Lindsay Corporation Reports Fiscal 2018 Third Quarter Results

  • Revenues increased 12 percent with growth in Irrigation and strong Infrastructure delivery performance
  • GAAP diluted earnings per share of $0.96 ($1.66 adjusted)1
  • Announcement of divestiture plan and consolidation of certain manufacturing facilities
  • Incurrence of after-tax costs of $7.5 million related to the Foundation for Growth initiative

OMAHA, Neb.--()--Lindsay Corporation (NYSE: LNN), a leading global manufacturer of irrigation and infrastructure equipment and technology, today announced results for its third quarter ended May 31, 2018.

“I am also pleased with the progress we have made on our Foundation for Growth initiative during the quarter. This effort, focused on simplifying our business and delivering better results for our customers and shareholders, is well underway.”

Third Quarter Summary

Revenues for the third quarter of fiscal 2018 were $169.6 million, an increase of 12 percent compared to revenues of $151.5 million in the prior year’s third quarter. Net earnings for the quarter were $10.4 million and diluted earnings per share were $0.96, compared with net earnings of $11.0 million and diluted earnings per share of $1.02 for the same period in the prior year. Net earnings for the quarter were reduced by after-tax costs of $7.5 million, or $0.70 per diluted share, related to the Company’s Foundation for Growth initiative. Adjusted net earnings for the third quarter were $17.9 million, or $1.66 per diluted share.1

“Solid overall revenue growth for the quarter resulted from gains in both reporting segments, led by 31 percent growth in Infrastructure and 7 percent growth in Irrigation,” said Tim Hassinger, President and Chief Executive Officer. “I am also pleased with the progress we have made on our Foundation for Growth initiative during the quarter. This effort, focused on simplifying our business and delivering better results for our customers and shareholders, is well underway.”

Segment Results

Irrigation segment revenues increased 7 percent to $128.4 million, compared to $120.0 million in the prior year’s third quarter. North America irrigation revenues increased 11 percent to $87.4 million, reflecting an increase in irrigation system unit volume and higher average selling prices. International irrigation revenues of $41.0 for the third quarter were slightly lower compared to the same period in the prior year.

Irrigation segment operating margin was 9.1 percent of sales in the third quarter (14.1 percent adjusted)1, compared to 13.8 percent of sales in the prior year. The effects of sales growth in North America and the recovery of $2.5 million in previously reserved accounts receivable were offset by the effects of higher freight costs in the U.S. and a lower margin mix from international project orders.

Infrastructure segment revenues increased 31 percent in the third quarter to $41.2 million, compared to $31.5 million in the prior year’s third quarter. The increase was driven by the delivery of a significant portion of two large Road Zipper System® orders that were in the backlog.

Infrastructure segment operating margin was 34.6 percent of sales in the third quarter (35.0 percent adjusted)1, compared to 25.5 percent of sales in the third quarter of the prior year. Higher revenue from Road Zipper Systems resulted in improved margin mix and operating cost leverage.

The backlog of unshipped orders at May 31, 2018 was $55.8 million, compared with $70.1 million at May 31, 2017, reflecting a higher backlog in the infrastructure segment and a lower backlog in the irrigation segment.

Foundation for Growth Initiative

In the previous quarter, the Company announced a defined performance improvement initiative, referred to as Foundation for Growth, with a financial objective of achieving operating margin performance of 11 percent to 12 percent in fiscal 2020 exclusive of market changes.

During the third quarter, in connection with a portfolio review of business investments, the Company committed to a plan of divestiture of its pump and filtration businesses as well as a Company-owned irrigation dealership. The investments are classified as held-for-sale in the accompanying May 31, 2018 balance sheet. The combined revenues from these businesses are approximately $70 million annually. The divestures are expected to reduce future revenues and to have a positive impact on operating margins. In addition to these business divestures, the Company announced plans to close one of its Infrastructure manufacturing facilities prior to the end of the calendar year.

