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What changed in ARTS WAY MANUFACTURING CO INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ARTS WAY MANUFACTURING CO INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+79 added−78 removedSource: 10-K (2025-02-18) vs 10-K (2024-02-28)

Top changes in ARTS WAY MANUFACTURING CO INC's 2024 10-K

79 paragraphs added · 78 removed · 54 edited across 4 sections

Item 1. Business

Business — how the company describes what it does

23 edited+4 added−4 removed25 unchanged
Biggest changeWe worked on the development of a chicken litter variation for our manure spreaders, a sonar leveling system for our defoliators, performed redesign work on our commercial forage box and also took steps to improve the design of our grinder mixers for manufacturability and cost savings.
Biggest changeRecent Product Developments In 2024, we focused on cost reductions to improve pricing competitiveness of our manure spreader product line and to boost margin of our highest demanded grinder mixer products. We finished the development of a chicken litter variation for our manure spreaders and a sonar leveling system for our defoliators.
We sell products to customers in the United States and nine foreign countries through a network of approximately 600 independent dealers in the United States and Canada, as well as overseas dealers in Australia, Japan and the United Kingdom. 4 Table of Contents We believe that our competitive pricing, product quality and performance, network of worldwide and domestic distributors, and strong market share for many of our products allow us to compete effectively in the agricultural products market.
We sell products to customers in the United States and nine foreign countries through a network of approximately 500 independent dealers in the United States and Canada, as well as overseas dealers in Australia, Japan and the United Kingdom. 4 Table of Contents We believe that our competitive pricing, product quality and performance, network of worldwide and domestic distributors, and strong market share for many of our products allow us to compete effectively in the agricultural products market.
The leaves are incorporated back into the soil to provide nutrients for next year’s crop. Product Distribution and Markets We distribute goods for our Agricultural Products segment primarily through a network of approximately 600 U.S. and Canadian independent dealers, as well as overseas dealers in Australia, Japan and the United Kingdom, whose customers require specialized agricultural machinery.
The leaves are incorporated back into the soil to provide nutrients for next year’s crop. Product Distribution and Markets We distribute goods for our Agricultural Products segment primarily through a network of approximately 500 U.S. and Canadian independent dealers, as well as overseas dealers in Australia, Japan and the United Kingdom, whose customers require specialized agricultural machinery.
Our local service parts staff is available to help customers and dealers with their service parts needs. Our Modular Buildings segment typically sells products customized to the end-user’s requirements directly to the end-user. We currently export products to nine foreign countries. We have been shipping grinder mixers abroad since 2006 and have exported portable rollermills as well.
Our local service parts staff is available to help customers and dealers with their service parts needs. Our Modular Buildings segment typically sells products customized to the end-users' requirements directly to the end-user. We currently export products to nine foreign countries. We have been shipping grinder mixers abroad since 2006 and have exported portable rollermills as well.
We take pride in our manure spreaders, forage equipment, bale processors, dirt work equipment, sugar beet harvesting equipment and feed mills. We provide limited OEM parts to some of the industry’s leading manufacturers. Feed mills. There’s no one better than Art’s Way when it comes to processing feed.
We take pride in our manure spreaders, forage equipment, bale processors, dirt work equipment, sugar beet harvesting equipment and feed mills. We provide limited original equipment manufacturer, or OEM, parts to some of the industry’s leading manufacturers. Feed mills. There’s no one better than Art’s Way when it comes to processing feed.
In addition to selling these facilities, we also offer a lease option to customers in need of temporary facilities. 2 Table of Contents Our Principal Agricultural Products Arthur Luscombe built the first PTO powered grinder mixer on his farm near Dolliver, Iowa.
In addition to selling these facilities, we also offer a lease option to customers in need of temporary facilities. 2 Table of Contents Our Principal Agricultural Products Arthur Luscombe built the first power take-off powered grinder mixer on his farm near Dolliver, Iowa.
We continue to strengthen these relationships and intend to develop new international markets. Our international sales accounted for 3.1% of consolidated sales during the 2023 fiscal year compared to 4.5% in the 2022 fiscal year. 3 Table of Contents Backlog. The Company’s backlog of orders vary on a daily basis.
We continue to strengthen these relationships and intend to develop new international markets. Our international sales accounted for 3.3% of consolidated sales during the 2024 fiscal year compared to 3.1% in the 2023 fiscal year. 3 Table of Contents Backlog. The Company’s backlog of orders varies on a daily basis.
Modular Buildings Our Modular Buildings segment, which accounted for 25.8% of our net revenue in the 2023 fiscal year and 18.5% of our net revenue in the 2022 fiscal year, is located in Monona, Iowa. This segment produces, sells and leases modular buildings, which are custom-designed to meet the specific research needs of our customers.
Modular Buildings Our Modular Buildings segment, which accounted for 40.1% of our net revenue in the 2024 fiscal year and 25.8% of our net revenue in the 2023 fiscal year, is located in Monona, Iowa. This segment produces, sells and leases modular buildings, which are custom-designed to meet the specific research needs of our customers.
