usually we than so, the due this that winter, buildings. And seen there But, as probably

of previous you’ve as for what -- buildings, decently is far was backlog Okay. that number is over The other sort the XX% that improved year. scientific And the indicated? as backlog

Yes. right. That’s

accounting leases, If you count They the think for or X.X get it’s so. from treated I more like obviously differently standpoint?

to larger lack you spend the for of major could see visibility be a on no buildings? money there universities? that these bidding is -- Do still you or for any jobs Any

it’s is dealing think we’re entities bigger. -- bit -- universities years. it’s but than looking business. are over look few the -- that’s of at interest I off that we And that’s corporate we frankly now with some But what And sense the I that food a it We the where and are We at improving. lot was from. mean coming safety fair of labs, think it’s we with last better improving,

And have months six the for expect XXX,XXX other that the in to that you sale the close next building in range, you or…?

straight about backlog? non-leased talking You’re

another have you sale, for could et in are this cetera. said -- XXX,XXX, using you The that building production you not

for equipment Union it’s in That’s that sale $X,XXX,XXX. have ag we and previously West building Yes. for a manufactured

$X,XXX,XXX, okay.

do closing it’s six and the et months, So, you’re you market on next in cetera? or bids the will just for be you think that waiting

on It’s the just market.

So, it’s I mean, really we But, would be say. to able listed, we’re we’re trying. motivated. not

make to happen. it trying We’re

Okay.

your X-K So, to increase is any XX%? more guess, just above the thing, the any stock I that a you is the with there one for of expectation to transaction sale go debt than the and filed or there for the to ability XX%, is authorization positioned

that And precluding I advantage book, really was smart everybody other view purposes, there need the think discount to there. book. It’s that of mean is of nothing the circumstances under in taking that it that different I that no from there, in of limitation think was for And contemplated. that buying was agreement stock there fact for need trading established just, that No, interested just a the the -- I didn’t anybody to and is discount an agreement from be I purposes. of specific it necessarily is rest view with guess be Board the XXXX would guess for I significant to different the to And be basically. and at XXXX

didn’t is that. just to more specific need necessarily nothing It’s than So, be there. there

look, of pace continue All Have you Well, at and you’re Okay. right. a each we’ll that all. hopefully be and will on the holiday quarters profitability let’s going good. the to happy forward, going achieve very

You too. Thank you.

Instructions] [Operator we At questions. further no time, have this

the and can to best calling all in today thank your I Well, for work from a happens. in and Company position Okay. the good we’re And the put come conditions Company know that with at point, in you you ahead. some we will your when interest hard we in possible see for to years it investment us. in at for be a will that ag otherwise benefit market, improving the hope place

we again. quarter. you you And talk will thank next So, to

This for concludes today’s conference. Thank you attending.