Art's-Way Manufacturing Co., Inc. (ARTW) Q3 2015 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. Today is Thursday, October 1, 2015, 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 Carrie Majeski, President and Chief Executive Officer; J. Ward McConnell, Jr., Vice Chairman of the Board of Directors of Art’s Way Manufacturing; Marc McConnell, Chairman of the Board of Directors of Art’s Way Manufacturing; and Dan Palmer, President of Art’s Way Scientific. I will now turn the call over to Ms. Majeski. You may begin.

I am going to start with the forward-looking statements. You should note that some of the statements made during this call may be considered forward-looking statements. Forward-looking statements include, but are not limited to, statements relating to our market position, strategies for growth, and future results of operation. Forward-looking statements are inherently subject to risks and uncertainties such as competitive factors, difficulties and delays in development, manufacturing, marketing and sales of Art’s Way products, general economic conditions, and other risk factors and uncertainties described in Art’s Way’s periodic reports filed with the SEC. Actual results may differ materially from anticipated results and Art’s Way does not undertake to update these forward-looking statements. With that, I’ll turn the call over to Marc.

Yes, I’d like to thank you all for calling in and for your continued interest in the company. Obviously, we had a very, very difficult quarter from an operational standpoint and it was also made worse by a goodwill impairment and we’ll be glad to talk about all of that. We’re focusing very much on what is within our control in our cost and we’ll be talking about that quite a bit later in the call, and what we’re doing about the situation. So at this time, I’ll give Carrie the opportunity to tell you the numbers.