Employees As of November 30, 2023, we employed 93 employees in our Agricultural Products segment including two on a part-time basis, and 31 employees in our Modular Buildings segment, two on a part-time basis. These numbers do not necessarily represent peak employment during the 2023 fiscal year. 5 Table of Contents
Employees As of November 30, 2024, we employed 68 employees in our Agricultural Products segment including one on a part-time basis, and 22 employees in our Modular Buildings segment, two on a part-time basis. These numbers do not necessarily represent peak employment during the 2024 fiscal year. 5 Table of Contents
Any one or all factors may be determinative, but they include brand loyalty, the relationship with dealers, product quality and performance, product innovation, product availability, parts and warranty programs, price, and customer service.
Many factors influence a buyer’s choice for agricultural equipment. Any one or all factors may be determinative, but they include brand loyalty, the relationship with dealers, product quality and performance, product innovation, product availability, parts and warranty programs, price, and customer service.
Our Modular Buildings segment manufactures modular buildings for various uses, commonly animal containment and research laboratories, through our wholly-owned subsidiary, Art’s-Way Scientific, Inc., an Iowa corporation. During the third quarter of fiscal 2023, the Company ceased operations of its Tools business, which in previous periods, was reported in consolidated numbers as the Company's third operating segment.
Our Modular Buildings segment manufactures modular buildings for various uses, commonly animal containment and research laboratories, through our wholly owned subsidiary, Art’s-Way Scientific, Inc., an Iowa corporation. During the third quarter of fiscal 2023, the Company ceased operations of its Tools business, which was reported in discontinued operations for the twelve months ended November 30, 2023.
We currently have no pending applications for intellectual property rights. We have a licensing and royalty agreement with Spreader, LLC to produce a loader mounted spreader in exchange for royalty payments until December 2027.
We have a licensing and royalty agreement with Spreader, LLC to produce a loader mounted spreader in exchange for royalty payments until December 2026.
Intellectual Property We maintain manufacturing rights on several products, which cover unique aspects of design. We also have trademarks covering product identification. We believe our trademarks and licenses help us to retain existing business and secure new relationships with customers. The duration of these rights ranges from 5 to 10 years, with options for renewal.
We believe our trademarks and licenses help us to retain existing business and secure new relationships with customers. The duration of these rights ranges from 5 to 10 years, with options for renewal. We currently have no pending applications for intellectual property rights.
The remaining components of the Tools segment are reported in discontinued operation for the twelve months ended November 30, 2023 and has been modified retrospectively to be reported in discontinued operations for the twelve months ended November 30, 2022. For detailed financial information relating to segment reporting, see Note 18 “Segment Information” to our financial statements in “Item 8.
The remaining components of the Tools segment were prior to the twelve months ended November 30, 2024. For detailed financial information relating to segment reporting, see Note 18 “Segment Information” to our financial statements in “Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of this report.
Agricultural Products Our Agricultural Products segment competes in a highly competitive agricultural equipment industry. We compete with larger manufacturers and suppliers that have broader product offerings and significant resources at their disposal; however, we believe that our competitive strengths allow us to compete effectively in our market.
We compete with larger manufacturers and suppliers that have broader product offerings and significant resources at their disposal; however, we believe that our competitive strengths allow us to compete effectively in our market. Management believes that grain and livestock producers, as well as those who provide services to grain and livestock operations, are the primary purchasers of agricultural equipment.
However, these suppliers are not principal suppliers and there are alternative sources for these materials. We do not typically rely on sales to one customer or a small group of customers. During the 2023 fiscal year, one customer accounted for just more than 12% consolidated net revenues from continuing operations.
We rely on foreign suppliers and foreign markets for materials and components for some of our products. However, these suppliers are not principal suppliers, and there are alternative sources for these materials. We do not typically rely on sales to one customer or a small group of customers.
Business of Our Segments Agricultural Products Our Agricultural Products segment, which accounted for 74.2% of our net revenue in the 2023 fiscal year and 81.5% of our net revenue in the 2022 fiscal year, is located primarily in Armstrong, Iowa.
These materials may be obtained electronically by accessing the SEC’s website at http://www.sec.gov. Business of Our Segments Agricultural Products Our Agricultural Products segment, which accounted for 59.9% of our net revenue in the 2024 fiscal year and 74.2% of our net revenue in the 2023 fiscal year, is located primarily in Armstrong, Iowa.
The Company’s Agricultural Products segment had a net backlog of approximately $4,364,000 as of February 1, 2024 compared to $9,366,000 on February 1, 2023. The Company saw a decline in orders on its fall early order program for the first time in three years.
The Company’s Agricultural Products segment had a net backlog of approximately $3,486,000 as of February 4, 2025 compared to $4,364,000 on February 4, 2024. The overall agriculture economy remained stagnant for our fall early order program after three years of increased demand.
The Exchange Act requires us to file periodic reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. These materials may be obtained electronically by accessing the SEC’s website at http://www.sec.gov.
