Good morning, ladies and gentlemen. Today is March 30th, and welcome to the Art’s Way Manufacturing First Quarter Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Your call leaders for today’s call are Marc McConnell, Chairman of the Board of Directors, Art’s Way Manufacturing; Carrie Gunnerson, CEO and President of Art’s Way Manufacturing. I’ll now turn the call over to Ms. Gunnerson. You may begin.

Good morning. I’m going to start by reading our 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 operations. 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 risks and uncertainties described in Art’s Way’s periodic reports on file with the Securities and Exchange Commission. Actual results may differ materially from anticipated results and Art’s Way does not undertake to update its forward-looking statements. Marc?

Yes. I’d like to welcome you all to the call, appreciate you being interested in calling in today. You’ve all reviewed our results for the first quarter. And we’ve got really a lot of positive signals, got a lot of good things going on, good progress, but we still have things impacting our P&L significantly as is evidenced by the earnings and we will be talking about that in the call. So, I’ll turn it to Carrie to go through some of the specifics and will talk more in the end.

All right. Thank you, Marc. I’m going to start by going over some of our information for our consolidated entities. Our consolidated revenues for the first quarter and year-to-date were 5,366,000, compared to 4,421,000 in the prior year, an increase of 944,000 or 21%. We continued to bring more focus to our key operations and simplify our business. At year-end, we had two facilities on the market for sale. We have closed on the sale of our Dubuque property just yesterday for $1.5 million and the proceeds will be used to pay down debt. Our property in West Union is build for sale and is currently listed out 1,595,000. As we have stated, reductions of our inventory and our debt have been our priority and will continue to be a priority of ours, as we move through 2018. Having said that, we do anticipate that our inventory will increase as we move through the second quarter, but should be reduced below our November 30, 2017 levels as we conclude the third quarter. Our backlogs have strengthened across all segments. For our agricultural products, our revenue for the quarter and year-to-date were $3,929,000 compared to $3,638,000 in the prior year or an increase of $561,000 or 17%. Our early order program was a success and we had more dealers participating this year compared to prior years. Our backlog on the ag side. We’re currently sitting at -- for ag, we’re sitting at $3,752,000 compared to $4,036,000 in the prior year. However, if you adjust last year’s number for the self-propelled beet harvesting equipment and for Art’s Way International look no longer been in those numbers, it would bring that backlog number down to $2,495,000. So, when you really compare Art’s Way produced products and the backlog for those products, were up…

Okay. Thank you very much. So, as you’ve heard. There are a lot of good positive signs. We are really pleased to see the revenue picking up significantly, see our backlog is pushing up significantly, again, a lot of good customer feedback from dealers in some industry publications and otherwise. And overall, feel like we are building momentum in each of our units, now that we’re simplified and able to give the resources to them and to the sales efforts. So that is good. Carrie touched on a number of the balance sheet items, and we will continue to be working on addressing non-strategic things in our inventory. And they may continue to impact margins in the quarters ahead as we continue to work through some of these things and free up the cash that’s tied up in inventory that’s not a significant part of our future. So, anyway, we’re making real progress there. As far as our outlook, a lot of interesting things are going on in the world that are affecting us right now. Everyone has heard about the steel tariffs, and that impacts us very directly. So, here in the very immediate past few days and weeks, we’ve been studying the impact on our products and realized that raising prices is inevitable. And we are about to roll that out to our customers. And fortunately, we’re doing that at a time when we have a strong backlog and are not desperate for it, but that may -- for our whole industry, it’s going to be kind of a big deal, I think. It’s the fact that the price of everything is going to go up. And it’s at a time that the market conditions haven’t gotten robust yet. So, it’s a concern but it may also be…

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

Yes. Good morning and a happy holiday to everybody. And it seems like you’re making progress. Of the $1.5 million that you collected, how much was reflected in the balance sheet? Is there a gain or loss with the $1.5 million to be reflected in the next quarter?

Last year for the end of 2017, we had, I guess reduced the value of that asset in anticipation of maybe a closer idea of what we’d able to realize on it. So, any impact from that sale really was in the fourth quarter 2017.

Okay. So…

Extent of that was 200,000 and change. Is that right, Carrie?

Yes. That’s correct.

So, there is a gain of 200,000 on the…

No.

No. There was a balance sheet loss in fourth quarter of 200,000 and change.

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

That’s correct.

Okay. Let’s see…

The big item is that deferred tax asset.

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

That was close to $300,000.

Okay, okay. And in the quarter ending May 31, 2017, you had a $0.5 million loss and you talk about improvement in the next quarter. Do you expect to break even or show a profit compared to what we showed last year?

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

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

Well, the price of milk, I’ve seen some improvement, but it’s still not very good. And really, a high concern is the fact that a major player in the dairy industry Dean Foods cut [ph] contract of 100 growers, say a month ago or so or notified them of cancellation and that’s kind of shaking things up a little bit and made people pretty scared. And there is oversupply at play there. But maybe in the long-term, this will help. And so, the dairy markets remain very weak. But, as far as scientific specifically and impact the dairy markets have had on them, we’ve actually seen an uptick in demand in ag buildings. But, it seems to be probably more due to the fact that there was -- during this rough winter, there was more mortality of calves than there usually would be in the winter. And I think that is the bigger issue where it really gets growers’ attention and starts looking for the solutions to that. And the ag buildings that we sell into the dairy markets are a solution to that.

Okay. And as far as the backlog for scientific buildings, is that -- what is that number you’ve sort of indicated? The other backlog was decently improved 50% over the previous year.

Yes. That’s right. If you count for the leases, it’s I think more like 1.1 or so. They get treated differently obviously from accounting standpoint?

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

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

And the other building that you have for sale in the 600,000 range, you expect to close that in the next six months or…?

You’re talking about non-leased straight backlog?

The 595,000, you said you have another building for sale, this could -- that you are not using in production et cetera.

Yes. That’s a building in West Union that we have previously manufactured ag equipment and it’s for sale for $1,595,000.

$1,595,000, okay. So, do you think you will be closing that in the next six months, or it’s just on the market and you’re waiting for bids et cetera?

It’s just on the market. So, we would really not be able to say. But, we’re trying. I mean, it’s listed, we’re motivated. We’re trying to make it happen.

Okay. So, the one thing, I guess, the ability for your debt is positioned to increase to more than 50%, is there any stock for sale or is there any expectation of a transaction with the 8-K that you just filed and the authorization to go above the 50%?

No, there is nothing specific contemplated. It’s just, that agreement was from 2002 under different circumstances and I guess for different purposes. And the fact that it was there, I mean that limitation -- the view of the rest of the Board just didn’t necessarily need to be there. And with the stock trading at a significant discount to book, I think it would be smart for anybody really to be interested in and taking advantage of that discount to book. And I think an agreement from 2002 that was established for other purposes, I guess is the view of everybody that there is no need in that precluding buying basically. So, there is nothing more specific than that. It’s just didn’t necessarily need to be there.

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

You too. Thank you.

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

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

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