Thanks, Marc. I’m going to start with Art’s Way Manufacturing number for just the Ag segment. Sales for the third quarter of 2015 were $4,447,000 compared to $8,555,000 in 2014. This was a decrease of $4,108,000. Our income before tax for the third quarter was a loss of $390,000 compared to income in the third quarter of 2014 of $1,112,000. This was a decrease of $1,502,000. Our portable feed equipment sales were down $1,459,000 for the quarter, but year-on-year, we’re still seeing an increase of about $600,000. Our bee harvester sales for the quarter were down approximately $1 million, and the majority of that is due to the fact that we had sold three self-propelled units last year, and this year we had only sold two and those units are high-dollar units ranging in the $700,000 area, so that’s where the primary decrease in bee harvester came from. Other sales were down $1,583,000 for the quarter and down $2,217,000 year-to-date. Our year-to-date sales for 2015 were $15,263,000 compared to $17,699,000. This is a decrease of $2,436,000 or 13%. Our year-to-date income before tax for 2015 is $911,000 compared to $1,041,000 last year. This is a decrease of $130,000 or 12.5%. Our backlog at Art’s Way Manufacturing currently sits at $937,000 compared to $2,884,000 last year. This is a difference of $1,896,000 or 67%. I’m going to move to Universal Harvester numbers now. Their sales for the third quarter of 2015 were $413,000, down from last year at $614,000. This is a decrease of $200,000 or 32%. Our income before tax at Universal Harvester for the third quarter was $581,000 compared to – that’s a loss of $581,000 compared to a loss of $77,000 last year. Our year-to-date sales at Universal Harvester are $898,000 compared to $2,774,000. This is a decrease of $1,876,000 or 67%. Year-to-date, our income before tax at Universal is a loss of $800,000 compared to income of $208,000 in the prior year. This is a decrease of $1,008,000. Our backlog currently at Universal Harvester is $31,000 compared to $138,000 in the prior year. That’s a decrease of $107,000 or 78%. This is the business that have been most impacted by the downturn in Ag, again primarily because our main customers are OEMs, and they’ve really cut back on their ordering and inventory, so we’ve really felt it here. As a result, we’ve pulled back on our staffing levels to a bare minimum, and in the third quarter we decided it was time to go ahead and look at that goodwill impairment and we did take that all the way down to zero in the quarter, and that did affect our year-to-date income by $619,000. We’re currently actively looking to sell our facility in [Aims], and we intend on moving production of parts and the remainder of the sales to our Armstrong location. Art’s Way International’s sales for the third quarter were $346,000 compared to $239,000 in the prior year. This is an increase of $107,000 or 44%. Our income before tax was a loss of $70,000 compared to a loss of $48,000 in the prior year. Our year-to-date sales at Art’s Way International for 2015 are $880,000 compared to $1,042,000. This is a decrease of $162,000. Our year-to-date income before tax for 2015 is a loss of $249,000 compared to $40,000 income in the prior year. Our backlog at Art’s Way International currently sits at $772,000 compared to $753,000 in the prior year. This is a $19,000 increase or 2.5%. Again, most of that decrease in our sales year-to-date for Art’s Way International came in the first quarter because we were more timely in delivering our goods during season in the prior year. We did move our manufacturing facility from Clifford, Ontario to Listowel, Ontario this year. We started that move in early May and didn’t start up production again until late June, so really both our second and third quarters kind of felt the expenses of that move going on. We do anticipate our sales levels will increase for the fourth quarter for this entity as we move into their season of use of snow blowers. Our Ag total for the third quarter of 2015 were $4,911,000 compared to $9,362,000 in the prior year. This is a decrease of $4,451,000 or 46%. Third quarter income before tax numbers for 2015 is a loss of $1,019,000 compared to income of $991,000 in the prior year. Our year-to-date sales for 2015 for the Ag segment are $16,592,000 compared to $21,366,000. This is a decrease of $4,774,000 or 22%. Again, I would just point out that of that decrease, Universal Harvester accounts for 40%. Our year-to-date income before tax for 2015 is a loss of $83,000 compared to income of $1,292,000 in the prior year. Our total Ag backlog currently sits at $1,545,000 compared to $3,534,000 in the prior year. This is a decrease of $1,990,000 or 56%. Moving on to our Ohio Metal segment, their third quarter sales for 2015 were $500,000 compared to $797,000. This is a decrease of $297,000 or 37%. Our income before tax is a loss of $91,000 compared to a loss of $82,000 in the prior year. Our year-to-date sales at Ohio Metal for 2015 are $1,851,000 compared to $2,603,000, a decrease of $752,000 or 29%. Our income before tax for 2015 is a loss of $173,000 compared to a loss of $18,000 in the prior year. Our backlog at Ohio Metal currently sits at $544,000 compared to $449,000 in the prior year. This is an increase of $95,000 or 21%. We continue to struggle with this segment due to oil and gas industry being down, a high percentage of our product does go into cutting pipe steel and we’re definitely feeling that impact. We’re working diligently on increasing