We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Exchange Act requires us to file periodic reports, proxy statements and other information with the “SEC”. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
Our Modular Buildings segments complete projects based on customer specifications and did not engage in specific product development during the 2023 fiscal year. Competition Each of our segments have competitive strengths described below. In addition to individual competitive strengths, the barrier to entry for competitors in our industries is high.
We expect continued focus on increasing margins on our current product lines and new developments that make our products more useful for our customers. Our Modular Buildings segment completed projects based on customer specifications and did not engage in specific product development during the 2024 fiscal year. Competition Each of our segments have competitive strengths described below.
The Company also has two other large research projects with a combined contract price over $6,000,000 that it is expected to land in fiscal 2024. The Company expects that its order backlogs will continue to fluctuate as orders are received, filled, or canceled, and, due to dealer discount arrangements it may enter into from time to time.
The Company expects that its order backlogs will continue to fluctuate as orders are received, filled, or canceled, and, due to dealer discount arrangements it may enter into from time to time. Accordingly, these figures are not necessarily indicative of future revenue.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of this report. Corporate information about Art’s-Way can be found on our website, http://www.artsway-mfg.com/ while information on our agriculture products can be found on http://www.artsway.com/ . We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Corporate information about Art’s-Way can be found on our website, http://www.artsway-mfg.com/, while information on our agriculture products can be found on http://www.artsway.com/ .
The Company’s Modular Buildings segment had approximately $6,170,00 of backlog as of February 1, 2024, compared to $4,985,000 on that date in 2023. The Modular Buildings segment contracted a $5,300,000 research project in December 2023, which is expected to be mostly completed in fiscal 2024.
High interest rates and low commodity prices are still affecting demand as we roll into fiscal 2025, however, we have seen better than expected demand for our grinder mixers. The Company’s Modular Buildings segment had approximately $2,393,000 of backlog as of February 4, 2025, compared to $6,170,000 on that date in 2024.
Removed
The Company believes high interest rates are affecting how much risk the dealers are willing to take on stock inventory. While the Company believes farmers are still going to be creating strong demand in 2024, the Company believes it is going to have to be more speculative with its products and have more inventory on hand.
Added
The information contained on our website or available by hyperlink from our website is not a part of this report and is not incorporated into this report or any other documents we file with, or furnish to, the Securities and Exchange Commission (the "SEC").
Removed
Accordingly, these figures are not necessarily indicative of future revenue. Recent Product Developments In 2023, we continued to make product improvements that improve manufacturability and to meet our customer’s evolving needs.
Added
The Modular Buildings segment has strong leads in the engineering phase that we expect to go under contract and become part of our project backlog, which could drive similar revenue results to fiscal 2024.
Removed
Management believes that grain and livestock producers, as well as those who provide services to grain and livestock operations, are the primary purchasers of agricultural equipment. Many factors influence a buyer’s choice for agricultural equipment.
Added
In addition to individual competitive strengths, the barrier to entry for competitors in our industries is high. Agricultural Products Our Agricultural Products segment competes in a highly competitive agricultural equipment industry.
Removed
We saw lead times increase on raw materials in 2022 as labor shortages from the COVID-19 pandemic left many of our suppliers understaffed. Lead times remained heightened during most of fiscal 2023 and began to soften near the end of fiscal 2023. We rely on foreign suppliers and foreign markets for materials and components for some of our products.
Added
During the 2024 fiscal year, one customer accounted for just more than 17% consolidated net revenues from continuing operations and another approximately 15% of consolidated revenues. Intellectual Property We maintain manufacturing rights on several products, which cover unique aspects of design. We also have trademarks covering product identification.

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−1 removed2 unchanged
Biggest changeThis property is currently listed for sale at market value. All of our owned real property is subject to mortgages granted to Bank Midwest as security for our long-term debt and our line of credit. See “Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – Liquidity and Capital Resources” for more information.
Biggest changeAll of our owned real property is subject to mortgages granted to Bank Midwest as security for our long-term debt and our line of credit. See “Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – Liquidity and Capital Resources” for more information.
In addition, we own approximately 30 acres of land west of Armstrong, on which the factory and inventory storage space is situated for our Agricultural Products segment. Our facility in Monona, Iowa was constructed by us in 2007, which houses the manufacturing for our Modular Buildings segment. The facility was custom-designed to meet our production needs.
In addition, we own approximately 30 acres of land west of Armstrong, on which the factory and inventory storage space is situated for our Agricultural Products segment. Our facility in Monona, Iowa was constructed by us in 2007, and houses the manufacturing for our Modular Buildings segment. The facility was custom-designed to meet our production needs.
It has approximately 50,000 square feet of useable space and accommodates a sprinkler system and crane. We own a second building to the east with approximately 12,000 square feet of space which is used as our weld shop for building frames.
It has approximately 50,000 square feet of usable space and accommodates a sprinkler system and crane. We own a second building to the east with approximately 12,000 square feet of space, which is used as our weld shop for building frames.
