Lindsay Corp 10-Q for FY2022 Q2
Lindsay Corp (LNN)
About this 10-Q
Lindsay Corp filed this 10-Q on April 5, 2022, covering the quarter ended February 28, 2022 (FY2022 Q2).
Headline figures
Quarter ended February 28, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $200.14M
- up 39.4% from $143.58M a year earlier
- Net income
- $14.57M
- up 22.7% from net income of $11.88M a year earlier
- Diluted EPS
- $1.32
- up 22.2% from $1.08 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For the quarterly period ended
OR
Commission File Number
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
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Accelerated filer |
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Non‑accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of March 31, 2022,
Lindsay Corporation
INDEX FORM 10-Q
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ITEM 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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ITEM 3 – Quantitative and Qualitative Disclosures about Market Risk |
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ITEM 2 – Unregistered Sales of Equity Securities and Use of Proceeds |
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- 2 -
Part I – FINANCIAL INFORMATION
ITEM 1 - Financial Statements
LINDSAY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
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Three months ended |
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Six months ended |
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($ and shares in thousands, except per share amounts) |
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February 28, |
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February 28, |
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February 28, |
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February 28, |
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Operating revenues |
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$ |
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$ |
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$ |
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$ |
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Cost of operating revenues |
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Gross profit |
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Operating expenses: |
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Selling expense |
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General and administrative expense |
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Engineering and research expense |
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Total operating expenses |
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Operating income |
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Other income (expense): |
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Interest expense |
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Interest income |
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Other income (expense), net |
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Total other income (expense) |
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Earnings before income taxes |
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Income tax expense |
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Net earnings |
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$ |
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$ |
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$ |
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$ |
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Earnings per share: |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Shares used in computing earnings per share: |
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Basic |
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Diluted |
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Cash dividends declared per share |
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$ |
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$ |
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements.
- 3 -
LINDSAY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
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Three months ended |
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Six months ended |
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($ in thousands) |
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February 28, |
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February 28, |
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February 28, |
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February 28, |
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Net earnings |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive income (loss): |
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Defined benefit pension plan adjustment, net of tax |
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Foreign currency translation adjustment, net of hedging activities and tax |
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Unrealized loss on marketable securities, net of tax |
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Total other comprehensive income (loss), net of tax (benefit) expense of ($ |
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Total comprehensive income |
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$ |
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$ |
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements.
- 4 -
LINDSAY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
($ and shares in thousands, except par values) |
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February 28, |
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February 28, |
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August 31, |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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$ |
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Marketable securities |
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Receivables, net of allowance of $ |
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Inventories, net |
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Other current assets, net |
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Total current assets |
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Property, plant, and equipment: |
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Cost |
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Less accumulated depreciation |
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Property, plant, and equipment, net |
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Intangibles, net |
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Goodwill |
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Operating lease right-of-use assets |
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Deferred income tax assets |
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Other noncurrent assets |
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Total assets |
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$ |
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$ |
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$ |
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LIABILITIES AND SHAREHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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$ |
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Current portion of long-term debt |
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Other current liabilities |
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Total current liabilities |
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Pension benefits liabilities |
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Long-term debt |
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Operating lease liabilities |
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Deferred income tax liabilities |
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Other |
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Total liabilities |
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Shareholders' equity: |
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Preferred stock of $ |
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Common stock of $ |
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Capital in excess of stated value |
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Retained earnings |
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Less treasury stock - at cost, |
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( |
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( |
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( |
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Accumulated other comprehensive loss, net |
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( |
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( |
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( |
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Total shareholders' equity |
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Total liabilities and shareholders' equity |
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$ |
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements.
- 5 -
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CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY |
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($ and shares in thousands, except per share amounts) |
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(Unaudited) |
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Shares of |
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Shares of |
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Common |
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Capital in |
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Retained |
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Treasury |
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Accumulated |
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Total |
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Balance at August 31, 2020 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Comprehensive income: |
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Net earnings |
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— |
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— |
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Other comprehensive income |
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— |
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— |
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Total comprehensive income |
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— |
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— |
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Cash dividends ($ |
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— |
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— |
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( |
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( |
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Issuance of common shares under share compensation plans, net |
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Share-based compensation expense |
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— |
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— |
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Balance at February 28, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Balance at August 31, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Comprehensive income: |
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Net earnings |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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( |
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( |
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Total comprehensive income |
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— |
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— |
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Cash dividends ($ |
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— |
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— |
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( |
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( |
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Issuance of common shares under share compensation plans, net |
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Share-based compensation expense |
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— |
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— |
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Balance at February 28, 2022 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements. |
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||||||||||||||||||||||
- 6 -
Lindsay Corporation and Subsidiaries |
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CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY |
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($ and shares in thousands, except per share amounts) |
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(Unaudited) |
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Shares of |
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Shares of |
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Common |
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Capital in |
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Retained |
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Treasury |
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Accumulated |
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Total |
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Balance at November 30, 2020 |
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$ |
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$ |
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$ |
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$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||||
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net earnings |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash dividends ($ |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||||
Issuance of common shares under share compensation plans, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Share-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balance at February 28, 2021 |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance at November 30, 2021 |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||||
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net earnings |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash dividends ($ |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|||||
Issuance of common shares under share compensation plans, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Share-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balance at February 28, 2022 |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
See accompanying notes to condensed consolidated financial statements. |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
- 7 -
LINDSAY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Six months ended |
|
|||||
($ in thousands) |
|
February 28, 2022 |
|
|
February 28, 2021 |
|
||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
||
Net earnings |
|
$ |
|
|
$ |
|
||
Adjustments to reconcile net earnings to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Provision for uncollectible accounts receivable |
|
|
|
|
|
|
||
Deferred income taxes |
|
|
|
|
|
|
||
Share-based compensation expense |
|
|
|
|
|
|
||
Unrealized foreign currency transaction gain |
|
|
( |
) |
|
|
( |
) |
Other, net |
|
|
|
|
|
|
||
Changes in assets and liabilities: |
|
|
|
|
|
|
||
Receivables |
|
|
( |
) |
|
|
( |
) |
Inventories |
|
|
( |
) |
|
|
( |
) |
Other current assets |
|
|
( |
) |
|
|
( |
) |
Accounts payable |
|
|
|
|
|
|
||
Other current liabilities |
|
|
( |
) |
|
|
|
|
Other noncurrent assets and liabilities |
|
|
( |
) |
|
|
|
|
Net cash (used in) provided by operating activities |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
||
Purchases of property, plant, and equipment |
|
|
( |
) |
|
|
( |
) |
Purchases of marketable securities |
|
|
( |
) |
|
|
( |
) |
Proceeds from maturities of marketable securities |
|
|
|
|
|
|
||
Other investing activities, net |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
||
Proceeds from exercise of stock options |
|
|
|
|
|
|
||
Common stock withheld for payroll tax obligations |
|
|
( |
) |
|
|
( |
) |
Proceeds from employee stock purchase plan |
|
|
|
|
|
|
||
Principal payments on long-term debt |
|
|
( |
) |
|
|
( |
) |
Dividends paid |
|
|
( |
) |
|
|
( |
) |
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Effect of exchange rate changes on cash and cash equivalents |
|
|
( |
) |
|
|
|
|
Net change in cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
Cash and cash equivalents, beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents, end of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
SUPPLEMENTAL CASH FLOW INFORMATION: |
|
|
|
|
|
|
||
Income taxes paid, net of refunds |
|
$ |
|
|
$ |
|
||
Interest paid |
|
$ |
|
|
$ |
|
||
See accompanying notes to condensed consolidated financial statements.