our business in the CBN and CBDs. These tools are more specialized and they have less foreign competition and they’re not tied so strongly to the oil and gas. We’ve also reduced our hours at this facility as well as brought down our overall headcount. We’re also working on bringing down the employee benefit cost at this facility by moving our non-union employees off of the union plan. Our Vessel segment for the third quarter had sales of $372,000 compared to $606,000. This is a decrease of $234,000. Our income before tax for 2015 for the third quarter was $113,000 compared to a loss of $64,000 in the prior year. Our year-to-date sales for Art’s Way Vessels for 2015 are $1,374,000 compared to $1,504,000 in 2014. This is a decrease in sales of $130,000 or 8%. Our year-to-date loss before tax for 2015 is $191,000 compared to $190,000 in the prior year. Our backlog here sits at $628,000 compared to $312,000. This is an increase of $316,000 or 101%. Our Vessels business has had a large order sitting on their books for quite some time now and we have not been able to start this order because we did not have released for fabrication and that really impacted our third quarter. We have since then released the start of the fabrication of this order, however because of the size of it we will not be delivering until about mid-December. So we do anticipate that our inventory levels will grow at this segment during the fourth quarter as we’re pouring all of that labor into this large order that will not ship with in the quarter. Here we are adding staff to support our current backlog and our sales and quote activity are strong. Our Modular Building segment had sales for the third quarter of 2015 at $1,103,000 compared to $820,000 in the prior year. This is an increase of $283,000 or 34%. Our income before tax for 2015 for the third quarter was $38,000 compared to zero in the prior year. This is an increase of $38,000. Our year-to-date sales at Modular segment for 2015 were $2,162,000 compared to $1,818,000, an increase of $344,000. Our income before tax year-to-date for 2015 is a loss of $139,000 compared to a loss of $249,000 in the prior year. Our backlog sits at $890,000 compared to $900,000 in the prior year. This business has picked up for us in the second half of the year in comparison to the last year and this facility sits relatively closely to our Ag facility that’s in West Union, Iowa. So we have started shifting some of our workforce from the West Union facility over to Art’s Way Scientific to help support their demand for production. Our corporate totals for the third quarter of 2015, sales were $6,886,000 compared to $11,585,000, a decrease of $4,699,000. Our third quarter income before tax for 2015 was a loss of $1,185,000 compared to income of $845,000, a decrease of $2,030,000. Our year-to-date sales for the corporate total for 2015 is $21,979,000 compared to $27,291,000, a decrease of $5,312,000. Our year-to-date income before tax for 2015 is a loss of $586,000 compared to income of $835,000, a decrease of $1,421,000. Our total backlog sits at $3,607,000 compared to $5,198,000 in the prior year, a decrease in the backlog of $1,591,000 or 31%. Again, I would just like to point out that there is a large chunk of that decrease in our income before tax being due to the write-down of goodwill at Universal Harvester. In the last call, we did bring up some of our concerns about our backlog and that we were seeing a decrease in incoming orders compared to the first quarter of 2015. This trend did continue into the third quarter. We have offered different programs and incentives to dealers in order to stimulate sales a little bit. Our annual order rating program typically goes out September 1 and we released that in mid-August this year to try to stimulate some sales. So we did see an uptick in our sales for the month of August, but that program now runs until December 31. So we’re anxiously waiting to see how sales come in on that program as that will set the tone for our next fiscal year. We do, however, understand from dealer surveys and other information available in the industry that all early order programs are seeing a decrease in sales over last year. We also discussed during the previous call that we had already cut some indirect positions. We have continued to do that and we have reduced hours for our direct staff. We’ve offered early retirement package to a number of our employees. Many of our facilities are running on reduced hours. We’ve also decided that we are going to close our facility in Aims, Iowa, shifting those – the production of that equipment up to our Armstrong facility. We have shifted employees from West Union to Monona and we will continue to do that through the winter months, essentially idling our facility in West Union to bring down overhead there. We certainly understand that we are not alone in this as John Deere reports that their ag and turf segments are down 25% for the first nine months of the year; Case New Holland is down 31% for their most recent period; and AGCO is showing being down 26%. We are still noticing that the dealers are struggling as well and they are definitely not wanting to stock any of our inventory. So we do anticipate that the sales that we have, we need to have inventory on hand in order to capitalize on those sales. So inventory will be an issue both for dealers and for manufacturers as we go forward. And that’s all I have prepared for today. Marc, I will hand the call back over to you.