Removed
Our facility in Canton, OH was purchased in connection with the acquisition of certain assets of Ohio Metal Working Products Company in September 2013. The building contains approximately 39,000 square feet of usable space and is in good condition. The purchased land is approximately 4.50 acres and was used by our Tools segment.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+0 added−0 removed2 unchanged
Biggest changeNo shares of preferred stock have been issued or are outstanding. As of February 14, 2023 we had 73 common stock stockholders of record, which number does not include stockholders who hold our common stock in street name. Dividends We did not pay a dividend during the 2023 or 2022 fiscal years.
Biggest changeNo shares of preferred stock have been issued or are outstanding. As of January 16, 2025 we had 70 common stock stockholders of record, which number does not include stockholders who hold our common stock in street name. Dividends We did not pay a dividend during the 2024 or 2023 fiscal years.
We expect that the payment of and the amount of any future dividends will depend on our financial condition at that time. Unregistered Sales of Equity Securities None. Purchases of Equity Securities by the Company There were no purchases of common stock by the Company made in the fourth quarter of fiscal 2023.
We expect that the payment of and the amount of any future dividends will depend on our financial condition at that time. Unregistered Sales of Equity Securities None. Purchases of Equity Securities by the Company There were no purchases of common stock by the Company made in the fourth quarter of fiscal 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

26 edited+21 added−19 removed38 unchanged
Biggest changeTotal income from operations for our Agricultural Products segment during the 2023 fiscal year was $664,000 compared to $1,205,000 for the 2022 fiscal year. Inflationary forces on components, manufacturing overhead, product mix with lesser profit margin compared to fiscal 2022 and increased operating expenses as discussed above were primary drivers of less operating income for fiscal 2023.
Biggest changeWe expect the engineering headcount reduction to be temporary, as we recognize the strategic value in new product development and continued product improvement. Total loss from operations for our Agricultural Products segment during the 2024 fiscal year was $1,510,000 compared to operating income of $664,000 for the 2023 fiscal year.
Due to the timing of filing an ERC claim after the IRS announced a moratorium on processing applications, and uncertainty surrounding the nature and timing of the claim approval and subsequent payment process, recognition of the claim is deferred until payment is received. Accordingly the claim has not been recorded in receivables, assets, or income.
Due to the timing of filing an ERC claim after the IRS announced a moratorium on processing applications, and uncertainty surrounding the nature and timing of the claim approval and subsequent payment process, recognition of the claim is deferred until payment is received. Accordingly the claim has not been recorded in receivables, assets, or income.
Similar to other farm equipment manufacturers, we are affected by items unique to the farm industry, including fluctuations in farm income resulting from the change in commodity prices, crop damage caused by weather and insects, government farm programs, interest rate fluctuations, and other unpredictable variables.
Similar to other farm equipment manufacturers, we are affected by items unique to the farm industry, including fluctuations in farm income resulting from changes in commodity prices, crop damage caused by weather and insects, government farm programs, interest rate fluctuations, and other unpredictable variables.
Revenues recognized when goods were ready for shipment in fiscal 2023 were approximately $3,110,000 compared to $1,010,000 in fiscal 2022. 8 Table of Contents The Modular Buildings segment is in the construction industry with its major source of revenue arising from modular building sales.
Revenues recognized when goods were ready for shipment in fiscal 2024 were approximately $1,073,000 com p ared to $3,110 ,000 in fiscal 2023. 8 Table of Contents The Modular Buildings segment is in the construction industry with its major source of revenue arising from modular building sales.
The major sources of revenue for the Agricultural Products segment are farm equipment and service parts related to farm equipment. The Agricultural Products segment generally executes short-term contracts that contain a single performance obligation – the delivery of product to the common carrier.
Our revenues primarily result from contracts with customers. The major sources of revenue for the Agricultural Products segment are farm equipment and service parts related to farm equipment. The Agricultural Products segment generally executes short-term contracts that contain a single performance obligation – the delivery of product to the common carrier.
If the assumptions made by management do not occur, we may need to record additional write downs. Revenue Recognition In accordance with ASC 606, revenue is measured based on consideration specified in a contract with a customer and recognized when we satisfy the performance obligation specified in each contract. Our revenues primarily result from contracts with customers.
If the assumptions made by management do not occur, we may need to record additional write downs. Revenue Recognition In accordance with Accounting Standards Codification, or ASC, 606, revenue is measured based on consideration specified in a contract with a customer and recognized when we satisfy the performance obligation specified in each contract.
The Agricultural Products segment represented $5,920,000 of our total consolidated operating expenses, while our Modular Buildings segment represented $1,133,000. Our consolidated operating income from continuing operations for the 2023 fiscal year was $1,531,000 compared to operating income of $605,000 for the 2022 fiscal year.
The Agricultural Products segment represented $5,665,000 of our total consolidated operating expenses, while our Modular Buildings segment represented $1,184,000. Our consolidated operating income from continuing operations for the 2024 fiscal year was $461,000 compared to operating income of $1,531,000 for the 2023 fiscal year.
