Art’s-Way Manufacturing – Sells Property
Art’s-Way Manufacturing Co., Inc. (ARTW) manufactures and distributes specialized agricultural equipment, as well as machinery for processing animal feed and other agricultural applications. The company generates $27 million in revenue (9% CAGR since 2018) and reports a net loss of $0.9 million on a TTM basis.
ARTW has entered into an agreement to sell an industrial property located in Canton, Ohio, to Stoneham Partners LLC for $1.8 million ($46/square foot and $497/square meter). The property, a 39,000-square-foot warehouse on 4.64 acres, was previously used by the company’s Tools segment. The sale is expected to be completed by November 30, 2024, provided all conditions are met, including a 45-day due diligence period and the buyer securing financing within 90 days. The proceeds from the sale will be used to pay down debt and finance operations.
The property was purchased in September 2013 when ARTW acquired the assets of Ohio Metal Working Products Company for approximately $3.2 million. For the land and building, they paid $1.2 million at that time. According to the notes from the company’s 2013 10-K, $0.1 million appears to have been allocated to land and $1.1 million to the building. Assuming the building is depreciated over 40 years, the building’s book value at the time of sale would be approximately $0.8 million. Adding the land at $0.1 million, the company is likely to realize a book gain of $0.9 million.
As of the latest report, tangible equity stood at $8.6 million. Pro forma, this increases by 10.5% to $9.5 million ($1.87/share). Meanwhile, net debt decreases from $6.6 million (77% net gearing) to $4.8 million (50% net gearing).
The stock is down 33% this year and is currently trading at a P/TB of 0.77 (pro forma), compared to a historical average of 1.07x. However, this might not be a "steal" given the relatively volatile earnings history over the past decade. On a positive note, retained earnings stand at $6.5 million.
(quickFS)
(Disclosure: The writer holds a small position in the company.)