Okay, thank you. As Carrie was just alluding to, we know that there are significant headwinds in our industry, with the ag industry as well as oil and gas and we’re seeing that affects our earnings with our Ohio Metals segment. Interestingly, with the ag product mix that we have, we have quite a few products that are tied to dairy and livestock and those had really allowed us to do fairly well even after most of the ag industry have started to really be impacted significantly. I guess, if you go back maybe a year and a half, two years ago, on that and they really started to feel it than we did. And so, as we’ve discussed before in April, orders got pretty slow and really price of milk in particular is one thing that was helping us for a period of time and when that went down as well as the other commodities, that’s when it really got quieter order wise for us. So the whole, both oil and gas and especially ag are really in a tough period. And it’s normal part of the cycle. This has happened since the beginning of time, it seems like in the ag industry. And so we are preparing in such a way that we will be able to sustain a long prolonged period of slow sales. Could it come back sooner than we think, but we have to focus on what is within our control and that is cost and adjusting in such a way that we will really be able to weather the storm however, no matter how long it takes. So as Carrie mentioned a lot of the cost that we’re addressing and we’re continuing to address more, but so far we’re looking at around $1.2 million in annual cost that we have just more recently identified. It takes a while to implement some of those cost reductions, some of them were maybe identified in the third quarter, but won’t actually be able to take effect until fourth quarter. And I think the true impact and benefit of the cost reductions that we’re making will really be out of the picture by going into the first quarter. I think that’s really where the benefit will show more than it’s been anywhere else. But it’s very significant, the numbers that we’re coming up with and it’s all in the name of matching our business to what the demand profile could look like for a sustained period of time. We’re fortunate to have a very strong capital position. We have good relationship with our bank. We are focused on keeping a lot of availability in liquidity with our banks so that we don’t get into any point of vulnerability. Obviously, inventory is an opportunity for us to help cash flow and we’ve had difficulty in getting that to actually go down part of that for the reasons that Carrie described where having whole goods in stock will allow us to get sales that are not straight off a dealer lot. So we need to be able to respond to the market where it needs arise and there will be sales, it’s just probably less likely that these equipments will sit on dealer lot for a few months before they sell it. So we have to remain agile in that way. And it’s also an opportunity for us to continue to focus on quality in our relationships with customers and innovate. And innovation is an interesting area, even in a bad ag economy, if you’re able to develop products that help farmers save money, then you have something that will still get retention. And so we’ve been working on that for a number of years in introducing good updates in that kind of thing. And we continue to look at ways to help our customers and end users save money and we think that’s what make us most relevant in a prolonged full period, at least in the ag. As Carrie also mentioned, some of our other businesses are in a little bit better period. Vessels had an odd quarter in part because of what Carrie described with the large order not having released to fabrication. We essentially had had production capacity set aside for this customer and they ate up quite a bit of our time and we went from a point of having not enough to do because we are waiting for that to fall to suddenly really having to respond the other way where we are going to have a hard time to deliver. So that’s very hard situation and it makes our numbers hard to follow and they will make it hard for us to compare to in the years ahead. But they are very busy and that’s good. And scientific is very busy and that’s good. And they could potentially begin be getting even a lot busier with a lot of the things that they are working on or negotiating on or bidding on that unfortunately take a long time to develop and that’s always been something we’ve talked about. But potentially really impactful thing there and I feel good about how they are doing and going to be doing. And our Canadian operations in snow blowers are going into a pretty decent period. And so we have some good signs of life there. But overall, we are very much focused on reducing costs so that we can go for a long period of time without materially impacting our capital position. We are not going to have quarters like we just had with the big goodwill impairment, obviously, but also just from an operational earnings standpoint, we don’t foresee something that severe going forward. In looking at the quarter ahead and with cautious optimism, last year fourth quarter was pretty strong for us, profits were $468,000. I don’t think there’s any way we could predict doing that well the fourth quarter of next year, because it was the second half of last year that was strong for Art’s Way; the first half was slow. In this year, it’s the first half that was good for us and it got slower in the second half. So we can’t expect it to be as good as the fourth quarter of last year. We don’t expect anything to be nearly as bad as this past third quarter. So we’re preparing for the long run here and making decisions we hope in a way that does not hurt us long-term in terms of opportunities and relationships with customers and key employees and all that, we are very careful about not sacrificing tomorrow because of today, but in some cases clearly we have to find a way to reduce the cost. So we are very focused on that. We are being proactive. It took longer for the slow period to reach us, so it’s going to take us a little bit longer to get to break even versus companies that experienced it sooner like Titan, but we are on top of it. So at this time, I’d welcome any questions. And also Ward McConnell is available if anyone has questions for him.