We expect to have access to capital as needed throughout fiscal 2024 from the collection of receivables, sale of inventory, the expected receipt of approximately $1.2 million of gross proceeds from a filed Employee Retention Credit and the potential sale of our Ohio real estate.
We expect to have access to capital as needed throughout fiscal 2025 from the collection of receivables, sale of inventory and the expected receipt of approximately $1.2 million of gross proceeds from a filed Employee Retention Credit or ERC.
Results of Operations Fiscal Year Ended November 30, 2023 Compared to Fiscal Year Ended November 30, 2022 Our consolidated net sales from continuing operations totaled $30,281,000 for the 2023 fiscal year, which represents a 18.1% increase from our consolidated net sales of $25,646,000 for the 2022 fiscal year.
Results of Operations Fiscal Year Ended November 30, 2024 Compared to Fiscal Year Ended November 30, 2023 Our consolidated net sales from continuing operations totaled $24,499,000 for the 2024 fiscal year, which represents a 19.1% decrease from our consolidated net sales of $30,281,000 for the 2023 fiscal year.
The following table represents our working capital and current ratio as of the end of the past two fiscal years: November 30, 2023 November 30, 2022 Current Assets $ 15,085,494 $ 14,133,429 Current Liabilities 9,395,023 9,267,289 Working Capital $ 5,690,471 $ 4,866,140 Current Ratio 1.61 1.53 We believe that our current cash and financing arrangements will provide sufficient cash to finance operations for the next 12 months.
The following table represents our working capital and current ratio as of the end of the past two fiscal years: November 30, 2024 November 30, 2023 Current Assets $ 13,124,309 $ 15,085,494 Current Liabilities 6,632,493 9,395,023 Working Capital $ 6,491,816 $ 5,690,471 Current Ratio 1.98 1.61 We believe that our current cash and financing arrangements will provide sufficient cash to finance operations for the next 12 months.
Our loans require us to comply with various covenants, including maintaining certain financial ratios and obtaining prior written consent from Bank Midwest for any investment in, acquisition of, or guaranty relating to another business or entity. We were out of compliance with our debt to worth ratio covenant in place under the Bank Midwest loans as of November 30, 2023.
Our loans require us to comply with various covenants, including maintaining certain financial ratios and obtaining prior written consent from Bank Midwest for any investment in, acquisition of, or guaranty relating to another business or entity.
Our consolidated revenues from continued operations increased 18.1% year on year and we had $1,531,000 of income from continuing operations for the fiscal year ended November, 30 2023. We finished the year ended November 30, 2023 with approximately $763,000 of consolidated net income from continued operations and saw our working capital increase by approximately $824,000.
Our consolidated revenues from continued operations decreased 19.1% year on year, and we had $461,000 of operating income from continuing operations for the fiscal year ended November 30, 2024. We finished the year ended November 30, 2024 with approximately $94,000 of consolidated net loss from continued operations, $307,000 of net income and saw our working capital increase by approximately $802,000.
Our consolidated operating expenses from continuing operations increased by 11.4%, from $6,334,000 in the 2022 fiscal year to $7,053,000 in the 2023 fiscal year. The majority of our corporate general and administrative expenses are borne by our Agricultural Products segment, including costs to be public.
Our consolidated operating expenses from continuing operations decreased by 2.9%, from $7,053,000 in the 2023 fiscal year to $6,849,000 in the 2024 fiscal year. The majority of our corporate general and administrative expenses are borne by our Agricultural Products segment, including costs associated with being a public company.
Bank Midwest has issued a waiver for the noncompliance as of November 30, 2023. 11 Table of Contents For additional information about our financing activities, please refer to Note 9 “Loan and Credit Agreements” to our financial statements in “Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of this report.
We were in compliance with covenants in place under the Bank Midwest loans as of November 30, 2024. 11 Table of Contents For additional information about our financing activities, please refer to Note 10 “Loan and Credit Agreements” to our financial statements in “Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of this report.
On November 30, 2023 we had $1,086,480 available on our line of credit and $2,337,903 of excess collateral towards our borrowing base. Our working capital remained strong at approximately $5,690,000 in fiscal 2023 with a current ratio of 1.61.
On November 30, 2024 we had $3,571,563 available on our line of credit and $930,036 of excess collateral towards our borrowing base. Our working capital remained strong at approximately $6,492,000 in fiscal 2024 with a current ratio of 1.98.
Our Agricultural Products segment had operating income of $664,000, and our Modular Buildings segment had operating income of $867,000. 9 Table of Contents Consolidated net income for the 2023 fiscal year was $267,000 compared to net income of $98,000 in the 2022 fiscal year. Our effective tax rate for the 2023 and 2022 fiscal years was 29.8% and 16.4%, respectively.
Our Agricultural Products segment had an operating loss of $1,510,000, and our Modular Buildings segment had operating income of $1,971,000. 9 Table of Contents Consolidated net income for the 2024 fiscal year was $307,000 compared to net income of $267,000 in the 2023 fiscal year.