- 8 -
LINDSAY CORPORATION AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 – Basis of Presentation
The condensed consolidated financial statements are presented in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and do not include all of the disclosures normally required by U.S. generally accepted accounting principles (“U.S. GAAP”) as contained in Lindsay Corporation’s (the “Company”) Annual Report on Form 10-K. Accordingly, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s most recent Annual Report on Form 10-K for the fiscal year ended August 31, 2021.
In the opinion of management, the condensed consolidated financial statements of the Company reflect all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position and the results of operations and cash flows for the periods presented. The results for interim periods are not necessarily indicative of trends or results expected by the Company for a full year. The condensed consolidated financial statements were prepared using U.S. GAAP. These principles require us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Actual results could differ from these estimates.
Recent Accounting Guidance Adopted
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting and related disclosure requirements for income taxes. The Company adopted this standard in the first quarter of its fiscal 2022. The adoption of this ASU did not have a material impact on its condensed consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The standard replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses on instruments within its scope, including trade receivables. This update is intended to provide financial statement users with more decision-useful information about the expected credit losses. The Company adopted this in the first quarter of the Company’s fiscal 2021. The adoption of this ASU did not have a material impact on its condensed consolidated financial statements and related disclosures.
In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which eliminates the requirement to calculate the implied fair value of goodwill; rather, an entity will measure its goodwill impairment by the amount the carrying value exceeds the fair value of a reporting unit. The Company adopted this in the first quarter of the Company’s fiscal 2021. The adoption of this ASU did not have a material impact on its condensed consolidated financial statements and related disclosures.
- 9 -
Note 2 – Revenue Recognition
Disaggregation of Revenue
A breakout by segment of revenue recognized over time versus at a point in time for the three and six months ended February 28, 2022 and 2021 is as follows:
|
|
Three months ended |
|
|
Three months ended |
|
||||||||||||||||||
|
|
February 28, 2022 |
|
|
February 28, 2021 |
|
||||||||||||||||||
($ in thousands) |
|
Irrigation |
|
|
Infrastructure |
|
|
Total |
|
|
Irrigation |
|
|
Infrastructure |
|
|
Total |
|
||||||
Point in time |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Over time |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Revenue from the contracts with customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Lease revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total operating revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Six months ended |
|
|
Six months ended |
|
||||||||||||||||||
|
|
February 28, 2022 |
|
|
February 28, 2021 |
|
||||||||||||||||||
($ in thousands) |
|
Irrigation |
|
|
Infrastructure |
|
|
Total |
|
|
Irrigation |
|
|
Infrastructure |
|
|
Total |
|
||||||
Point in time |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Over time |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Revenue from the contracts with customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Lease revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total operating revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Further disaggregation of revenue is disclosed in the Note 13 – Industry Segment Information.
For contracts with an initial length longer than twelve months, the unsatisfied performance obligations were $
Contract Balances
Contract assets arise when recorded revenue for a contract exceeds the amounts billed under the terms of such contract. Contract liabilities arise when billed amounts exceed revenue recorded. Amounts are billable to customers upon various measures of performance, including achievement of certain milestones and completion of specified units of completion of the contract. At February 28, 2022, February 28, 2021, and August 31, 2021, contract assets amounted to $
Note 3 – Net Earnings per Share
Basic earnings per share is calculated on the basis of weighted average outstanding common shares. Diluted earnings per share is calculated on the basis of basic weighted average outstanding common shares adjusted for the dilutive effect of stock options, restricted stock unit awards and other dilutive securities.
- 10 -
The following table shows the computation of basic and diluted net earnings per share for the three and six months ended February 28, 2022 and 2021:
|
|
Three months ended |
|
|
Six months ended |
|
||||||||||
($ and shares in thousands, except per share amounts) |
|
February 28, |
|
|
February 28, |
|
|
February 28, |
|
|
February 28, |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net earnings |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted effect of stock awards |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding assuming |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic net earnings per share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted net earnings per share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Certain stock options and restricted stock units were excluded from the computation of diluted net earnings per share because their effect would have been anti-dilutive. Performance stock units are excluded from the calculation of dilutive potential common shares until the threshold performance conditions have been satisfied.
