ARTW Swings to Profit on ERC Windfall, Modular Buildings Surge

TL;DR

**ARTW's profit surge is a one-time ERC boost, but the Modular Buildings segment is quietly carrying the load, making it a cautious buy for long-term growth.**

AI Summary

Art's-Way Manufacturing Co., Inc. (ARTW) reported a significant turnaround for the nine months ended August 31, 2025, with net income soaring to $1,680,423, a substantial improvement from a net loss of $524,552 in the prior-year period. This was primarily driven by a one-time Employee Retention Credit (ERC) refund of $1,620,103 and $246,108 in related interest income. Total sales for the nine-month period decreased slightly by 2.3% to $17,909,941 from $18,329,363, mainly due to a 27.1% decline in Agricultural Products segment sales, which fell from $11,779,000 to $9,956,000. Conversely, the Modular Buildings segment experienced robust growth, with sales increasing by 21.4% to $7,954,000 from $6,550,000. Gross profit for the nine months increased by 4.8% to $5,322,451. Operating expenses decreased by 13.1% to $4,464,583, contributing to a positive income from operations of $857,868, compared to a loss of $57,618 in the prior year. The company also successfully disposed of its Tools segment's remaining real estate for $1,800,000 in October 2024, fully exiting discontinued operations.

Why It Matters

This filing reveals a critical financial pivot for Art's-Way, largely due to a significant Employee Retention Credit refund, which provided a substantial one-time boost to net income. While the Agricultural Products segment faces headwinds with a 27.1% sales decline, the strong 21.4% growth in the Modular Buildings segment indicates a successful diversification strategy and potential for future organic growth. Investors should note the underlying segment performance beyond the ERC, as sustained profitability will depend on continued strength in modular buildings and a potential rebound in agricultural equipment. This competitive context highlights the company's ability to adapt in a challenging market, impacting its long-term viability and market position.

Risk Assessment

Risk Level: medium — The company's net income for the nine months ended August 31, 2025, was significantly bolstered by a $1,620,103 Employee Retention Credit refund, which is a non-recurring event. Without this, the underlying operational profitability would be much lower, as evidenced by the 2.3% decline in total sales and a 27.1% drop in the Agricultural Products segment sales. This reliance on a one-time gain and the weakness in a core segment indicate medium risk.

Analyst Insight

Investors should analyze ARTW's performance excluding the one-time Employee Retention Credit to assess core operational health. Focus on the continued growth of the Modular Buildings segment and monitor any strategies to revitalize the Agricultural Products segment for sustainable long-term value.

Financial Highlights

debt To Equity

0.57

revenue

$17,909,941

operating Margin

4.79%

total Assets

$21,815,740

total Debt

$2,678,717

net Income

$1,680,423

gross Margin

29.72%

cash Position

$5,960

revenue Growth

-2.3%

Revenue Breakdown

Key Numbers

• $1,680,423 — Net Income (Swung from a $524,552 net loss in the prior year, largely due to ERC.)
• $1,620,103 — Employee Retention Credit (Significant one-time income boost for the nine months ended August 31, 2025.)
• $17,909,941 — Total Sales (Slight decrease from $18,329,363 in the prior nine-month period.)
• -27.1% — Agricultural Products Sales Change (Decline in sales for the nine months ended August 31, 2025, compared to prior year.)
• +21.4% — Modular Buildings Sales Change (Growth in sales for the nine months ended August 31, 2025, compared to prior year.)
• $857,868 — Income from Operations (Significant improvement from a $57,618 loss in the prior nine-month period.)
• $5,960 — Cash at end of period (Increased from $1,860 at November 30, 2024.)
• $1,800,000 — Sale of Tools segment real estate (Completed in October 2024, marking full exit from discontinued operations.)