Third quarter operating expenses include pre-tax costs of $7.6 million in connection with the Foundation for Growth initiative, of which $6.0 million represents an adjustment to the carrying value of businesses held-for-sale with the remainder representing severance costs and professional consulting fees. These costs, and additional future costs anticipated in connection with this initiative, are expected to be recovered through improved operating income in fiscal 2020.

Outlook

“We are responding to higher freight and steel costs in the U.S. by passing through these increases to customers,” said Mr. Hassinger. “To date, we have been successful implementing price increases to address this challenge; however, further steel cost increases may be more challenging for us to pass on.”

Added Mr. Hassinger, “Strong infrastructure sales in our third quarter were a result of our ability to deliver a significant portion of two large orders that had been in our backlog. We continue to build a solid pipeline of Road Zipper System projects to support continued growth in this business.”

Third Quarter Conference Call

Lindsay’s fiscal 2018 third quarter investor conference call is scheduled for 11:00 a.m. Eastern Time today. Interested investors may participate in the call by dialing (877) 317-6789 in the U.S., or (412) 317-6789 internationally, and requesting the Lindsay Corporation call. 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 Corporation is a leading global manufacturer and distributor of irrigation and infrastructure equipment and technology. The Lindsay family of irrigation brands includes Zimmatic® and FieldNET® as well as irrigation consulting, design, pump and filtration offerings, advanced machine-to-machine communication, remote control and monitoring technology, and wireless networking solutions. Also a global leader in the transportation industry, Lindsay Transportation Solutions manufactures equipment to improve road safety and keep traffic moving on the world’s roads, bridges and tunnels, through the Barrier Systems®, Road Zipper® and Snoline™ brands. For more information about Lindsay Corporation, visit www.lindsay.com.

1   Please see Reg G reconciliation of GAAP operating income, net earnings and earnings per share to adjusted figures at end of document.
 

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 risks and uncertainties in the annual, quarterly and current reports that the Company files with the Securities and Exchange Commission. Forward-looking statements include information concerning possible or assumed future results of operations and planned financing of the Company and those statements preceded by, followed by or including the words “anticipate,” “estimate,” “believe,” “intend,” "expect," "outlook," "could," "may," "should," “will,” or similar expressions. For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The Company undertakes no obligation to update any forward-looking information contained in this press release.

 
 
LINDSAY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
             
Three months ended Nine months ended
May 31,     May 31, May 31, May 31,
(in thousands, except per share amounts) 2018 2017 2018 2017
 
Operating revenues $ 169,571 $ 151,533 $ 424,436 $ 386,048
Cost of operating revenues   118,093     105,627     305,245     278,827  
Gross profit   51,478     45,906     119,191     107,221  
 
Operating expenses:
Selling expense 10,842 10,451 31,087 30,565
General and administrative expense 17,974 13,693 44,203 35,278
Engineering and research expense   3,960     4,348     11,932     12,707  
Total operating expenses   32,776     28,492     87,222     78,550  
 
Operating income 18,702 17,414 31,969 28,671
 
Interest expense (1,226 ) (1,156 ) (3,502 ) (3,566 )
Interest income 540 545 1,171 881
Other expense, net   (571 )   (606 )   (1,725 )   (818 )
 
Earnings before income taxes 17,445 16,197 27,913 25,168
 
Income tax expense   7,066     5,245     12,614     8,331  
 
Net earnings $ 10,379   $ 10,952   $ 15,299   $ 16,837  
 
Earnings per share:
Basic $ 0.96 $ 1.03 $ 1.43 $ 1.58
Diluted $ 0.96 $ 1.02 $ 1.42 $ 1.58
 
Shares used in computing earnings per share:
Basic 10,757 10,677 10,735 10,657
Diluted 10,785 10,705 10,763 10,682
 
Cash dividends declared per share $ 0.30 $ 0.29 $ 0.90 $ 0.87
 
 
LINDSAY CORPORATION AND SUBSIDIARIES
SUMMARY OPERATING RESULTS
(Unaudited)
                 