|
|
Three months ended |
|
|
Six months ended |
|
||||||||||
(Units and options in thousands) |
|
February 28, |
|
|
February 28, |
|
|
February 28, |
|
|
February 28, |
|
||||
Restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock options |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Performance stock units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Note 4 – Income Taxes
The Company recorded income tax expense of $
It is the Company’s policy to report income tax expense for interim periods using an estimated annual effective income tax rate. The estimated annual effective income tax rate was
- 11 -
Note 5 – Inventories
Inventories consisted of the following as of February 28, 2022, February 28, 2021, and August 31, 2021:
($ in thousands) |
|
February 28, |
|
|
February 28, |
|
|
August 31, |
|
|||
Raw materials and supplies |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Work in process |
|
|
|
|
|
|
|
|
|
|||
Finished goods and purchased parts, net |
|
|
|
|
|
|
|
|
|
|||
Total inventory value before LIFO adjustment |
|
|
|
|
|
|
|
|
|
|||
Less adjustment to LIFO value |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Inventories, net |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Note 6 – Long-Term Debt
The following table sets forth the outstanding principal balances of the Company’s long-term debt as of the dates shown:
($ in thousands) |
|
February 28, |
|
|
February 28, |
|
|
August 31, |
|
|||
Series A Senior Notes |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Elecsys Series 2006A Bonds |
|
|
|
|
|
|
|
|
|
|||
Total debt |
|
|
|
|
|
|
|
|
|
|||
Less current portion |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Less unamortized debt issuance costs |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total long-term debt |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Principal payments on the debt are due as follows:
Due within |
|
$ in thousands |
|
|
1 year |
|
$ |
|
|
2 years |
|
|
|
|
3 years |
|
|
|
|
4 years |
|
|
|
|
5 years |
|
|
|
|
Thereafter |
|
|
|
|
|
|
$ |
|
|
Note 7 – Fair Value Measurements
The following table presents the Company’s financial assets and liabilities measured at fair value, based upon the level within the fair value hierarchy in which the fair value measurements fall, as of February 28, 2022, February 28, 2021, and August 31, 2021. There were no transfers between any levels for the periods presented.
- 12 -
|
|
February 28, 2022 |
|
|||||||||||||
($ in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. treasury securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
February 28, 2021 |
|
|||||||||||||
($ in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. treasury securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earn-out liability |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
August 31, 2021 |
|
|||||||||||||
($ in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. treasury securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earn-out liability |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
The Company’s investment in marketable securities consists of United States treasury bonds and investment grade corporate bonds. The marketable securities are classified as available-for-sale and are carried at fair value with the change in unrealized gains and losses reported as a separate component on the condensed consolidated statements of comprehensive income until realized. The Company determines fair value using data points that are observable, such as quoted prices and interest rates. The amortized cost of the investments approximates fair value. Investment income is recorded within other (expense) income on the condensed consolidated statements of earnings. As of February 28, 2022, approximately
The Company’s earn-out liability relates to its acquisition of Net Irrigate, LLC during the third quarter of fiscal 2020 and was settled in full during the first quarter of fiscal 2022.
There were
- 13 -
Note 8 – Commitments and Contingencies
In the ordinary course of its business operations, the Company enters into arrangements that obligate it to make future payments under contracts such as lease agreements. Additionally, the Company is involved, from time to time, in commercial litigation, employment disputes, administrative proceedings, business disputes and other legal proceedings. The Company has established accruals for certain proceedings based on an assessment of probability of loss. The Company believes that any such currently-pending proceedings are either covered by insurance or would not have a material effect on the business or its consolidated financial statements if decided in a manner that is unfavorable to the Company. Such proceedings are exclusive of environmental remediation matters which are discussed separately below.
Infrastructure Products
The Company is currently defending a number of product liability lawsuits arising out of vehicle collisions with highway barriers incorporating the Company’s X-Lite® end terminal. Despite the September 2018 reversal of a sizable judgment against a competitor, the Company expects that the significant attention brought to the infrastructure products industry by the original judgment may lead to additional lawsuits being filed against the Company and others in the industry.
The Company, certain of its subsidiaries, and certain third parties which originally designed the X-Lite end terminal have also been named in a lawsuit filed on June 9, 2020 in the Circuit Court of Cole County, Missouri by Missouri Highways and Transportation Commission (“MHTC”). MHTC alleges, among other things, that the X-Lite end terminal was defectively designed and failed to perform as designed, intended, and advertised, leading to MHTC’s removal and replacement of X-Lite end terminals from Missouri’s roadways. MHTC alleges strict liability (defective design and failure to warn), negligence, breach of express warranties, breach of implied warranties (merchantability and fitness for a particular purpose), fraud, and public nuisance. MHTC seeks compensatory damages, interest, attorneys’ fees, and punitive damages.
The Company believes it has meritorious factual and legal defenses to each of the lawsuits discussed above and is prepared to vigorously defend its interests. Based on the information currently available to the Company, the Company does not believe that a loss is probable in any of these lawsuits; therefore, no accrual has been included in the Company’s consolidated financial statements. While it is possible that a loss may be incurred, the Company is unable to estimate a range of potential loss due to the complexity and current status of these lawsuits. However, the Company maintains insurance coverage to mitigate the impact of adverse exposures in these lawsuits and does not expect that these lawsuits will have a material adverse effect on its business or its consolidated financial statements.
In June 2019, the Company was informed by letter that the Department of Justice, Civil Division and U.S. Attorney’s Office for the Northern District of New York, with the assistance of the Department of Transportation, Office of Inspector General, are conducting an investigation of the Company relating to the Company’s X-Lite end terminal and potential violations of the federal civil False Claims Act. Depending on the outcome of this matter, there could be a material adverse effect on the Company’s business or its consolidated financial statements. Given the current posture of the matter, the Company is unable to estimate a range of potential loss, if any, or to express an opinion regarding the ultimate outcome.
