Lindsay Corporation Reports Fiscal 2018 Second Quarter Results

  • Revenues increase 5 percent led by growth in North America irrigation
  • GAAP diluted earnings per share of $0.16 ($0.56 adjusted)1
  • Results include a $2.6 million tax expense due to the enactment of U.S. tax reform
  • Results include pre-tax costs of $2.3 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 second quarter ended February 28, 2018.

Second Quarter Summary

Revenues for the second quarter of fiscal 2018 were $130.3 million, an increase of 5 percent compared to revenues of $124.1 million in the prior year’s second quarter. Net earnings for the quarter were $1.7 million and diluted earnings per share were $0.16, compared with net earnings of $5.0 million and diluted earnings per share of $0.47 in the prior year. Net earnings for the quarter were reduced by tax expense of $2.6 million due to the enactment of the U.S. Tax Cuts and Jobs Act and by after-tax costs of $1.7 million comprised of severance costs and professional consulting fees related to the Company’s Foundation for Growth initiative. Adjusted net earnings for the second quarter were $6.0 million, or $0.56 per diluted share.1

“We were pleased to have achieved revenue and operating income improvement in both the Irrigation and Infrastructure segments for the quarter,” said Tim Hassinger, President and Chief Executive Officer. “Improved demand in North America irrigation drove overall revenue growth, and growth in our Road Zipper System® business continues to support solid performance in our Infrastructure segment.”

Segment Results

Irrigation segment revenues increased 5 percent to $111.9 million from $106.2 million in the prior year’s second quarter. North America irrigation revenues increased 23 percent, driven by an increase in irrigation system unit volume. International irrigation revenues for the second quarter were $33.0 million, a decrease of 22 percent compared to the second quarter of the prior year. The second quarter of the prior year included revenues from projects in developing markets that did not repeat in the current period, while demand in core markets remained stable.

Irrigation segment operating margin was 10.7 percent of sales in the second quarter (11.2 percent adjusted)1, compared to 10.6 percent of sales in the prior year. Improved volume leverage from higher North America irrigation system sales was partially offset by the impact of lower project sales and margins in international markets.

Infrastructure segment revenues increased 3 percent to $18.5 million for the quarter, as increased Road Zipper System revenue was partially offset by lower revenue from North America road safety products.

Infrastructure segment operating margin was 13.6 percent of sales in the quarter compared to 8.9 percent of sales in the second quarter of the prior year. A higher proportion of revenue from Road Zipper Systems resulted in an improved margin mix.

The backlog of unshipped orders at February 28, 2018 was $90.2 million, compared with $62.3 million at February 28, 2017, with higher backlogs in both the irrigation and infrastructure segments. Additions to the backlog during the quarter include an order valued at approximately $9.3 million to deploy the Road Zipper System on the Richmond-San Rafael Bridge in California and follow-on orders, valued at approximately $11.1 million, from an existing customer in Japan.

Impact of U.S. Tax Reform

Second quarter earnings include a $2.6 million, or $0.241 per diluted share, expense for the estimated impact of the U.S. Tax Cuts and Jobs Act enacted during the quarter. This amount includes one-time impacts from the deemed repatriation transition tax on certain foreign earnings and from the remeasurement of deferred tax items at a lower rate.

Foundation for Growth Initiative

During the quarter the Company initiated a focused performance improvement initiative referred to as Foundation for Growth. Objectives include setting strategic direction, defining priorities, and improving overall operating performance. A key financial objective is to achieve operating margin performance of 11 percent to 12 percent in fiscal 2020 without assuming improvement in the market environment. Second quarter earnings include after-tax costs of $1.7 million, or $0.151 per diluted share, related to severance costs and professional consulting fees incurred in connection with the initiative. Additional costs anticipated in connection with this initiative, over each of the next several quarters, are expected to be recovered through improved operating income in fiscal 2020.

Outlook

“Although we have seen improved demand this year in North America, agricultural market conditions are expected to remain challenging until there is a meaningful improvement in commodity prices and farm income. In our Infrastructure business, a growing backlog of Road Zipper projects provides for growth,” said Mr. Hassinger. “The recently announced tariffs on steel and aluminum product imports are concerning because of the potential impact on raw material cost and possible trade retaliation that would affect U.S. agricultural products, however it won’t be possible to fully assess the impact until more details are known.”