Three months ended Nine months ended
May 31, May 31, May 31, May 31,
(in thousands) 2018 2017 2018 2017
Operating revenues:
Irrigation segment $ 128,421 $ 120,040 $ 343,639 $ 316,102
Infrastructure segment   41,150     31,493     80,797     69,946  
Total operating revenues $ 169,571   $ 151,533   $ 424,436   $ 386,048  
 
Operating income:
Irrigation segment $ 11,718 $ 16,508 $ 31,502 $ 32,961
Infrastructure segment 14,248 8,016 20,058 12,588
Corporate   (7,264 )   (7,110 )   (19,591 )   (16,878 )
Total operating income $ 18,702   $ 17,414   $ 31,969   $ 28,671  
 
 

The Company manages its business activities in two reportable segments as follows:

Irrigation This reporting segment includes the manufacture and marketing of center pivot, lateral move, and hose reel irrigation systems as well as various water pumping stations, controls, filtration solutions and machine-to-machine technology.

Infrastructure – This reporting segment includes the manufacture and marketing of moveable barriers, specialty barriers, crash cushions and end terminals, and road marking and road safety equipment.

 
LINDSAY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
           
 
May 31, May 31, August 31,
(in thousands) 2018 2017 2017
 
ASSETS
Current assets:
Cash and cash equivalents $ 111,779 $ 113,212 $ 121,620
Receivables, net 92,135 86,772 73,850
Inventories, net 82,635 88,601 86,155
Prepaid expenses 4,132 4,944 4,384
Assets held-for-sale 51,516
Other current assets   8,209     11,877     6,925  
Total current assets   350,406     305,406     292,934  
 
Property, plant, and equipment, net 59,884 74,409 74,498
Intangibles, net 28,656 43,874 42,808
Goodwill 64,723 76,843 77,131
Deferred income tax assets 4,581 6,027 5,311
Other noncurrent assets, net   11,978     4,728     13,350  
Total assets $ 520,228   $ 511,287   $ 506,032  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 30,281 $ 40,256 $ 36,717
Current portion of long-term debt 204 200 201
Liabilities held-for-sale 14,275
Other current liabilities   53,911     62,501     55,119  
Total current liabilities   98,671     102,957     92,037  
 
Pension benefits liabilities 6,080 6,628 6,295
Long-term debt 116,622 116,826 116,775
Deferred income tax liabilities 1,117 1,111 1,191
Other noncurrent liabilities   20,229     20,060     19,679  
Total liabilities   242,719     247,582     235,977  
 
Shareholders' equity:
Preferred stock
Common stock 18,841 18,773 18,780
Capital in excess of stated value 67,587 61,709 63,006
Retained earnings 483,243 474,483 477,615
Less treasury stock - at cost (277,238 ) (277,238 ) (277,238 )
Accumulated other comprehensive loss, net   (14,924 )   (14,022 )   (12,108 )
Total shareholders' equity   277,509     263,705     270,055  
Total liabilities and shareholders' equity $ 520,228   $ 511,287   $ 506,032  
 
 
LINDSAY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
       
Nine months ended
May 31, May 31,
(in thousands) 2018 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 15,299 $ 16,837

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

Depreciation and amortization 12,851 12,337
Loss on businesses held-for-sale 6,023
Provision for uncollectible accounts receivable (2,407 ) (408 )
Deferred income taxes (687 ) (1,383 )
Share-based compensation expense 2,942 2,798
Other, net 473 226
Changes in assets and liabilities:
Receivables (29,826 ) (5,737 )
Inventories (8,247 ) (13,217 )
Prepaid expenses and other current assets (971 ) 3,255
Accounts payable 1,901 8,182
Other current liabilities 10,058 4,734
Other noncurrent assets and liabilities   766     (3,158 )
Net cash provided by operating activities   8,175     24,466  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, and equipment (6,920 ) (6,219 )
Proceeds from settlement of net investment hedges 101 2,054
Payments for settlement of net investment hedges (3,089 ) (948 )
Other investing activities, net   241     137  
Net cash used in investing activities   (9,667 )   (4,976 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 2,788 2,455
Common stock withheld for payroll tax obligations (833 ) (635 )
Principal payments on long-term debt (150 ) (147 )
Dividends paid   (9,671 )   (9,280 )
Net cash used in financing activities   (7,866 )   (7,607 )
 