Environmental Remediation
In previous years, the Company committed to a plan to remediate environmental contamination of the groundwater at and adjacent to its Lindsay, Nebraska facility (the “site”). The current estimated aggregate accrued cost of $
The Company accrues the anticipated cost of investigation and remediation when the obligation is probable and can be reasonably estimated. While a definitive plan has not been formally approved by the EPA, the Company believes the current accrual is a good faith estimate of the long-term cost of remediation at this site; however, the estimate of costs and their timing could change as a result of a number of factors, including but not limited to (1) EPA input on the proposed remediation plan and any changes which the EPA may subsequently require, (2) effectiveness of the in situ thermal pilot remediation pilot study, (3) refinement of cost estimates and length of time required to complete remediation and post-remediation operations and maintenance, (4) effectiveness of the technology chosen in remediation of the site as well as changes in technology that may be available in the future, and (5) unforeseen circumstances existing at the site. As a result of these factors, the actual amount of costs incurred by the Company in connection with the remediation of contamination of its Lindsay, Nebraska site
- 14 -
could exceed the amounts accrued for this expense at this time. While any revisions could be material to the operating results of any fiscal quarter or fiscal year, the Company does not expect such additional expenses would have a material adverse effect on its liquidity or financial condition.
The following table summarizes the undiscounted environmental remediation liability classifications included in the condensed consolidated balance sheets as of February 28, 2022, February 28, 2021, and August 31, 2021:
($ in thousands) |
|
February 28, |
|
|
February 28, |
|
|
August 31, |
|
|||
Other current liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Other noncurrent liabilities |
|
|
|
|
|
|
|
|
|
|||
Total environmental remediation liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Note 9 – Warranties
The following table provides the changes in the Company’s product warranties:
|
|
Three months ended |
|
|
Six months ended |
|
||||||||||
($ in thousands) |
|
February 28, |
|
|
February 28, |
|
|
February 28, |
|
|
February 28, |
|
||||
Product warranty accrual balance, beginning of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Liabilities accrued for warranties during the period |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warranty claims paid during the period |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Changes in estimates |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Product warranty accrual balance, end of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Note 10 – Share-Based Compensation
The Company’s current share-based compensation plans, approved by the stockholders of the Company, provides for awards of stock options, restricted shares, restricted stock units (“RSUs”), stock appreciation rights, performance shares, and performance stock units (“PSUs”) to employees and non-employee directors of the Company. The Company measures and recognizes compensation expense for all share-based payment awards made to employees and directors based on estimated fair values. Share-based compensation expense was $
Note 11 – Other Current Liabilities
($ in thousands) |
|
February 28, |
|
|
February 28, |
|
|
August 31, |
|
|||
Other current liabilities: |
|
|
|
|
|
|
|
|
|
|||
Contract liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Compensation and benefits |
|
|
|
|
|
|
|
|
|
|||
Warranties |
|
|
|
|
|
|
|
|
|
|||
Dealer related liabilities |
|
|
|
|
|
|
|
|
|
|||
Operating lease liabilities |
|
|
|
|
|
|
|
|
|
|||
Tax related liabilities |
|
|
|
|
|
|
|
|
|
|||
Accrued insurance |
|
|
|
|
|
|
|
|
|
|||
Deferred revenue - lease |
|
|
|
|
|
|
|
|
|
|||
Accrued environmental liabilities |
|
|
|
|
|
|
|
|
|
|||
Other |
|
|
|
|
|
|
|
|
|
|||
Total other current liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|||
- 15 -
Note 12 – Share Repurchases
Note 13 – Industry Segment Information
The Company manages its business activities in
Irrigation - This reporting segment includes the manufacture and marketing of center pivot, lateral move and hose reel irrigation systems and large diameter steel tubing 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 internet of things, or “IIoT”, solutions. The irrigation reporting segment consists of
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. The infrastructure reporting segment consists of
|
|
Three months ended |
|
|
Six months ended |
|
||||||||||
($ in thousands) |
|
February 28, |
|
|
February 28, |
|
|
February 28, |
|
|
February 28, |
|
||||
Operating revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Irrigation: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
International |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Irrigation total |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Infrastructure |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total operating revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Irrigation |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Infrastructure |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total operating income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest and other expense, net |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Earnings before income taxes |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
- 16 -
ITEM 2 ‑ Management's Discussion and Analysis of Financial Condition and Results of Operations
Concerning Forward‑Looking Statements
This Quarterly Report on Form 10-Q contains not only historical information, but also forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are not historical are forward-looking and reflect information concerning possible or assumed future results of operations and planned financing of the Company. In addition, forward-looking statements may be made orally or in press releases, conferences, reports, on the Company's web site, or otherwise, in the future by or on behalf of the Company. When used by or on behalf of the Company, the words “expect,” “anticipate,” “estimate,” “believe,” “intend,” “will,” “plan,” “predict,” “project,” “outlook,” “could,” “may,” “should” or similar expressions generally identify forward-looking statements. The entire section entitled “Executive Overview and Outlook” should be considered forward-looking statements. 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.
Forward-looking statements involve a number of risks and uncertainties, including but not limited to those discussed in the “Risk Factors” section in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2021. Readers should not place undue reliance on any forward-looking statement and should recognize that the statements are predictions of future results or conditions, which may not occur as anticipated. Actual results or conditions could differ materially from those anticipated in the forward-looking statements and from historical results, due to the risks and uncertainties described herein and in the Company’s other public filings with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended August 31, 2021, as well as other risks and uncertainties not now anticipated. The risks and uncertainties described herein and in the Company’s other public filings are not exclusive and further information concerning the Company and its businesses, including factors that potentially could materially affect the Company's financial results, may emerge from time to time. Except as required by law, the Company assumes no obligation to update forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.
COVID-19 Impact
In March 2020, the World Health Organization declared the 2019 coronavirus disease (COVID-19) a global pandemic. This outbreak has adversely affected workforces, customers, economies, and financial markets globally, leading to economic uncertainty. Shelter-in-place or stay-at-home orders have been implemented from time to time in many of the jurisdictions in which the Company operates. However, the Company’s manufacturing facilities worldwide have remained open throughout the outbreak with limited exceptions. Accordingly, COVID-19 has had a limited impact on the Company’s manufacturing operations to date, although the Company continues to experience supply chain challenges, including increased lead times and limited availability of certain components, raw material price increases, and labor and transportation logistical constraints that have contributed to cost increases. During the quarter we experienced a short-term disruption in labor availability in our Nebraska manufacturing facility due to an increase in employee absences caused by the Omicron variant. The pandemic has not had a material adverse effect on the overall demand for the Company’s irrigation or infrastructure products. However, the pandemic has resulted in a slowdown of some road construction activity and delays in certain project implementations. While the Company has implemented new procedures to protect the health and well-being of employees and customers, costs associated with these procedures have not been material.