Mr. Hassinger continued, “The organization is excited about the launch of our Foundation for Growth initiative. This effort, focused on delivering better results to our customers and shareholders, is already underway and I look forward to providing regular updates as this initiative progresses.”

Second Quarter Conference Call

Lindsay’s fiscal 2018 second 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 Six months ended
(in thousands, except per share amounts)  

February 28,
2018

   

February 28,
2017

 

February 28,
2018

 

February 28,
2017

   
Operating revenues $ 130,339 $ 124,125 $ 254,865 $ 234,515
Cost of operating revenues     95,023     91,184     187,152     173,200
Gross profit     35,316     32,941     67,713     61,315
 
Operating expenses:
Selling expense 10,020 10,132 20,245 20,114
General and administrative expense 14,311 10,230 26,229 21,585
Engineering and research expense     3,919     4,057     7,972     8,359
Total operating expenses     28,250     24,419     54,446     50,058
 
Operating income 7,066 8,522 13,267 11,257
 
Interest expense (1,095 ) (1,201 ) (2,331 ) (2,410 )
Interest income 311 171 686 336
Other expense, net     (606 )     144     (1,154 )     (212 )
 
Earnings before income taxes 5,676 7,636 10,468 8,971
 
Income tax expense     3,941     2,624     5,548     3,086
 
Net earnings $   1,735 $   5,012 $   4,920 $   5,885
 
Earnings per share:
Basic $ 0.16 $ 0.47 $ 0.46 $ 0.55
Diluted $ 0.16 $ 0.47 $ 0.46 $ 0.55
 
Shares used in computing earnings per share:
Basic 10,743 10,657 10,724 10,647
Diluted 10,765 10,674 10,752 10,670
 
Cash dividends declared per share $ 0.30 $ 0.29 $ 0.60 $ 0.58
 
 
LINDSAY CORPORATION AND SUBSIDIARIES
SUMMARY OPERATING RESULTS
(Unaudited)
                 
Three months ended Six months ended
(in thousands)  

February 28,
2018

 

February 28,
2017

February 28,
2018

 

February 28,
2017

Operating revenues:
Irrigation segment $ 111,865 $ 106,209 $ 215,218 $ 196,061
Infrastructure segment     18,474     17,916     39,647     38,454
Total operating revenues $   130,339 $   124,125 $   254,865 $   234,515
 
Operating income:
Irrigation segment $ 11,933 $ 11,304 $ 19,784 $ 16,453
Infrastructure segment 2,519 1,595 5,810 4,571
Corporate     (7,386 )     (4,377 )     (12,327 )     (9,767 )
Total operating income $   7,066 $   8,522 $   13,267 $   11,257
 
 

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)
               
   
(in thousands)

February 28,
2018

February 28,
2017

August 31,
2017

 
ASSETS
Current assets:
Cash and cash equivalents $ 102,211 $ 102,825 $ 121,620
Receivables, net 96,738 78,828 73,850
Inventories, net 102,975 82,847 86,155
Prepaid expenses 5,339 5,208 4,384
Other current assets     6,092     15,968     6,925
Total current assets     313,355     285,676     292,934
 
Property, plant, and equipment, net 72,678 75,632 74,498
Intangibles, net 40,677 44,890 42,808
Goodwill 77,296 76,577 77,131
Deferred income tax assets 5,773 3,094 5,311
Other noncurrent assets, net     12,575     4,747     13,350
Total assets $   522,354 $   490,616 $   506,032
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 46,599 $ 44,254 $ 36,717
Current portion of long-term debt 203 199 201
Other current liabilities     57,720     46,350     55,119
Total current liabilities     104,522     90,803     92,037
 
Pension benefits liabilities 6,152 6,708 6,295
Long-term debt 116,673 116,876 116,775
Deferred income tax liabilities 1,179 1,678 1,191
Other noncurrent liabilities     20,768     20,995     19,679
Total liabilities     249,294     237,060     235,977
 
Shareholders' equity:
Preferred stock
Common stock 18,841 18,746 18,780
Capital in excess of stated value 66,625 59,002 63,006
Retained earnings 476,091 466,630 477,615
Less treasury stock - at cost (277,238 ) (277,238 ) (277,238 )
Accumulated other comprehensive loss, net     (11,259 )     (13,584 )     (12,108 )
Total shareholders' equity     273,060     253,556     270,055
Total liabilities and shareholders' equity $   522,354 $   490,616 $   506,032
 