We increased revenue in both our Agricultural Products and Modular Building segments in fiscal 2023. Our consolidated gross profit as a percentage of net sales increased to 28.3% in the 2023 fiscal year compared to 27.1% of net sales in the 2022 fiscal year.
We increased revenue in our Modular Buildings segment while our Agricultural Products segment was met with difficult market conditions in fiscal 2024. Our consolidated gross profit as a percentage of net sales increased to 29.8% in the 2024 fiscal year compared to 28.3% of net sales in the 2023 fiscal year.
Management believes the liquidation of the Tools segment will allow for investment in technological advances that improve efficiency and margins in the Agricultural Products segments, our largest revenue source. 10 Table of Contents Trends and Uncertainties We are subject to a number of trends and uncertainties that may affect our short-term or long-term liquidity, sales revenues, and operations.
Our Tools segment reported net income of $402,000 for the twelve months ended November 30, 2024 compared to net loss of $496,000 in the same period of fiscal 2023. 10 Table of Contents Trends and Uncertainties We are subject to a number of trends and uncertainties that may affect our short-term or long-term liquidity, sales revenues, and operations.
We have a Bank Midwest credit facility consisting of a $5,000,000 revolving line of credit and a $500,000 reserve line of credit, pursuant to which we had borrowed a combined $4,413,520, with $1,086,480 remaining, as of November 30, 2023, and two term loans, which had outstanding principal balances of $2,080,718 and $336,858 as of November 30, 2023.
We have a Bank Midwest credit facility consisting of a $5,500,000 revolving line of credit, pursuant to which we had borrowed $1,928,437, with $3,571,563 remaining, as of November 30, 2024, and one term loan, which had an outstanding principal balance of $1,779,877 as of November 30, 2024. The revolving line of credit is being used for working capital purposes.
We expect to receive approximately $1,200,000 of net proceeds from the Employee Retention Credit in fiscal 2024 and estimate expected net proceeds of approximately $2,000,000 upon sale of our Ohio real estate, which we expect will be used to retire a significant portion of our debt and fund capex needs as discussed above.
We will be focused on increasing efficiency and margin gains to make the most out of our expected sales in fiscal 2025. We expect to receive approximately $1,200,000 of net proceeds from the Employee Retention Credit in fiscal 2025.
Total income from operations from our Modular Buildings segment during the 2023 fiscal year was $867,000 compared to operating loss of $600,000 in the 2022 fiscal year. We took steps in fiscal 2023 to improve our project management team to increase profitability on projects and to provide better service to our customers.
This increase is primarily due to increased bonus payout for excellent fiscal 2024 performance. Total income from operations from our Modular Buildings segment during the 2024 fiscal year was $1,971,000 compared to operating income of $867,000 in the 2023 fiscal year.
Our Modular Buildings segment’s net sales for the 2023 fiscal year were $7,814,000 compared to $4,734,000 for the 2022 fiscal year, an increase of $3,080,000, or 65.1%. We saw an increase in agricultural sales in fiscal 2023 from the continued strength of the agricultural market and also landed a large research product that drove up sales.
Our Modular Buildings segment’s net sales for the 2024 fiscal year were $9,836,000 compared to $7,814,000 for the 2023 fiscal year, an increase of $2,022,000, or 25.9%.
We have identified additional ways to improve our profit margin through automation and continue to make that a focus in fiscal 2024. Our Agricultural Products segment’s operating expenses for the 2023 fiscal year were $5,920,000 compared to $5,239,000 for the 2022 fiscal year, an increase of $681,000, or 13.0%.
We put a focus on cost reductions on two of our highest volume products in fiscal 2024, which we expect to bear fruit in fiscal 2025. Our Agricultural Products segment’s operating expenses for the 2024 fiscal year were $5,665,000 compared to $5,920,000 for the 2023 fiscal year, a decrease of $255,000, or 4.3%.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ” of this report. Financial Condition Our Agricultural Products segment continued its profitability for the third straight year in fiscal 2023. Our Modular Buildings segment added a strong financial performance for fiscal 2023.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ” of this report. Financial Condition Our Agricultural Products segment saw a 34.7% decline in revenue in fiscal 2024 due to suppressed commodity prices, high borrowing rates and saturated inventory levels. Our Modular Buildings segment increased revenues by 25.9% and recorded strong profitability.
Our Agricultural Products segment’s net sales for the 2023 fiscal year were $22,467,000 compared to $20,912,000 during the 2022 fiscal year, an increase of $ 1,555,000, or 7.4%. Commodity prices in the agricultural market remained strong for the majority of fiscal 2023, and our production execution on our pent up backlog led to the increase in sales in fiscal 2023.
Our effective tax rate for the 2024 and 2023 fiscal years was 30.3% and 29.9%, respectively. Agricultural Products. Our Agricultural Products segment’s net sales for the 2024 fiscal year were $14,663,000 compared to $22,467,000 during the 2023 fiscal year, a decrease of $7,804,000, or 34.7%.