The ongoing impact of COVID-19 on the Company’s business, results of operations, or cash flows remains uncertain and depends on numerous evolving factors that the Company may not be able to accurately predict or effectively respond to, including, without limitation, the duration and scope of the outbreak, mutations of COVID-19, actions taken by governments, businesses, and individuals in response to the outbreak, the effect on economic activity and actions taken in response, the effect on customers and their demand for the Company’s products and services, and the Company’s ability to manufacture, sell, distribute and service its products, including without limitation as a result of supply chain challenges, facility closures, social distancing, restrictions on travel, fear or anxiety by the populace, and shelter-in-place orders. As such, the full financial impact of COVID-19 on the Company’s business is difficult to estimate.
Accounting Policies
In preparing the Company’s condensed consolidated financial statements in conformity with U.S. GAAP, management must make a variety of decisions which impact the reported amounts and the related disclosures. These decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. In making these decisions, management applies its judgment based on its understanding and analysis of the relevant circumstances and the Company’s historical experience.
- 17 -
The Company’s accounting policies that are most important to the presentation of its results of operations and financial condition, and which require the greatest use of judgments and estimates by management, are designated as its critical accounting policies. See discussion of the Company’s critical accounting policies under Item 7 in the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended August 31, 2021. Management periodically re-evaluates and adjusts its critical accounting policies as circumstances change. There were no significant changes in the Company’s critical accounting policies during the six months ended February 28, 2022.
Recent Accounting Guidance
See Note 1 – Basis of Presentation and the disclosure therein of recently adopted accounting guidance to the condensed consolidated financial statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Executive Overview and Outlook
Operating revenues for the three months ended February 28, 2022 were $200.1 million, an increase of 39 percent compared to $143.6 million for the three months ended February 28, 2021. Irrigation segment revenues increased 52 percent to $180.7 million and infrastructure segment revenues decreased 23 percent to $19.4 million. Net earnings for the three months ended February 28, 2022 were $14.6 million, or $1.32 per diluted share, compared to net earnings of $11.9 million, or $1.08 per diluted share, for the three months ended February 28, 2021.
The primary drivers for the Company’s irrigation segment are the need for irrigated agricultural crop production, which is tied to population growth and the attendant need for expanded food production, and the need to use water resources efficiently. These drivers are affected by a number of factors, including the following:
- 18 -
Demand for irrigation equipment in the U.S. has remained robust over the same prior year period due to positive farmer sentiment resulting from strong agricultural commodity prices and a favorable outlook for net farm income. During this period supply chain constraints such as steel and other raw material costs as well as freight and logistics costs have continued to persist. These circumstances have continued to temper operating margins and are expected to continue to do so until these increased costs can be fully covered by increases in selling prices. In addition, supply chain constraints impacting availability of raw materials and trucking resources have contributed to cost increases and have resulted in extended lead times for deliveries.
The most significant opportunities for growth in irrigation sales over the next several years continue to be in international markets where irrigation use is less developed and demand is driven primarily by food security, water scarcity and population growth. While international irrigation markets remain active with opportunities for further development and expansion, regional political and economic factors, including armed conflict, currency conditions and other factors can create a challenging environment. The Company continues to monitor the Ukraine and Russia conflict for both short and long-term implications and has currently suspended business activity in Russia and Belarus. Sales with Russian and Ukrainian customers historically have represented less than 5% of consolidated revenues. Additionally, international results are heavily dependent upon project sales which tend to fluctuate and can be difficult to forecast accurately.
The infrastructure business continues to be driven by the Company's transportation safety products, the demand for which largely depends on government spending for road construction and improvements. The enactment of the Infrastructure Investment and Jobs Act in November 2021 marked the largest infusion of federal investment into infrastructure projects in more than a decade. This legislation introduced $110 billion in incremental federal funding, planned for roads, bridges, and other transportation projects, which the Company anticipates will translate into higher demand for its transportation safety products.
The backlog of unshipped orders at February 28, 2022 was $111.0 million compared with $101.4 million at February 28, 2021. The irrigation backlog is higher compared to the prior year while the infrastructure backlog is lower. The Company’s backlog can fluctuate from period to period due to the seasonality, cyclicality, timing and execution of contracts. Backlog typically represents long-term projects as well as short lead-time orders, and therefore is generally not a good indication of the next fiscal quarter’s revenues.
- 19 -
Results of Operations
For the Three Months ended February 28, 2022 compared to the Three Months ended February 28, 2021
The following section presents an analysis of the Company’s operating results displayed in the condensed consolidated statements of earnings for the three months ended February 28, 2022 and 2021. It should be read together with the industry segment information in Note 13 to the condensed consolidated financial statements:
|
|
Three months ended |
|
|
|
|||||
($ in thousands) |
|
February 28, |
|
|
February 28, |
|
|
Percent |
||
Consolidated |
|
|
|
|
|
|
|
|
||
Operating revenues |
|
$ |
200,137 |
|
|
$ |
143,577 |
|
|
39% |
Gross profit |
|
$ |
42,944 |
|
|
$ |
41,174 |
|
|
4% |
Gross margin |
|
|
21.5 |
% |
|
|
28.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
||
Operating expenses (1) |
|
$ |
24,606 |
|
|
$ |
25,365 |
|
|
-3% |
Operating income |
|
$ |
18,338 |
|
|
$ |
15,809 |
|
|
16% |
Operating margin |
|
|
9.2 |
% |
|
|
11.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
||
Other income (expense), net |
|
$ |
866 |
|
|
$ |
(1,248 |
) |
|
-169% |
Income tax expense |
|
$ |
4,638 |
|
|
$ |
2,685 |
|
|
73% |
Overall income tax rate |
|
|
24.2 |
% |
|
|
18.4 |
% |
|
|
Net earnings |
|
$ |
14,566 |
|
|
$ |
11,876 |
|
|
23% |
|
|
|
|
|
|
|
|
|
||
Irrigation Segment |
|
|
|
|
|
|
|
|
||
Segment operating revenues |
|
$ |
180,759 |
|
|
$ |
118,572 |
|
|
52% |
Segment operating income |
|
$ |
24,734 |
|
|
$ |
18,045 |
|
|
37% |
Segment operating margin |
|
|
13.7 |
% |
|
|
15.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
||
Infrastructure Segment |
|
|
|
|
|
|
|
|
||
Segment operating revenues |
|
$ |
19,378 |
|
|
$ |
25,005 |
|
|
-23% |
Segment operating income |
|
$ |
324 |
|
|
$ |
6,341 |
|
|
-95% |
Segment operating margin |
|
|
1.7 |
% |
|
|
25.4 |
% |
|
|
Revenues
Operating revenues for the three months ended February 28, 2022 increased 39 percent to $200.1 million from $143.6 million for the three months ended February 28, 2021, as irrigation revenues increased $62.2 million and infrastructure revenues decreased $5.6 million. The irrigation segment provided 90 percent of the Company’s revenue during the three months ended February 28, 2022 as compared to 83 percent for the three months ended February 28, 2021.