[Operator Instructions] Our first question comes from Roger Miller.

Let’s start with an overall explanation, a little bit more grassroots on goodwill impairment, bringing that down to zero. So, I presume you’re going to sell the building in Aims [ph]. Is that correct at Universal Harvester?

We don’t have a deal imminent, but yeah, that’s the intent.

And what is that building projected to sell for?

It would probably be around $1.4 million.

Let me ask you this, is that building too far away to use it for warehousing farm equipment if you need to build up your inventory in order to help take care of these dealers that are in inventory?

We already have really adequate space to do that particularly in our West Union facility where we do some of that now. There’s also a second building in Armstrong where we do some of that now. So we’re not building a huge inventory; we’re building what we think is an appropriate inventory. But for that purpose, we wouldn’t see Aims as needed in that regard.

And of course, the best time in the year probably be putting that up for sale would be the spring, correct?

May be soon.

Normally any building sold in the wintertime seems to not get their full value of the building, at least that’s my experience.

We’ll say it’s been for sale for six months. So it’s been for sale for a period of time at a higher price. And so we’ve now lowered the price and we have some confidence that it’s more likely to get action.

I’m looking at the whole picture, and obviously it’s not good and the reflection of the share price tells the story. That’s not uncommon right now in the stock market. So as a shareholder and someone who holds a large position, what do you plan on doing about reducing cost of management, specifically are you going to continue to issue shares even though they’ve been boarded on, I know they are available. Is that one area that you might consider? I mean, rewarding management and seeing this picture is not exactly what I think shareholders want to see.

Well, I don’t have a real answer for you. I mean, the board would consider that. We don’t have any imminent plans as far as issuing shares or anything like that. I guess, I don’t know exactly – are you assuming that we were going to do that or --?

No, I guess that’s one way of paying debt is to issue shares, but you couldn’t do that in this market You’ve got shares voted on that are continually issued on a regular basis to management, and if you’re not going to cut salaries and I presume you’re not cutting salaries of the any of your top management, so that is specifically – if you’re losing money you got to do something, and I haven’t heard the plan other than selling Aims building and the bright spot, and I know where the bright spots are, the question is it’s going to take two quarters for vessels I presume to get profitable, is that correct?

Well, it’s hard to say exactly, I mean I would think that it would look pretty good particularly with delivery in the first quarter next year. But a lot of the fourth quarter activity will go to inventory because that will not get shipped. So it’s a little hard to follow on that.

And shareholders have waited a considerable amount of time for vessels to turn itself around, and you’ve been very patient with it, and that’s where I am going with this.

I don’t know that patient – well, I guess if 30,000 [indiscernible] looks patient. Internally, I don’t think anyone would say we are highly patient. What we’ve made and not obtained and we think improvement, and we will see – we see improvements with the business and we will then have short order period or something like that, and it looks like we are just sliding backwards. So I mean I’ve got perhaps more frustration than anybody, well, as does Carrie and Ward. We all have just unending frustration with vessels, but we always also seem to be improving in certain ways. So I mean it’s not getting there anywhere near as fast as it should have, and hindsight being 2020 in looking at the number of years that we’ve supported it, you probably could have decided something different a long time ago, but we don’t have that benefit of retrospect. So, it’s in a better place than it was, I mean the numbers for the quarter don’t demonstrate that. But I think we are going in a better place with it.

So the backlog demonstrates the position that it is going forward, and that’s the first time I’ve seen any brightness come from vessels as far as sales go, and going forward the revenue will at least get to a breakeven, if not profitable. So, in case we will all end at one point, I believe you manufactured through Universal Harvester, is that right?

Universal provided reels to another company who build whole g that then supplied Case New Holland. So a lot of it went to Case New Holland, but it wasn’t necessarily our direct customer, although some of the parts and that kind of thing would have been direct, but short answer is we are part of the chain, but they weren’t necessarily our customers.

They were, Marc, it was [Bosch].

Yeah, he is talking about UHC though.

Well, the reason why I brought that up was you are having obviously – it’s extremely a struggle in your move into a different plan. I’m just wondering if they are having the same problems too and the picture that they plan themselves to manufacture is working for them.

For Case New Holland, I don’t know, I know they are having a hard time and the dealers all have too much inventory of combines and some others I believe too. And those are the product lines that we are involved with. And I understand that some of the manufacturers like Case New Holland had too much inventory on their properties. So there is a long chain of inventory there.

Correct. I guess the question is, is there any possibility they may want to shut their – turn 100% around and shut their plant down and have you manufacture again, have you thought about going back to or going direct since you are going through a third party?

Well, you mean to build like the whole swatter or something like that?

Well, to build whatever you can for?

I think what we’ve been saying is that manufacturers like that have been trying to bring in more work to provide work for their employees more so than the other way around. That’s what we’ve seen in particular, ag cos or other large OEMs with UHC in that was what they were attempting to do.

So I was getting to the point that may be you can build at a less expense of rate that than they can, even if it is ag co?

Well, I would think so and we were building for them. But at this point, we think they want to do that on their own. But regardless whether they are doing on their own or not, there is no demand.

Well, then I guess we need to move on to Art’s Way Scientific and that’d be Dan Palmer and maybe Dan can explain what’s going on since we haven’t heard on the conference call anything about that.

Dan, I believe is actually not on, is that correct, Carrie?

That’s correct.