We believe our brand and sales lead funnel is providing us with increased sales potential in fiscal 2024. Discontinued Operations. On June 7, 2023 we announced we would be discontinuing our Tools segment with the last day of normal operations on July 14, 2023. There were no employees as of November 30, 2023.
On June 7, 2023 we announced we would be discontinuing our Tools segment with the last day of normal operations occurring on July 14, 2023. Just over a year later, on October 21, 2024, we completed the sale of the remaining real estate associated with our Tools segment for $1,800,000.
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The primary driver for the increase in effective tax rate was due to add backs related to differences in restricted stock values at grant and vest date and non-deductible meals expense. Agricultural Products.
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Commodity prices in the agricultural market dropped below five-year averages in fiscal 2024, which lead to a strong decrease in demand for our products. This demand decrease was not isolated to our company, instigating mass layoffs and major production cuts in fiscal 2024 for many in our industry.
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Incoming orders began to slow near the end of fiscal 2023 as supply chains in our industry began to catch up to demand. Gross profit percentage for the 2023 fiscal year was 29.3% compared to 30.8% for the 2022 fiscal year. We saw component prices and manufacturing overhead continue to increase from inflationary forces in fiscal 2023.
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Another factor in the sales decrease was the amount of inventory on dealer lots at the end of fiscal 2023. Many dealers were oversaturated with inventory related to excess demand in 2023 from high commodity prices and supply chains' inability to keep up.
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This, coupled with product mix was the primary driver for the decrease in gross profit percentage. We doubled the number of unit sales on our manure spreaders in fiscal 2023, as we added smaller unit options to our manure spreader line.
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This turned drastically in the first quarter of fiscal 2024, as increasing interest rates and declining commodity prices decreased expected net farm income. Gross profit percentage in the Agricultural Products segment for the 2024 fiscal year was 28.3% compared to 29.3% for the 2023 fiscal year. We continued to see inflationary pressure in fiscal 2024.
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A large portion of our sales increase was related to the manure spreader line which has a lower profit margin to stay competitive with other industry leaders. We continued to make steps to drive production efficiency in fiscal 2023, most notably with the creation of new fixturing to weld a higher volume of parts in our robotic weld cells.
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Steel prices rose through the summer of fiscal 2024 but leveled off and dropped near the end of the year. We continued to see price increases from insurance groups and other manufacturing expense companies, which lead to an increase in our overhead costs. We attribute these factors and overall sales decrease to the drop in gross profit percentage.
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Our selling expense accounted for approximately $200,000 of this increase, which included additional commissions in fiscal 2023, from increased sales and more sales in territories represented by our independent reps and increased advertising spend in fiscal 2023 to generate more product interest about our products and to reach new geographic areas.
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A large share of the operating expense decrease is related to our selling expenses, most notably, commission expense, for which we saw a decrease of $418,000 due to the large sales decrease and the hiring of an inside salesperson. Some of this decrease was offset with added salary for the inside salesperson and travel expense.
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Our general and administrative expenses increased approximately $461,000 from fiscal 2022. This was due in part to ERP conversion expenses included training, data conversion and post implementation support. The new ERP is expected to improve our financial reporting, material resource planning and overall administrative efficiency.
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Our general and administrative expenses increased approximately $333,000 from fiscal 2023.
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We also added a Human Resources manager to our team this fiscal year, which added to the increased general and administrative expense. Our costs of being public, most notably, audit fees also increased in fiscal 2023. Our engineering expenses increased approximately $19,000 from fiscal 2022 due to some consulting work to increase robotic weld cell activity.
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The increase is due to $186,000 of additional salary expense due to wage increases and from the hiring of a HR manager at the end of fiscal 2023 along with a $48,000 increase in computer contract expense related to an enterprise resource planning or ERP conversion that we completed in August of 2023.
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We continue to strive for improvements that will improve our product margins and improve manufacturability. We took additional steps in fiscal 2023 to increase our operational effectiveness including product quality and efficiency initiatives with upgraded equipment and new internal programs. Modular Buildings.
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We also paid out approximately $201,000 in early retirement benefits to employees in the spring of fiscal 2024 in order to drop our headcount to align with our lessened demand. We estimate the early retirement will save us $263,000 in wages and benefits annually moving forward.
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Our Modular Building segment's gross profit for the 2023 fiscal year was 25.6% compared to 10.5% during the 2022 fiscal year. Sales volume played a key factor in increasing our gross profit for fiscal 2023. We also increased our billing rates to combat rising labor and overhead costs from fiscal 2022 that led to better margins in fiscal 2023.
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In addition to early retirement, we also enacted layoffs and strategic terminations that are expected to cut approximately $750,000 of operating expenses annually. Our engineering expenses decreased approximately $166,000 from fiscal 2023 due to a reduction in headcount in our engineering department.
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Operating expenses for the 2023 fiscal year were $1,133,000 compared to $1,095,000 for the 2022 fiscal year, an increase of $38,000, or 3.5%. This increase was primarily due to increased selling expenses from additional commissions paid on an increase in agricultural building sales.