North America irrigation revenues for the three months ended February 28, 2022 of $100.7 million increased $20.6 million, or 26 percent, from $80.2 million for the three months ended February 28, 2021. The increase resulted primarily from higher average selling prices. Unit sales volume was lower year-over-year due to the impact of Omicron-related employee absences on production and shipping capabilities. Demand for irrigation equipment is supported by higher agricultural commodity prices and farm income, while higher average selling prices result from the pass through of higher raw material costs to customers.
International irrigation revenues for the three months ended February 28, 2022 of $80.0 million increased $41.6 million, or 108 percent, from $38.4 million for the three months ended February 28, 2021. The increase resulted from a combination of higher average selling prices and higher unit sales volumes in most international markets. Revenues in Brazil more than tripled compared to the prior year second quarter, and we also completed final deliveries of a large project in Egypt. These increases are the result of positive market fundamentals and from the pass through of higher raw material costs. The overall increase in revenues was partially offset by unfavorable effects of foreign currency translation of approximately $2.1 million compared to the same prior year period.
- 20 -
Infrastructure segment revenues for the three months ended February 28, 2022 of $19.4 million decreased $5.6 million, or 23 percent, from $25.0 million for the three months ended February 28, 2021. The decrease resulted from lower Road Zipper System sales and lease revenue, which were partially offset by increased sales of road safety products.
Gross Profit
Gross profit for the three months ended February 28, 2022 of $42.9 million increased 4 percent from $41.2 million for the three months ended February 28, 2021. The increase in gross profit resulted from higher irrigation segment revenues that were partially offset by lower infrastructure segment revenues. In addition, gross profit was reduced by the impact of higher input costs that were not fully recovered by higher pricing. Gross profit was also reduced by approximately $2.8 million resulting from the impact of the last-in, first-out ("LIFO") method of accounting for inventory in the irrigation segment. Under LIFO, higher raw material costs are recognized in cost of goods sold rather than in ending inventory values. In addition, costs of approximately $1.8 million were incurred during the quarter related to non-recurring factory maintenance and outside consulting services. Gross margin was 21.5 percent of sales for the three months ended February 28, 2022 compared with 28.7 percent of sales for the three months ended February 28, 2021. In addition to the factors noted above, lower gross margin in the current year period resulted in part from a higher proportion of irrigation revenues, which have a lower gross margin than infrastructure revenues, as compared to the same prior year period.
Operating Expenses
Operating expenses of $24.6 million for the three months ended February 28, 2022 decreased $0.8 million, or 3 percent, compared with $25.4 million for the three months ended February 28, 2021. The decrease resulted primarily from lower employee incentive expense compared to the same prior year period. The prior year included a one-time expense of $1.5 million in equity awards related to the retirement of the Company's chief executive officer.
Other Income (Expense), net
The Company recorded other income of $0.9 million for the three months ended February 28, 2022 compared to other expense of $1.2 million for the three months ended February 28, 2021. The change resulted primarily from higher foreign currency transaction gains compared to the same prior year period.
Income Taxes
The Company recorded income tax expense of $4.6 million and $2.7 million for the three months ended February 28, 2022 and 2021, respectively. The effective income tax rate was 24.2 percent and 18.4 percent for the three months ended February 28, 2022 and 2021, respectively. The impact of discrete items was not significant during the three months ended February 28, 2022 and 2021.
- 21 -
For the Six Months ended February 28, 2022 compared to the Six Months ended February 28, 2021
The following section presents an analysis of the Company’s operating results displayed in the condensed consolidated statements of earnings for the six months ended February 28, 2022 and 2021. It should be read together with the industry segment information in Note 13 to the condensed consolidated financial statements:
|
|
Six months ended |
|
|
|
|||||
($ in thousands) |
|
February 28, |
|
|
February 28, |
|
|
Percent |
||
Consolidated |
|
|
|
|
|
|
|
|
||
Operating revenues |
|
$ |
366,288 |
|
|
$ |
252,062 |
|
|
45% |
Gross profit |
|
$ |
80,381 |
|
|
$ |
72,582 |
|
|
11% |
Gross margin |
|
|
21.9 |
% |
|
|
28.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
||
Operating expenses (1) |
|
$ |
48,682 |
|
|
$ |
49,239 |
|
|
-1% |
Operating income |
|
$ |
31,699 |
|
|
$ |
23,343 |
|
|
36% |
Operating margin |
|
|
8.7 |
% |
|
|
9.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
||
Other expense, net |
|
$ |
(3,019 |
) |
|
$ |
(1,900 |
) |
|
59% |
Income tax expense |
|
$ |
6,213 |
|
|
$ |
2,472 |
|
|
151% |
Overall income tax rate |
|
|
21.7 |
% |
|
|
11.5 |
% |
|
|
Net earnings |
|
$ |
22,467 |
|
|
$ |
18,971 |
|
|
18% |
|
|
|
|
|
|
|
|
|
||
Irrigation Segment |
|
|
|
|
|
|
|
|
||
Segment operating revenues |
|
$ |
326,667 |
|
|
$ |
205,929 |
|
|
59% |
Segment operating income |
|
$ |
41,946 |
|
|
$ |
28,678 |
|
|
46% |
Segment operating margin |
|
|
12.8 |
% |
|
|
13.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
||
Infrastructure Segment |
|
|
|
|
|
|
|
|
||
Segment operating revenues |
|
$ |
39,621 |
|
|
$ |
46,133 |
|
|
-14% |
Segment operating income |
|
$ |
3,090 |
|
|
$ |
10,597 |
|
|
-71% |
Segment operating margin |
|
|
7.8 |
% |
|
|
23.0 |
% |
|
|
Revenues
Operating revenues for the six months ended February 28, 2022 increased 45 percent to $366.3 million from $252.1 million for the six months ended February 28, 2021, as irrigation revenues increased $120.7 million and infrastructure revenues decreased $6.5 million. The irrigation segment provided 89 percent of the Company’s revenue during the six months ended February 28, 2022 as compared to 82 percent for the six months ended February 28, 2021.
