Lindsay Corporation : Reports Fiscal 2019 Third Quarter Results

North America irrigation equipment demand remained constrained during the quarter Infrastructure revenue and results were lower in comparison to strong prior year performance Outlook for both irrigation and infrastructure showing signs of improvement

Lindsay Corporation (NYSE: LNN), a leading global manufacturer and distributor of irrigation and infrastructure equipment and technology, today announced results for its third quarter ended May 31, 2019.

Third Quarter Summary

Revenues for the third quarter of fiscal 2019 were $121.1 million, a decrease of $48.5 million, or 29 percent, compared to revenues of $169.6 million in the prior year third quarter. Approximately $27.2 million of the decrease in revenues was attributable to previously announced business divestitures in the irrigation segment as part of the Company’s Foundation for Growth initiative.

Net earnings for the quarter were $2.9 million, or $0.27 per diluted share, compared with net earnings of $10.4 million, or $0.96 per diluted share, for the same period in the prior year. In addition to the impact of lower revenues, net earnings for the quarter were reduced by after-tax costs of $2.6 million, or $0.23 per diluted share, related to the Company’s Foundation for Growth initiative. Excluding these additional costs, net earnings for the third quarter would have been $5.5 million, or $0.50 per diluted share.¹ Net earnings for the same period in the prior year, adjusted for Foundation for Growth costs, would have been $17.9 million, or $1.66 per diluted share.¹ Net earnings in the prior year included $1.5 million, or $0.14 per diluted share, related to the business divestitures.

“Low commodity prices and uncertainty regarding the outcome of trade negotiations continued to weigh on farmer sentiment and demand for irrigation equipment during the quarter,” said Tim Hassinger, President and Chief Executive Officer. “Along with that, strong Road Zipper System^® sales in the prior year third quarter resulted in a challenging year over year comparison.”

Segment Results

Irrigation segment revenues for the third quarter of fiscal 2019 were $98.6 million, a decrease of $29.8 million, or 23 percent, compared to $128.4 million in the prior year third quarter. Excluding the impact of the divestitures, North America irrigation revenues of $63.0 million increased $2.8 million, or 5 percent, compared to the prior year. Higher revenue from engineering project services and the impact of higher average selling prices were partially offset by lower irrigation equipment unit volume and lower sales of replacement parts. International irrigation revenues of $35.6 million decreased $5.4 million, or 13 percent, compared to the prior year. Excluding the negative impact of differences in foreign currency translation compared to the prior year, international irrigation revenues decreased $2.7 million, or 7 percent.

Irrigation segment operating margin was 11.2 percent of sales (11.7 percent adjusted)¹ in the third quarter, compared to 9.1 percent of sales (14.1 percent adjusted)¹ in the prior year. The prior year benefited from the recovery of $2.5 million in previously reserved accounts receivable that did not repeat. In addition, lower sales of irrigation equipment and replacement parts in North America resulted in a lower margin mix in the current quarter.

Infrastructure segment revenues for the third quarter of fiscal 2019 were $22.4 million, a decrease of $18.7 million, or 45 percent, compared to $41.2 million in the prior year third quarter. The decrease resulted almost entirely from lower Road Zipper System^® sales compared to the prior year’s period.

Infrastructure segment operating margin was 15.8 percent of sales (16.0 percent adjusted)¹ in the third quarter, compared to 34.6 percent of sales (35.0 percent adjusted)¹ in the third quarter of the prior year. The prior year period included high margin Road Zipper System^® orders that did not repeat in the current quarter.

The backlog of unshipped orders at May 31, 2019 was $42.5 million compared with $55.8 million at May 31, 2018. Approximately $12.4 million of the reduction in backlog resulted from business divestitures. Excluding the impact of the divestitures, irrigation segment backlogs were higher and infrastructure backlogs were lower compared to the prior year. Subsequent to the end of the quarter, a $15.0 million Road Zipper System^® order was received from a customer in Japan, with delivery expected to begin in the fourth quarter of fiscal 2019.

Foundation for Growth Initiative

In fiscal 2018, the Company announced a defined performance improvement initiative, referred to as Foundation for Growth, with the objectives of simplifying the business and achieving operating margin performance of 11 percent to 12 percent in fiscal 2020, assuming no improvement in market conditions from fiscal 2017.

Outlook

“Severe wet weather and widespread flooding in the U.S. have caused delayed corn plantings and curtailed planted acreage, reducing supply estimates and driving a recent increase in corn prices. Any further reduction in supply and increase in corn prices supports an improved outlook for irrigation equipment demand,” said Mr. Hassinger. “The short-term outlook for international markets remains mixed, with growth expected in Brazil and developing markets while certain other markets remain challenged.”

Mr. Hassinger added, “The receipt of a large international Road Zipper System order, along with early successes we are seeing in partnering with states on road construction projects, positions the infrastructure segment for growth. In addition, we expect that execution of our Foundation for Growth initiative will help us achieve our objective of delivering improved operating margins.”