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The sudden deterioration of the agricultural markets in fiscal 2024 was the primary driver for the decline in operating income from fiscal 2023. We reacted quickly when we identified adverse market conditions early on in fiscal 2024, and began right-sizing operations and overhead expenses to facilitate better performance in fiscal 2025. Modular Buildings.
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One employee remained employed by the Tools segment through October 2, 2023 to oversee the liquidation process, mainly the sale of remaining inventory and auctioning off machinery and equipment.
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While our agricultural products building sales suffered under the same adverse market conditions of our Agricultural Products segment, we saw increased demand in the research markets for our modular products, which led to a 124% increase in research sales.
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Our discontinued operations generated approximately $661,000 from operating activities for the twelve months ended November 30, 2023, which includes the liquidation of inventory and receivables and approximately $76,000 from investing activities from the sale of equipment. The Company real estate is listed for sale at market value in the Canton, Ohio area.
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Our Modular Building segment's gross profit percentage for the 2024 fiscal year was 32.1% compared to 25.6% during the 2023 fiscal year. Our project performance in fiscal 2024 exceeded expectations as our workforce was consistently under budget on production disciplines.
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We estimate approximately $2,000,000 in net proceeds on the sale of this real estate based on market value of comps in the area. Our Tools segment had sales of $2,031,000 for the twelve months ended November 30, 2023 and $2,753,000 for the twelve months ended November 30, 2022.
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We are also historically more efficient when our shop is busy and perform better on research projects as we often have more contingency built in than traditional ag modulars. Operating expenses for the 2024 fiscal year were $1,184,000 compared to $1,133,000 for the 2023 fiscal year, an increase of $51,000, or 4.5%.
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Liquidity and Capital Resources Our main source of funds during the 2023 fiscal year was cash generated by financing activities. Income from continuing operations, sale of inventory and property, plant and equipment of our discontinued operations and the use of our line of credit were used to fund our operating and investing activities.
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Our project management team continued to build on fiscal 2023 strides to increase profitability on projects and to provide better service to our customers. This focus translated to some of the best results we have seen in this operating segment and we believe our sales funnel leading into fiscal 2025 can deliver similar performance. Discontinued Operations.
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A large increase in receivables consumed cash in 2023 as we used extended terms to increase our sales in fiscal 2023. We also consumed significant cash increasing our inventory to stay ahead of supply chain delays.
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The assets and liabilities of this segment were gone prior to November 30, 2024 and will no longer report discontinued operations in our current year financials moving forward. Our discontinued operations generated approximately $1,271,000 from operating, investing and financing activities mainly related to closing activities and the sale of real estate.
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We expect to be driving these inventory levels down in fiscal 2024 as many of our vendor lead times are returning to pre pandemic levels. We used approximately $841,000 in fiscal 2023 for purchases of property, plant and equipment, primarily facility upgrades and manufacturing equipment to improve operational efficiency.
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Liquidity and Capital Resources Our main source of funds during the 2024 fiscal year was cash generated by operating activities of approximately $2,869,000. We utilized favorable billing schedules in our Modular Buildings segment to generate approximately $1,654,000 in positive cash flow for our fiscal 2024 projects.
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We expect our primary capital needs for fiscal 2024 to be operating expenses. We also expect to use cash in fiscal 2024 to acquire additional equipment that improves automation and efficiency in our manufacturing process. These additions will help us drive out costs to improve product margins and be more competitive in our industry.
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We also generated approximately $983,000 of cash from the collection of extended term and other outstanding receivables at fiscal 2023 year end, predominately from our Agricultural Products segment. We were also able to reduce our inventory level in fiscal 2024 from higher than normal inventory level at the end of fiscal 2023, to generate approximately $551,000 of positive cash.
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The revolving line of credit is being used for working capital purposes. We also have three Economic Injury Disaster Loans provided by the U.S.
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We expect to be able to continue to decrease inventory in fiscal 2025 to provide positive cash. Our net loss plus noncash adjustment items also provided approximately $1,358,000 in cash in fiscal 2024. Our discontinued operations provided approximately $1,271,000 in positive cash flow primarily from the sale of our remaining real estate.
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Small Business Administration with an aggregate principal balance of $482,078 as of November 30, 2023. $160,599 of the EIDL balance is tied to our discontinued operation and is expected to be paid upon liquidation of the real estate.
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Our largest uses of cash in fiscal 2024 were the payment of accounts payable, purchases of property, plant, and equipment, and retirement of debt, including the payoff of our roof loan and a large decrease in our operating line of credit. We expect our primary capital needs for fiscal 2025 to be operating expenses and continued retirement of debt.
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We expect our operating expenses to be down significantly in fiscal 2025 as we have right-sized our staff for incoming demand. We expect to use available cash or financing in fiscal 2025 to acquire equipment that we identify as improving efficiency in our manufacturing process.
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We also have two Economic Injury Disaster Loans provided by the U.S. Small Business Administration with an aggregate principal balance of $315,089 as of November 30, 2024.

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