Lindsay Corporation Reports Fiscal 2014 Third Quarter Results

June 25, 2014

Third Quarter Results
Third quarter fiscal 2014 revenues were $169.9 million, versus $219.5 million of revenues in the same prior year period. Net earnings were $16.5 million or $1.28 per diluted share compared with $26.1 million or $2.01 per diluted share in the prior year.

Total irrigation equipment revenues decreased 26 percent to $149.0 million from $200.9 million in the prior fiscal year's third quarter primarily due to lower crop prices. U.S. irrigation revenues of $88.1 million declined 26 percent while international irrigation revenues of $60.9 million decreased 26 percent. Infrastructure revenues increased 13 percent to $20.9 million with increases in road safety, rail and Road Zipper product lines.

Gross margin was 28.4 percent of sales compared to 28.7 percent of sales in the prior year's third quarter. Gross margin in irrigation declined by less than one percentage point primarily due to fixed cost deleverage on lower sales. Infrastructure gross margins improved by approximately three percentage points due to sales mix and leverage on higher sales.

Operating expenses were $23.0 million compared to $23.5 million in the same prior year period. Excluding the acquired Lakos filtration business, operating expenses decreased $2.7 million with the largest decreases in incentive compensation and bad debt expense Operating expenses including Lakos were 13.6 percent of sales in the third quarter of fiscal 2014 compared with 10.7 percent of sales in the prior year period. Operating margins were 14.8 percent in the third quarter, versus 18.0 percent in the prior year period.

Cash and cash equivalents of $182.1 million were $11.8 million higher compared to the end of the third quarter in the prior fiscal year, while debt decreased $1.1 million. During the quarter the Company repurchased 129,104 shares for $11.2 million. Year to date the Company repurchased 207,624 shares for $17.8 million.

Backlog of unshipped orders at May 31, 2014 was $73.6 million compared with $80.0 million at May 31, 2013 and $89.3 million at February 28, 2014. Backlog increased in the U.S. irrigation and infrastructure markets and declined in the international irrigation market over the same time last year. The current year infrastructure backlog includes a $12.8 million Road Zipper System order for the Golden Gate Bridge which is expected to be recognized in revenue in fiscal 2015. The prior year irrigation backlog included $23.0 million of equipment and installation remaining on a project in Iraq, of which $2.6 million remained in backlog at the end of the third quarter of fiscal 2014.

The June 2014 escalation of political instability has made it more difficult to complete the Company's contract in Iraq. At May 31, 2014 the Company had a total exposure of $4.4 million on this contract, including $2.5 million of accounts receivable, which is not currently due, and a $1.9 million performance bond securing completion of the contract. The Company has not provided a reserve for these amounts, but will continue to assess the situation as developments in the country evolve. Further installation of equipment in Iraq has been put on hold as a result of the escalation of hostilities in the region.

Nine Month Results
Total revenues for the nine months ended May 31, 2014 were $470.4 million, a 13 percent decrease from $542.5 million of revenues in the same prior year period. Net earnings were $40.2 million or $3.11 per diluted share compared with $60.1 million or $4.66 per diluted share in the prior year. Total irrigation equipment revenues decreased 17 percent to $414.1 million from $497.8 million during the first nine months of the prior fiscal year. U.S. irrigation revenues of $260.8 million declined 21 percent, while international irrigation revenues of $153.3 million decreased 8 percent due primarily to near-completion of the Iraq project. Infrastructure revenues increased 26 percent to $56.3 million.

Outlook
Rick Parod, president and chief executive officer, commented, "Lower commodity prices led to decreases in irrigation sales throughout North America during the primary selling season. Spring storms have created additional demand for replacement units, which increased our U.S. irrigation backlog at the end of the quarter. However, overall favorable growing conditions in North America continue to restrain crop prices. The lower crop prices, along with the reduction in the Sec. 179 tax benefits, create a headwind for irrigation equipment demand as compared to the previous year. Coupled with the addition of the conflicts in Ukraine and the Middle East, we have seen some slowing in international projects, as well."