North America irrigation revenues for the six months ended February 28, 2022 of $179.7 million increased $46.7 million, or 35 percent, from $132.9 million for the six months ended February 28, 2021. The increase resulted from a combination of higher irrigation equipment unit sales volume and higher average selling prices. Increased demand for irrigation equipment is supported by higher agricultural commodity prices and farm income, while higher average selling prices result from the pass through of higher raw material costs to customers.
International irrigation revenues for the six months ended February 28, 2022 of $147.0 million increased $74.0 million, or 101 percent, from $73.0 million for the six months ended February 28, 2021. The increase resulted from a combination of higher average selling prices and higher unit sales volumes in most international markets, namely Brazil, Middle East and Europe. These increases are the result of positive market fundamentals and from the pass through of higher raw material costs. The overall increase in revenues was partially offset by unfavorable effects of foreign currency translation of approximately $0.9 million compared to the same prior year period.
Infrastructure segment revenues for the six months ended February 28, 2022 of $39.6 million decreased $6.5 million, or 14 percent, from $46.1 million for the six months ended February 28, 2021. The decrease resulted from lower Road Zipper System sales, which were partially offset by higher Road Zipper System lease revenue and increased sales of road safety products.
- 22 -
Gross Profit
Gross profit for the six months ended February 28, 2022 of $80.4 million increased 11 percent from $72.6 million for the six months ended February 28, 2021. The increase in gross profit resulted from higher irrigation segment revenues that were partially offset by lower infrastructure segment revenues. In addition, gross profit was reduced by the impact of higher costs of raw materials and other inputs, as well as approximately $8.8 million resulting from the impact of the LIFO method of accounting for inventory, of which $7.8 million impacted the irrigation segment and $1.0 million impacted the infrastructure segment. Under LIFO, higher raw material costs are recognized in cost of goods sold rather than in ending inventory values. Gross margin was 21.9 percent of sales for the six months ended February 28, 2022 compared with 28.8 percent of sales for the six months ended February 28, 2021. In addition to the factors noted above, lower gross margin in the current year period resulted in part from a higher proportion of irrigation revenues, which have a lower gross margin than infrastructure revenues, as compared to the same prior year period.
Operating Expenses
Operating expenses of $48.7 million for the six months ended February 28, 2022 decreased $0.6 million, or 1 percent, compared with $49.2 million for the six months ended February 28, 2021. The decrease resulted primarily from lower employee incentive expenses, partially offset by increases in other areas such as travel, compared to the same prior year period. The prior year included a one-time expense of $1.5 million in equity awards related to the retirement of the Company's chief executive officer.
Other Income (Expense), net
Other expense for the six months ended February 28, 2022 increased $1.1 million compared to the six months ended February 28, 2021. The change resulted primarily from higher foreign currency transaction losses compared to the same prior year period.
Income Taxes
The Company recorded income tax expense of $6.2 million and $2.5 million for the six months ended February 28, 2022 and 2021, respectively. The effective income tax rate was 21.7 percent and 11.5 percent for the six months ended February 28, 2022 and 2021, respectively. The current year period includes a benefit of $0.7 million related to the vesting of share-based compensation awards while the same prior year period includes a benefit of $1.7 million related to the release of a valuation allowance related to net operating loss carryforwards in a foreign jurisdiction.
- 23 -
Liquidity and Capital Resources
The Company's cash, cash equivalents, and marketable securities totaled $93.9 million at February 28, 2022 compared with $130.3 million at February 28, 2021 and $146.7 million at August 31, 2021. The Company requires cash for financing its receivables and inventories, paying operating expenses and capital expenditures, and for dividends and share repurchases. The Company meets its liquidity needs and finances its capital expenditures from its available cash and funds provided by operations along with borrowings under its credit arrangements described below. The Company’s investments in marketable securities are primarily comprised of United States government securities and investment grade corporate securities. The Company believes its current cash resources, investments in marketable securities, projected operating cash flow, and remaining capacity under its continuing bank lines of credit are sufficient to cover all its expected working capital needs, planned capital expenditures and dividends. The Company may require additional borrowings to fund potential acquisitions in the future.
The Company’s total cash and cash equivalents held by foreign subsidiaries were approximately $37.3 million, $35.8 million, and $38.4 million as of February 28, 2022, February 28, 2021, and August 31, 2021, respectively. The Company considers earnings in foreign subsidiaries to be indefinitely reinvested and would need to accrue and pay incremental state, local, and foreign taxes if such earnings were repatriated to the United States. The Company does not intend to repatriate the funds and does not expect these funds to have a significant impact on the Company’s overall liquidity.
Net working capital was $288.9 million at February 28, 2022, as compared with $260.8 million at February 28, 2021 and $277.9 million at August 31, 2021. Cash used in operating activities totaled $35.9 million during the six months ended February 28, 2022, compared to cash provided by operating activities of $11.1 million during the six months ended February 28, 2021. This change was primarily due to increases in receivables and inventories, both driven by strong irrigation demand, that were partially offset by changes in accounts payable, compared to the same prior year period.