Third Quarter Conference Call

Lindsay’s fiscal 2019 third quarter investor conference call is scheduled for 11:00 a.m. Eastern Time today. Interested investors may participate in the call by dialing [phone] in the U.S., or [phone] 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 (NYSE: LNN) is a leading global manufacturer and distributor of irrigation and infrastructure equipment and technology. Established in 1955, the company has been at the forefront of research and development of innovative solutions to meet the food, fuel, fiber and transportation needs of the world’s rapidly growing population. The Lindsay family of irrigation brands includes Zimmatic^® center pivot and lateral move agricultural irrigation systems and FieldNET^® remote irrigation management and scheduling technology, as well as irrigation consulting and design and industrial IoT 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.

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.

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

LINDSAY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
		Three months ended										Nine months ended
(in thousands, except per share amounts)			May 31, 2019					May 31, 2018					May 31, 2019					May 31, 2018
Operating revenues		$		121,054			$		169,571			$		342,187			$		424,436
Cost of operating revenues				91,055					118,093					259,066					305,245
Gross profit				29,999					51,478					83,121					119,191
Operating expenses:
Selling expense				7,515					10,842					23,934					31,087
General and administrative expense				14,695					17,862					46,585					43,866
Engineering and research expense				3,314					3,960					10,547					11,932
Total operating expenses				25,524					32,664					81,066					86,885
Operating income				4,475					18,814					2,055					32,306
Interest expense				(1,169	)				(1,226	)				(3,552	)				(3,502	)
Interest income				525					540					1,930					1,171
Other income (expense), net				(602	)				(683	)				(591	)				(2,062	)
Earnings (loss) before income taxes				3,229					17,445					(158	)				27,913
Income tax expense (benefit)				332					7,066					(827	)				12,614
Net earnings		$		2,897			$		10,379			$		669			$		15,299
Earnings per share:
Basic		$		0.27			$		0.96			$		0.06			$		1.43
Diluted		$		0.27			$		0.96			$		0.06			$		1.42
Shares used in computing earnings per share:
Basic				10,786					10,757					10,779					10,735
Diluted				10,814					10,785					10,807					10,763
Cash dividends declared per share		$		0.31			$		0.30			$		0.93			$		0.90

LINDSAY CORPORATION AND SUBSIDIARIES
SUMMARY OPERATING RESULTS
(Unaudited)
		Three months ended											Nine months ended
(in thousands)			May 31, 2019					May 31, 2018					May 31, 2019					May 31, 2018
Operating revenues:
Irrigation segment		$		98,618			$		128,421			$		281,994			$		343,639
Infrastructure segment				22,436					41,150					60,193					80,797
Total operating revenues		$		121,054			$		169,571			$		342,187			$		424,436
Operating income:
Irrigation segment		$		11,037			$		11,718			$		26,341			$		31,502
Infrastructure segment				3,537					14,248					7,259					20,058
Corporate				(10,099	)				(7,152	)				(31,545	)				(19,254	)
Total operating income		$		4,475			$		18,814			$		2,055			$		32,306

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 innovative technology solutions such as GPS positioning and guidance, variable rate irrigation, remote irrigation management and scheduling technology, irrigation consulting and design and industrial IoT solutions.

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)		May 31, 2019					May 31, 2018					August 31, 2018
ASSETS
Current assets:
Cash and cash equivalents		$		110,839			$		111,779			$		160,787
Receivables, net				94,584					92,135					69,107
Inventories, net				91,091					82,635					79,233
Assets held-for-sale				2,744					51,516					10,837
Other current assets, net				17,903					12,341					11,087
Total current assets				317,161					350,406					331,051
Property, plant, and equipment, net				70,367					59,884					57,248
Intangibles, net				25,103					28,656					27,376
Goodwill				64,454					64,723					64,671
Deferred income tax assets				8,783					4,581					6,645
Other noncurrent assets, net				20,054					11,528					12,824
Total assets		$		505,922			$		519,778			$		499,815
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable		$		37,509			$		30,281			$		30,530
Current portion of long-term debt				208					204					205
Liabilities held-for-sale				—					14,275					2,424
Other current liabilities				49,102					53,911					46,935
Total current liabilities				86,819					98,671					80,094
Pension benefits liabilities				5,661					6,080					5,874
Long-term debt				115,885					116,172					116,129
Deferred income tax liabilities				918					1,117					1,083
Other noncurrent liabilities				26,245					20,229					19,769
Total liabilities				235,528					242,269					222,949
Shareholders' equity:
Preferred stock				—					—					—
Common stock				18,870					18,841					18,841
Capital in excess of stated value				70,566					67,587					68,465
Retained earnings				476,580					483,243					484,886
Less treasury stock - at cost				(277,238	)				(277,238	)				(277,238	)
Accumulated other comprehensive loss, net				(18,384	)				(14,924	)				(18,088	)
Total shareholders' equity				270,394					277,509					276,866
Total liabilities and shareholders' equity		$		505,922			$		519,778			$		499,815