Key Players & Entities

• Art's-Way Manufacturing Co., Inc. (company) — registrant
• Internal Revenue Service (regulator) — recipient of amended tax returns
• $1,680,423 (dollar_amount) — Net Income for nine months ended August 31, 2025
• $524,552 (dollar_amount) — Net Loss for nine months ended August 31, 2024
• $1,620,103 (dollar_amount) — Employee Retention Credit refund
• $246,108 (dollar_amount) — Interest income on Employee Retention Credits
• $17,909,941 (dollar_amount) — Total sales for nine months ended August 31, 2025
• $18,329,363 (dollar_amount) — Total sales for nine months ended August 31, 2024
• $9,956,000 (dollar_amount) — Agricultural Products segment sales for nine months ended August 31, 2025
• $7,954,000 (dollar_amount) — Modular Buildings segment sales for nine months ended August 31, 2025

FAQ

Risk Factors

• Inventory Management [medium — operational]: Inventories increased to $11,237,942 as of August 31, 2025, from $10,237,913 at November 30, 2024. Effective management of these higher inventory levels is crucial to avoid obsolescence and carrying costs.
• Agricultural Market Volatility [medium — market]: The Agricultural Products segment experienced a 27.1% sales decline. This highlights the segment's sensitivity to market conditions, which could impact future revenue if trends persist.
• Reliance on One-Time Credits [high — financial]: The significant net income of $1,680,423 for the nine months ended August 31, 2025, was heavily influenced by a $1,620,103 Employee Retention Credit refund. Future profitability will depend on core operational performance.
• Customer Deposits and Billings [low — operational]: Customer deposits decreased from $180,597 to $72,765, while billings in excess of cost and profit decreased significantly from $1,929,151 to $352,131. This shift may indicate changes in project timelines or customer payment patterns.
• Debt and Credit Facilities [medium — financial]: The company has a line of credit of $2,672,437 and long-term debt totaling $1,880,280 (excluding current portion) as of August 31, 2025. Managing these obligations is key to financial stability.

Industry Context

Art's-Way operates in the manufacturing sector, with key segments in Agricultural Products and Modular Buildings. The Agricultural Products segment faces challenges from market volatility, as evidenced by a significant sales decline. Conversely, the Modular Buildings segment shows strong growth, indicating demand in that area. The company's ability to navigate these differing segment dynamics will be crucial.

Regulatory Implications

The company's financial results were significantly impacted by the Employee Retention Credit (ERC), a government-provided stimulus. Future regulatory changes or interpretations related to such credits could affect financial reporting and the sustainability of reported profits.

What Investors Should Do

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Key Dates

• 2025-08-31: Nine months ended reporting period — Company reported a significant net income turnaround, largely due to ERC refund, despite a slight overall revenue decrease.
• 2024-10-01: Sale of Tools segment real estate — Completed the full exit from discontinued operations, generating $1,800,000.
• 2025-08-31: Balance Sheet Date — Total assets were $21,815,740 and total liabilities were $7,901,931.
• 2024-11-30: Prior Balance Sheet Date — Total assets were $21,240,684 and total liabilities were $9,146,861.

Glossary

Employee Retention Credit (ERC)

A refundable tax credit for businesses that continued to pay employees during the COVID-19 pandemic. (A one-time refund of $1,620,103 significantly boosted net income for the nine-month period.)

Billings in excess of cost and profit

Represents revenue recognized on long-term contracts where the cumulative billings to customers exceed the cumulative costs and estimated profits recognized to date. (A substantial decrease from $1,929,151 to $352,131 may indicate changes in project execution or revenue recognition timing.)

Cost and profit in excess of billings

Represents costs and estimated profits incurred on long-term contracts where the cumulative costs and profits exceed the cumulative billings to customers. (An increase from $213,195 to $658,955 suggests that billings have not kept pace with costs on certain projects.)

Discontinued operations

A component of a business that has been sold, disposed of, or is classified as held for sale, and whose operations and cash flows can be clearly distinguished from the rest of the company. (The company has fully exited its Tools segment by selling its remaining real estate.)

Year-Over-Year Comparison

For the nine months ended August 31, 2025, Art's-Way Manufacturing Co., Inc. reported a significant swing from a net loss to a net income of $1,680,423, primarily due to a $1,620,103 ERC refund. Total sales saw a slight decrease of 2.3% to $17,909,941. Gross profit improved by 4.8% to $5,322,451, and operating expenses decreased by 13.1%, leading to a positive income from operations of $857,868, a substantial improvement from the prior year's loss. The company also completed its exit from discontinued operations.