Parod continued, "We have achieved a significant change in our Infrastructure segment. Revenues have grown 26% percent to-date and the business is profitable. We continue to see opportunities for growth in global applications of our technologies and in expansion of our global market share. A multi-year highway bill with similar or improved funding levels would likely benefit the segment even further."

Parod added, "Drivers for the Company's markets of population growth, expanded food production and efficient water use, and infrastructure expansion support our expectation for long-term growth. We anticipate a continuation of lower agricultural equipment demand in the near term, and have implemented appropriate expense controls. However, we will continue investment in critical growth initiatives and the execution of our capital allocation plan announced in early January 2014."

Third-Quarter Conference Call
Lindsay's fiscal 2014 third quarter investor conference call is scheduled for 11:00 a.m. Eastern Time today. Interested investors may participate in the call by dialing (888) 321-8161 in the U.S., or (706) 758-0065 internationally, and referring to conference ID # 57122482. Additionally, the conference call will be simulcast live on the Internet, and can be accessed via the investor relations section of the Company's Web site, www.lindsay.com. Replays of the conference call will remain on our Web site through the next quarterly earnings release. The Company will have a slide presentation available to augment management's formal presentation, which will also be accessible via the Company's Web site.

About the Company
Lindsay manufactures and markets irrigation equipment primarily used in agricultural markets which increase or stabilize crop production while conserving water, energy, and labor. The Company also manufactures and markets infrastructure and road safety products under the Lindsay Transportation Solutions trade name. At May 31, 2014 Lindsay had approximately 12.7 million shares outstanding, which are traded on the New York Stock Exchange under the symbol LNN.

For more information regarding Lindsay Corporation, see the Company's Web site at www.lindsay.com.

Concerning Forward-looking Statements This release contains forward-looking statements that are subject to risks and uncertainties and which reflect management's current beliefs and estimates of future economic circumstances, industry conditions, company performance and financial results. You can find a discussion of many of these

Lindsay Corporation and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

 

 

 

 

 

 

Three months ended

Nine months ended

May 31,

May 31,

May 31,

May 31,

($ and shares in thousands, except per share amounts)

2014

2013

2014

2013

 

Operating revenues

$

169,936

$

219,542

$

470,411

$

542,451

Cost of operating revenues

 

121,687

 

 

156,506

 

 

339,339

 

 

386,194

 

Gross profit

 

48,249

 

 

63,036

 

 

131,072

 

 

156,257

 

 

Operating expenses:

Selling expense

9,954

8,674

29,244

23,995

General and administrative expense

10,002

11,783

31,099

32,056

Engineering and research expense

 

3,071

 

 

3,029

 

 

8,602

 

 

8,946

 

Total operating expenses

 

23,027

 

 

23,486

 

 

68,945

 

 

64,997

 

 

Operating income

25,222

39,550

62,127

91,260

 

Other income (expense):

Interest expense

(45

)

(32

)

(140

)

(258

)

Interest income

295

100

587

367

Other income (expense), net

 

28

 

 

132

 

 

(468

)

 

252

 

 

Earnings before income taxes

25,500

39,750

62,106

91,621

 

Income tax expense

 

9,001

 

 

13,687

 

 

21,923

 

 

31,479

 

 

Net earnings

$

16,499

 

$

26,063

 

$

40,183

 

$

60,142

 

 

Earnings per share:

Basic

$

1.28

$

2.03

$

3.12

$

4.69

Diluted

$

1.28

$

2.01

$

3.11

$

4.66

 

Shares used in computing earnings per share:

Basic

12,843

12,858

12,881

12,819

Diluted

12,889

12,947

12,927

12,894

 

Cash dividends declared per share

$

0.260

$

0.115

$

0.650

$

0.345

 

 

 

Lindsay Corporation and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

 

 

 

May 31,

May 31,

August 31,

($ and shares in thousands, except par values)

2014

2013

2013

 

ASSETS

Current Assets:

Cash and cash equivalents

$

182,051

$

170,215

$

151,927

Receivables, net

103,513

130,924

120,291

Inventories, net

79,010

72,458

68,607

Deferred income taxes

14,748

11,810

12,705

Other current assets

 

19,992

 

 

18,307

 

 

15,261

 

Total current assets

 

399,314

 

 

403,714

 

 

368,791

 

 

Property, Plant and Equipment:

Cost

160,969

144,199

153,422

Less accumulated depreciation

 

(95,940

)

 

(87,293

)

 

(88,358

)

Property, plant and equipment, net

 

65,029

 

 

56,906

 

 

65,064

 

 

Intangibles, net

33,060

22,974

36,007

Goodwill

37,211

30,111

37,414

Other noncurrent assets

 

3,957

 

 

4,416

 

 

5,020

 

Total assets

$

538,571

 

$

518,121

 

$

512,296

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:

Accounts payable

$

47,352

$

56,902

$

42,276

Current portion of long-term debt

-

1,071

-

Other current liabilities

 

65,173

 

 

65,259

 

 

59,816

 

Total current liabilities

 

112,525

 

 

123,232

 

 

102,092

 

 

Pension benefits liabilities

6,141

6,603

6,324

Deferred income taxes

13,999

8,809

15,415

Other noncurrent liabilities

 

7,869

 

 

7,715

 

 

7,827

 

Total liabilities

 

140,534

 

 

146,359

 

 

131,658

 

 

Shareholders' Equity:

Preferred stock

-

-

-

Common stock

18,636

18,560

18,571

Capital in excess of stated value

51,896

48,392

49,764

Retained earnings

437,415

396,825

405,580

Less treasury stock

(108,714

)

(90,961

)

(90,961

)

Accumulated other comprehensive loss, net

 

(1,196

)

 

(1,054

)

 

(2,316

)

Total shareholders' equity

 

398,037

 

 

371,762

 

 

380,638

 

Total liabilities and shareholders' equity

$

538,571

 

$

518,121

 

$

512,296

 

 

 

 

Lindsay Corporation and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

Nine months ended

May 31,

May 31,

($ in thousands)

2014

2013

 

CASH FLOWS FROM OPERATING ACTIVITIES:

Net earnings

$

40,183

$

60,142

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization

11,131

9,380

Provision for uncollectible accounts receivable

891

1,502

Deferred income taxes

(3,692

)

(5,304

)

Share-based compensation expense

3,218

3,452

Other, net

(430

)

176

Changes in assets and liabilities:

Receivables

17,014

(49,375

)

Inventories

(9,694

)

(19,898

)

Other current assets

(3,595

)

(7,712

)

Accounts payable

4,501

25,203

Other current liabilities

773

18,233

Current income taxes payable

4,657

4,551

Other noncurrent assets and liabilities

 

962

 

 

536

 

Net cash provided by operating activities

 

65,919

 

 

40,886

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property, plant and equipment

(7,836

)

(8,149

)

Proceeds from sale of property, plant and equipment

19

21

Proceeds from settlement of net investment hedges

280

1,536

Payments for settlement of net investment hedges

 

(2,017

)

 

(2,051

)

Net cash used in investing activities

 

(9,554

)

 

(8,643

)

 

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from exercise of stock options

455

1,781

Common stock withheld for payroll tax withholdings

(2,027

)

(2,441

)

Principal payments on long-term debt

-

(3,214

)

Excess tax benefits from share-based compensation

742

2,751

Repurchase of common shares

(17,753

)

-

Dividends paid

 

(8,348

)

 

(4,432

)

Net cash used in financing activities

 

(26,931

)

 

(5,555

)

 

Effect of exchange rate changes on cash and cash equivalents

 

690

 

 

83

 

Net change in cash and cash equivalents

30,124

26,771

Cash and cash equivalents, beginning of period

 

151,927

 

 

143,444

 

Cash and cash equivalents, end of period

$

182,051

 

$

170,215

 


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