Effect of exchange rate changes on cash and cash equivalents   (483 )   83  
Net change in cash and cash equivalents (9,841 ) 11,966
Cash and cash equivalents, beginning of period   121,620     101,246  
Cash and cash equivalents, end of period $ 111,779   $ 113,212  
 
 
LINDSAY CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
 

The non-GAAP tables below disclose (a) the impact on diluted earnings per share of (1) tax expense attributed to enactment of the Tax Cuts and Jobs Act ("U.S. Tax Reform"), and (2) an adjustment to the carrying value of businesses held-for-sale, severance costs and consulting fees associated with the Company's Foundation for Growth Initiative ("FFG costs"), (b) the impact on operating income of FFG costs, and (c) the impact on segment operating income of FFG costs. Management believes adjusted net earnings, adjusted diluted earnings per share and adjusted operating income are important indicators of the Company’s business performance because they exclude items that may not be indicative of, or may be unrelated to, the Company’s underlying operating results, and provide a useful baseline for analyzing trends in the business. Non-GAAP measures used by the Company may differ from similar measures used by other companies, even when similar terms are used to identify such measures. These adjusted financial measures should not be considered in isolation or as a substitute for reported net earnings, diluted earnings per share and operating income. These non-GAAP financial measures reflect an additional way of viewing the Company’s operations that, when viewed with the GAAP results and the following reconciliations to the corresponding GAAP financial measures, management believes provides a more complete understanding of the Company’s business.

       
Three months ended Nine months ended
(in thousands, except per share amounts)

May 31,
2018

   

Diluted
earnings
per share

May 31,
2018

   

Diluted
earnings
per share

 
Net earnings - reported GAAP measure $ 10,379 $ 0.96 $ 15,299 $ 1.42
 
Impact of U.S. Tax Reform 2,578 0.24
 
FFG costs - after tax   7,525     0.70     9,193     0.85  
 
Net earnings - adjusted $ 17,904   $ 1.66   $ 27,070   $ 2.52  
Average shares outstanding - diluted 10,785 10,763
 
 
For the three months ended May 31, 2018

Operating income reconciliation

Consolidated Irrigation Infrastructure Corporate
 
Operating income - reported GAAP measure $ 18,702 $ 11,718 $ 14,248 $ (7,264 )
 
FFG costs - before tax   7,556     6,356     165     1,035  
 
Adjusted operating income $ 26,258   $ 18,074   $ 14,413   $ (6,229 )
 
Operating revenues $ 169,571 $ 128,421 $ 41,150 $
 
Operating income as a percent of operating revenues 11.0 % 9.1 % 34.6 % N/A
 
Adjusted operating income as a percent of operating revenues   15.5 %   14.1 %   35.0 %   N/A  
 
 
For the nine months ended May 31, 2018

Operating income reconciliation

Consolidated Irrigation Infrastructure Corporate
 
Operating income - reported GAAP measure $ 31,969 $ 31,502 $ 20,058 $ (19,591 )
 
FFG costs - before tax   9,887     6,929     165     2,793  
 
Adjusted operating income $ 41,856   $ 38,431   $ 20,223   $ (16,798 )
 
Operating revenues $ 424,436 $ 343,639 $ 80,797 $
 
Operating income as a percent of operating revenues 7.5 % 9.2 % 24.8 % N/A
 
Adjusted operating income as a percent of operating revenues   9.9 %   11.2 %   25.0 %   N/A  
 

Contacts

Lindsay Corporation
Brian Ketcham, 402-827-6579
Vice President & Chief Financial Officer
or
Halliburton Investor Relations
Hala Elsherbini or Geralyn DeBusk, 972-458-8000

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