LINDSAY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
		Nine months ended
(in thousands)			May 31, 2019					May 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings		$		669			$		15,299
Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:
Depreciation and amortization				10,452					12,851
Loss on sale of business				301					6,023
Provision for uncollectible accounts receivable				(726	)				(2,407	)
Deferred income taxes				(2,556	)				(687	)
Share-based compensation expense				3,226					2,942
Other, net				(14	)				473
Changes in assets and liabilities:
Receivables				(26,371	)				(29,826	)
Inventories				(14,467	)				(8,247	)
Other current assets				546					(971	)
Accounts payable				9,072					1,901
Other current liabilities				(4,078	)				10,058
Other noncurrent assets and liabilities				4,318					766
Net cash (used in) provided by operating activities				(19,628	)				8,175
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, and equipment				(20,210	)				(6,920	)
Proceeds from settlement of net investment hedges				2,262					101
Payments for settlement of net investment hedges				(327	)				(3,089	)
Other investing activities, net				60					241
Net cash used in investing activities				(18,215	)				(9,667	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options				177					2,788
Common stock withheld for payroll tax obligations				(1,124	)				(833	)
Principal payments on long-term debt				(153	)				(150	)
Payment of debt issuance costs				(115	)				—
Dividends paid				(10,032	)				(9,671	)
Net cash used in financing activities				(11,247	)				(7,866	)
Effect of exchange rate changes on cash and cash equivalents				(858	)				(483	)
Net change in cash and cash equivalents				(49,948	)				(9,841	)
Cash and cash equivalents, beginning of period				160,787					121,620
Cash and cash equivalents, end of period		$		110,839			$		111,779

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 consulting fees, severance costs and loss from business divestitures, 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, 2019				Diluted earnings per share				May 31, 2019				Diluted earnings per share
Net earnings - as reported		$	2,897			$	0.27			$	669			$	0.06
FFG costs - after tax			2,553				0.23				9,140				0.85
Net earnings - adjusted		$	5,450			$	0.50			$	9,809			$	0.91
Average shares outstanding - diluted							10,814								10,807
		For the three months ended May 31, 2019
Operating income reconciliation		Consolidated				Irrigation				Infrastructure				Corporate
Operating income - as reported		$	4,475			$	11,037			$	3,537			$	(10,099	)
FFG costs - pre-tax			3,890				550				56				3,284
Adjusted operating income		$	8,365			$	11,587			$	3,593			$	(6,815	)
Operating revenues		$	121,054			$	98,618			$	22,436			$	—
Operating income as a percent of operating revenues			3.7	%			11.2	%			15.8	%		N/A
Adjusted operating income as a percent of operating revenues			6.9	%			11.7	%			16.0	%		N/A
		For the nine months ended May 31, 2019
Operating income reconciliation		Consolidated				Irrigation				Infrastructure				Corporate
Operating income - as reported		$	2,055			$	26,341			$	7,259			$	(31,545	)
FFG costs - pre-tax			13,166				676				188				12,302
Adjusted operating income		$	15,221			$	27,017			$	7,447			$	(19,243	)
Operating revenues		$	342,187			$	281,994			$	60,193			$	—
Operating income as a percent of operating revenues			0.6	%			9.3	%			12.1	%		N/A
Adjusted operating income as a percent of operating revenues			4.4	%			9.6	%			12.4	%		N/A

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								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 - as reported		$	10,379			$	0.96			$	15,299			$	1.42
Impact of U.S. Tax Reform			—				0.00				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 - as reported		$	18,814			$	11,718			$	14,248			$	(7,152	)
FFG costs - pre-tax			7,556				6,356				165				1,035
Adjusted operating income		$	26,370			$	18,074			$	14,413			$	(6,117	)
Operating revenues		$	169,571			$	128,421			$	41,150			$	—
Operating income as a percent of operating revenues			11.1	%			9.1	%			34.6	%		N/A
Adjusted operating income as a percent of operating revenues			15.6	%			14.1	%			35.0	%		N/A
		For the nine months ended May 31, 2018
Operating income reconciliation		Consolidated				Irrigation				Infrastructure				Corporate
Operating income - as reported		$	32,306			$	31,502			$	20,058			$	(19,254	)
FFG costs - pre-tax			9,887				6,929				165				2,793
Adjusted operating income		$	42,193			$	38,431			$	20,223			$	(16,461	)
Operating revenues		$	424,436			$	343,639			$	80,797			$	—
Operating income as a percent of operating revenues			7.6	%			9.2	%			24.8	%		N/A
Adjusted operating income as a percent of operating revenues			9.9	%			11.2	%			25.0	%		N/A

 

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