 
LINDSAY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
         
Six months ended
(in thousands)  

February 28,
2018

 

February 28,
2017

CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 4,920 $ 5,885
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization 8,599 8,120
Provision for uncollectible accounts receivable 228 (609 )
Deferred income taxes (931 ) 1,707
Share-based compensation expense 1,887 1,815
Other, net 45 (594 )
Changes in assets and liabilities:
Receivables (23,084 ) 2,710
Inventories (15,239 ) (7,368 )
Prepaid expenses and other current assets (1,731 ) 3,375
Accounts payable 9,728 11,926
Other current liabilities 5,313 (14,122 )
Other noncurrent assets and liabilities     1,368     (2,123 )
Net cash (used in) provided by operating activities     (8,897 )     10,722
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, and equipment (4,715 ) (4,194 )
Proceeds from settlement of net investment hedges 101 2,054
Payments for settlement of net investment hedges (1,967 ) (482 )
Other investing activities, net     137     136
Net cash used in investing activities     (6,444 )     (2,486 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 2,788 647
Common stock withheld for payroll tax obligations (833 ) (635 )
Principal payments on long-term debt (100 ) (98 )
Dividends paid     (6,444 )     (6,181 )
Net cash used in financing activities     (4,589 )     (6,267 )
 
Effect of exchange rate changes on cash and cash equivalents     521     (390 )
Net change in cash and cash equivalents (19,409 ) 1,579
Cash and cash equivalents, beginning of period     121,620     101,246
Cash and cash equivalents, end of period $   102,211 $   102,825
 
 

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 U.S. Tax Cuts and Jobs Act ("U.S. Tax Reform"), and (2) severance costs and professional 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     Six months ended
(in thousands, except per share amounts)

February 28,
2018

 

Diluted
earnings
per share

February 28,
2018

 

Diluted
earnings
per share

 
Net earnings - reported GAAP measure $ 1,735 $ 0.16 $ 4,920 $ 0.46
 
Impact of U.S. Tax Reform 2,578 0.24 2,578 0.24
 
FFG costs - after tax   1,668   0.15   1,668   0.16
 
Net earnings - adjusted $ 5,981 $ 0.56 $ 9,166 $ 0.85
Average shares outstanding - diluted 10,765 10,752
 
 
Three months ended February 28, 2018
Operating income reconciliation Consolidated Irrigation Infrastructure Corporate
 
Operating income - reported GAAP measure $ 7,066 $ 11,933 $ 2,519 $ (7,386 )
 
FFG costs - before tax   2,331   573     1,758
 
Adjusted operating income $ 9,397 $ 12,506 $ 2,519 $ (5,628 )
 
Operating revenues $ 130,339 $ 111,865 $ 18,474 $
 
Operating income as a percent of operating revenues 5.4 % 10.7 % 13.6 % N/A
 
Adjusted operating income as a percent of operating revenues   7.2 %   11.2 %   13.6 % N/A
 
 
Six months ended February 28, 2018
Operating income reconciliation Consolidated Irrigation Infrastructure Corporate
 
Operating income - reported GAAP measure $ 13,267 $ 19,784 $ 5,810 $ (12,327 )
 
FFG costs - before tax   2,331   573     1,758
 
Adjusted operating income $ 15,598 $ 20,357 $ 5,810 $ (10,569 )
 
Operating revenues $ 254,865 $ 215,218 $ 39,647 $
 
Operating income as a percent of operating revenues 5.2 % 9.2 % 14.7 % N/A
 
Adjusted operating income as a percent of operating revenues   6.1 %   9.5 %   14.7 % N/A

Contacts

LINDSAY CORPORATION:
Brian Ketcham, 402-827-6579
Vice President & Chief Financial Officer
or
HALLIBURTON INVESTOR RELATIONS:
Hala Elsherbini, 972-458-8000
or
Geralyn DeBusk, 972-458-8000

Contacts

LINDSAY CORPORATION:
Brian Ketcham, 402-827-6579
Vice President & Chief Financial Officer
or
HALLIBURTON INVESTOR RELATIONS:
Hala Elsherbini, 972-458-8000
or
Geralyn DeBusk, 972-458-8000