Right. Dan is not on.

I thought at the beginning of the conference call I heard his name, but would you like to explain what’s going on?

Well, I’d say they have a good steady business that they have right now that they are building, primarily to be delivered in the fourth quarter. His leads that is actively working on in getting closer on in a number of cases are really strong. I mean, better than it’s been in a good while. We have the case of a customer who was trying building of ours and then perhaps over the next few years wanting to buy many as in 30 or 40 or 50 and that kind of thing and they have their first building, they are very pleased with it and we are talking about the next one that kind of thing. But we don’t have that in the backlog yet.

Is that a third party sale?

Well, it’s a direct customer of ours. It’s not a dealer or anything like that.

So do you have the figures on Art’s Way Scientific, can you tell us how many leads they have at this point?

Carrie, do you have?

I don’t have the numbers on the final report. But I do keep more of an active log on the jobs that Dan thinks he is going to be able to do something with and kind of report on that on a weekly basis up to Marc and Ward. And I can tell you that there is far more leads on there that Dan is chasing that he thinks he has got an opportunity for. We’ve got jobs out for a bid and those bid dates are coming due towards the end of October and into November where we are going to know if we hit some of those jobs or not.

And if you do hit those jobs, you are going to announce them [indiscernible]?

I think we would where we can as far as the customers go. It’s a case-by-case basis whether or not they wanted to be known. Some of them are involved with animal science and you know the whole concern there. So I would like to when we can – it’s just in some cases the customer is not okay with that and so in that case we don’t do it.

Well, if you can announce the customer, maybe you could announce the size of the contracts if they amount to any sizable...

If it was a significant order, we would do that and release new backlog numbers probably.

Yes, we’d be fine doing that. I’d also add to what Carrie was saying that recall a couple of years ago, the really big job we had at Stanford that was kind of a big feather in our cap and we’ve been wanting to replicate work like that in the best we can. We do have some interested clients right now for example that are going there and looking at that facility and people are getting closer in their decision process. [Indiscernible] and that’s a good sign for us. Unfortunately, all these just really take longer than we like them to. But I would say there is a lot to be hopeful about here and we have a lot of credibility in the industry, particularly after that Stanford job.

Ward believed in diversification and you’ve been well diversified, at this point as it occurred to you that you might want to sell off any of these divisions, is there any demand?

I’m open-minded to such things depending on which firms they are, I guess. But I wouldn’t want to do it when they are at a loss position for one thing. I don’t think any of the one that would be interested in selling are at a right point to sell, really. So I don’t see that as being something that would be helpful or impactful to us anytime soon.

And I presume you don’t want to sell Art’s Way Scientific?

Right, I don’t. We see a kind of upside there and we’ve seen when that business is good, how good it can be and that this really inspiring and of course in the years between it can be slow, but other than it, it has, in my mind, just untold potential. We don’t know how big it could become. In the concept we bring to market, it’s not mature market yet for what we’re trying to provide. So I just think that there is a ton of upside and a lot of legs to that business and we’ve got a good company, we’ve got a good reputation, we’ve got good people, very good people, we got a lot of credibility. And so that business has and continue to have a lot of opportunity to really pop and we’ve talked about that a long time, but at some point maybe we will reach a tipping point to allow that to happen more consistently too.

Have you thought about bringing in more sales people Art’s Way scientific to help Dan or you’re not in a position to do that right now?

We talked about that and we do – we are willing to invest in more support for him. But we haven’t successfully pulled the trigger on somebody for that. So I will say and we didn’t cover it earlier, we also have remained interested in strategic acquisitions that would go with Scientific and worked very actively on one that did not happen. But we are interested in building that business and looking at opportunities to do it, whether it’s acquisition or product development or wherever the opportunity may be. So even though we are in a tough quarter and it’s a drain on our financial position obviously, we are not allowing ourselves to get to a point of vulnerability where we can still take advantage of our opportunities for Scientific and other businesses. So we are still pursuing a lot of things.

Any other acquisitions in any other areas that you would look at?