Key Financial Figures

• $0.01 — hange on which registered Common stock $0.01 par value ARTW The Nasdaq Stock Mar
• $1,620,103 — S") in October of 2023 in the amount of $1,620,103; of which $ 798,836 was related to Q2 o
• $3,432,000 — on December 1, 2023 were approximately $3,432,000, $ 289,000 and $ 767,000 , respectively

Filing Documents

• artw20250831_10q.htm (10-Q) — 1012KB
• ex_867687.htm (EX-10.1) — 36KB
• ex_841875.htm (EX-31.1) — 13KB
• ex_841876.htm (EX-31.2) — 13KB
• ex_841877.htm (EX-32.1) — 5KB
• ex_841878.htm (EX-32.2) — 6KB
• 0001437749-25-030917.txt ( ) — 6509KB
• artw-20250831.xsd (EX-101.SCH) — 65KB
• artw-20250831_cal.xml (EX-101.CAL) — 56KB
• artw-20250831_def.xml (EX-101.DEF) — 381KB
• artw-20250831_lab.xml (EX-101.LAB) — 322KB
• artw-20250831_pre.xml (EX-101.PRE) — 421KB
• artw20250831_10q_htm.xml (XML) — 1190KB

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION 1 Item 1.

Financial Statements

Financial Statements 1 Condensed Consolidated Balance Sheets as of August 31, 2025 and November 30, 2024 1 Condensed Consolidated Statements of Operations for the Three-month and Nine-month periods ended August 31, 2025 and August 31, 2024 2 Condensed Consolidated Statements of Stockholders' Equity for the Nine-month periods ended August, 31 2025 and August 31, 2024 3 Condensed Consolidated Statements of Cash Flows for the Nine-month periods ended August 31, 2025 and August 31, 2024 4 Notes to Unaudited Condensed Consolidated Financial Statements 5 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 19 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 21 Item 4.

Controls and Procedures

Controls and Procedures 21

– OTHER INFORMATION

PART II – OTHER INFORMATION 22 Item 1.

Legal Proceedings

Legal Proceedings 22 Item 1A.

Risk Factors

Risk Factors 22 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 22 Item 3. Defaults Upon Senior Securities 22 Item 4. Mine Safety Disclosures 22 Item 5. Other Information 22 Item 6. Exhibits 23

SIGNATURES

SIGNATURES 24 Table of Contents

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements ART'S-WAY MANUFACTURING CO., INC. Condensed Consolidated Balance Sheets (Unaudited) August 31, 2025 November 30, 2024 Assets Current assets: Cash $ 5,960 $ 1,860 Accounts receivable, net 2,023,964 2,372,876 Inventories, net 11,237,942 10,327,913 Cost and profit in excess of billings 658,955 213,195 Other current assets 254,410 208,465 Total current assets 14,181,231 13,124,309 Property, plant, and equipment, net 5,104,659 5,150,870 Assets held for lease, net 127,796 89,033 Deferred income taxes, net 1,994,267 2,440,297 Other assets 407,787 436,175 Total assets $ 21,815,740 $ 21,240,684 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 1,175,899 $ 944,448 Customer deposits 72,765 180,597 Billings in excess of cost and profit 352,131 1,929,151 Income taxes payable 5,000 5,500 Accrued expenses 933,965 1,303,718 Line of credit 2,672,437 1,928,437 Current portion of finance lease liabilities 246,565 220,908 Current portion of long-term debt 125,979 119,734 Total current liabilities 5,584,741 6,632,493 Long-term portion of operating lease liabilities - 4,700 Long-term portion of finance lease liabilities 436,910 534,436 Long-term debt, excluding current portion 1,880,280 1,975,232 Total liabilities 7,901,931 9,146,861 Commitments and Contingencies (Notes 9, 11, 12 and 15) Stockholders' equity: Undesignated preferred stock - $ 0.01 par value. Authorized 500,000 shares on August 31, 2025 and November 30, 2024; issued and outstanding 0 shares on August 31, 2025 and November 30, 2024. - - Common stock – $ 0.01 par value. Authorized 9,500,000 shares on August 31, 2025 and November 30, 2024; 5,220,423 issued on August 31, 2025 and 5,149,173 on November 30, 2024 52,204 51,492 Additional paid-in capital 5,161,242 5,020,849 Retained earnings 9,009,051 7,328,628 Treasury stock, at cost ( 113,589 shares on August 31, 2025 and 1