I guess I’d look at a number of things. I would say on the – Ag of course is very cyclical, we are very much in it and we are diverse within ag, but we don’t have – other than UHC, we don’t have a whole lot that gets the full benefit of the good times in real crop commodities. Not quite so much. We might be interested in something that fits in that way, if it were to come along, and I think there probably are some opportunities and will be some opportunities in that regard with the market being where it is and people that don’t want to write it out for another whatever period of time it is. I would want to remain in a stronger position to still be able to look at those things. And so that’s what we’re willing to do and we’re focused on staying in that position. But I wouldn’t say that I’m actively seeking an Ag product line or company to absorb right now.

Let me go out [indiscernible] on Ohio Metals, they are involved somewhat in the oil industry, correct?

Very much.

The oil industry is on its knees, however, oil was stabilized and they predicted it would go down further. It seems to be trying to get legs with the foreign exposure at this moment, specifically with Russia and the US and Syria, there is possibilities oil could rise and throughout the Middle East we know there is problems. Have you looked at all at the oil industry for something sideways to Ohio Metals?

I guess we’ve looked a little bit and we haven’t found – I mean that’s the news popped up, that looks like a good fit. We entertain the idea of some other tool cutting types of things that weren’t necessarily oil and gas directed, but I don’t have a lot on that, but we think somewhat open to it.

I would assume that that industry, we know sales are down, we know there is a weakness there, we also know there is possibilities of a turnaround that you might want to look there for some smaller companies that might be available or someone that might want to divest itself off a division. I’m looking over this whole situation and I guess I’m going to ask – the last question I’m going to ask I really don’t want to ask, but I’m going to ask, is there any possibility of a growing concern being issued in the near future?

Do you mean from an accounting standpoint?

Yes, because you stated that you had the credit available and you do have positive going forward in vessels and it looks like Art’s Way Scientific we know it’s been going along, but are any of these other divisions going to hurt you significantly that you can’t withstand it?

I don’t think so. I mean, I think we have to stay ahead of it and adjust our business and reduce the cost the best we can to be able to absorb all of that. So I don’t intend to let us get to a point of vulnerability where growing concern is a real threat there.

I know you have the qualifications to run this company, because you’ve been head of the machinery association, I believe you’ve been President of a bank, you still are, is that correct?

Chairman.

Chairman? Well, you’re well qualified and there is no doubt about it. Ward, would you like to say anything about the whole picture right now?

I’d say one thing that may be helpful. By far, the changes that they have made, Marc and Carrie have made is not fully been felt yet. They had to run down some of it. And it was pay-offs of vacations and so on, it was a lot of things. And I think this quarter they will be rundown. So I think that’s going to help a lot. Otherwise, I think the story to tell was about [size]. We hadn’t mentioned that.

And can we anticipate one more quarter of losses and then – is that correct or am I jumping the ship here?

I’d say it’s hard to say if it’s going to be plus or minus right now, I expect it to be just heck of a lot better than the third quarter, even just looking at operational earnings, not just the goodwill involved. I expect that to be a lot better. I don’t expect it to be nearly as good as the fourth quarter of last year and I think it’s going to – it’s hard to say. It’s hard to say. It’s possible that it may still be negative as a lot of the things the cuts that we are making and are still making as it to take effect. I don’t think it gets really clean probably until the beginning first quarter, probably. Ward mentioned severances and that kind of thing, that may be still happening in this quarter and I will say also that we continue to look for these opportunities and sit down and meet and find the opportunities. So this will be a continual effort to reduce cost. But as for the decisions that we’ve already made to address cost, I think that will get clean towards the end of this quarter and into the first.

I’m going to leave room for someone else to hopefully ask questions and I continue to be a supporting shareholder. I have plans on going forward to accumulate more shares and I believe in the management and let’s see what we can do going forward. And please if you have any large contracts, especially from Scientific, give us the dollar amount going forward and I hope the board realizes how important that is.

Okay, yes. I agree.

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

Thank you all for your continued interest in the company. Obviously, it’s a very disappointing quarter, it’s a tough one to talk about, but we are very focused on reducing cost in such a way that we can manage our way through no matter how long this takes. So we are very proactive in that regard and plan on being here a long time and continue to support our business in such a way that we can take advantage of the upside opportunities for all of our segments. So overall financially, we are strong and I think we are, biasly think we are well managed and we will be able to handle with. So your continued support would be appreciated and it’s all I have for today. Thank you.

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