Cash flows used in investing activities totaled $15.6 million during the six months ended February 28, 2022 compared to $17.7 million during the six months ended February 28, 2021. Purchases of marketable securities increased $10.2 million compared to the same prior year period. Purchases of property, plant, and equipment were $6.9 million, compared to $16.6 million in the same prior year period, which included $8.5 million for the land and building purchase in Turkey.
Cash flows used in financing activities totaled $5.5 million during the six months ended February 28, 2022 compared to cash flows used in financing activities of $4.5 million during the six months ended February 28, 2021. The decrease was primarily the result of higher proceeds from the exercise of stock options compared to the same prior year period.
Capital Allocation Plan
The Company’s capital allocation plan is to continue investing in revenue and earnings growth, combined with a defined process for enhancing returns to stockholders. Under the Company’s capital allocation plan, the priorities for uses of cash include:
Capital Expenditures
Capital expenditures for fiscal 2022 are expected to be between $15.0 million and $20.0 million, including equipment replacement, productivity improvements and new product development. The Company’s management does maintain flexibility to modify the amount and timing of some of the planned expenditures in response to economic conditions.
Dividends
In the second quarter of fiscal 2022, the Company paid a quarterly cash dividend to stockholders of $0.33 per common share, or $3.6 million, compared to a quarterly cash dividend of $0.32 per common share, or $3.5 million, in the second quarter of fiscal 2021.
- 24 -
Share Repurchases
The Company’s Board of Directors authorized a share repurchase program of up to $250.0 million of common stock with no expiration date. Under the program, shares may be repurchased in privately negotiated and/or open market transactions as well as under formalized trading plans in accordance with the guidelines specified under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. There were no shares repurchased during the six months ended February 28, 2022 or 2021. The remaining amount available under the repurchase program was $63.7 million as of February 28, 2022.
Long-Term Borrowing Facilities
Senior Notes. The Company has outstanding $115.0 million in aggregate principal amount of Senior Notes, Series A (the “Senior Notes”). The entire principal of the Senior Notes is due and payable on February 19, 2030. Interest on the Senior Notes is payable semi-annually at a fixed annual rate of 3.82 percent. Borrowings under the Senior Notes are unsecured. The Company used the proceeds of the sale of the Senior Notes for general corporate purposes, including acquisitions and dividends.
Revolving Credit Facility. The Company has outstanding a $50.0 million unsecured Amended and Restated Revolving Credit Facility (the “Revolving Credit Facility”) with Wells Fargo Bank, National Association (“Wells Fargo”) expiring August 26, 2026. The Company intends to use borrowings under the Revolving Credit Facility for working capital purposes and to fund acquisitions. At February 28, 2022 and 2021, the Company had no outstanding borrowings under the Revolving Credit Facility. The amount of borrowings available at any time under the Revolving Credit Facility is reduced by the amount of standby letters of credit issued by Wells Fargo then outstanding. At February 28, 2022, the Company had the ability to borrow up to $50.0 million under the Revolving Credit Facility. The Revolving Credit Facility may be increased by up to an additional $50.0 million at any time, subject to additional commitment approval. The Revolving Credit Facility was amended to transition the benchmark rate from the London Interbank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”). Borrowings under the Revolving Credit Facility bear interest at a variable rate equal to the SOFR plus a margin of between 100 and 210 basis points depending on the Company’s leverage ratio then in effect (which resulted in a variable rate of 1.40 percent at February 28, 2022), subject to adjustment as set forth in the loan documents for the Revolving Credit Facility. Interest is paid on a monthly to quarterly basis depending on loan type. The Company currently pays an annual commitment fee on the unused portion of the Revolving Credit Facility. The fee is between 0.125 percent and 0.2 percent (0.125 percent at February 28, 2022) on the unused balance depending on the Company’s leverage ratio then in effect.
Borrowings under the Revolving Credit Facility have equal priority with borrowings under the Company’s Senior Notes. Each of the credit arrangements described above include certain covenants relating primarily to the Company’s financial condition. These financial covenants include a funded debt to EBITDA leverage ratio and an interest coverage ratio. In the event that the loan documents for the Revolving Credit Facility were to require the Company to comply with any financial covenant that is not already included or is more restrictive than what is already included in the arrangement governing the Senior Notes, then such covenant shall be deemed incorporated by reference for the benefit of holders of the Senior Notes. Upon the occurrence of any event of default of these covenants, including a change in control of the Company, all amounts outstanding thereunder may be declared to be immediately due and payable. At February 28, 2022 and 2021, the Company was in compliance with all financial loan covenants contained in its credit arrangements in place as of each of those dates.
Series 2006A Bonds. Elecsys International LLC, a wholly owned subsidiary of the Company, has outstanding $1.0 million in principal amount of industrial revenue bonds that were issued in 2006 (the “Series 2006A Bonds”). Principal and interest on the Series 2006A Bonds are payable monthly through maturity on September 1, 2026. The interest rate is adjustable every five years based on the yield of the 5-year United States Treasury Notes, plus 0.45 percent (1.72 percent as of February 28, 2022). This rate was adjusted on September 1, 2021 in accordance with the terms of the bonds, and the adjusted rate will be in force through maturity. The obligations under the Series 2006A Bonds are secured by a first priority security interest in certain real estate.
Contractual Obligations and Commercial Commitments
There have been no material changes in the Company’s contractual obligations and commercial commitments as described in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2021.
ITEM 3 – Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes from the Company’s quantitative and qualitative disclosures about market risk previously disclosed in the Company’s most recent Annual Report on Form 10-K. See discussion of the Company’s quantitative and qualitative disclosures about market risk under Part II, Item 7A in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2021.
- 25 -
ITEM 4 – Controls and Procedures
Disclosure Controls and Procedures
The Company carried out an evaluation under the supervision and the participation of the Company’s management, including the Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of February 28, 2022.
Changes in Internal Control over Financial Reporting
The CEO and CFO determined that there has not been any significant change to the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
- 26 -
Part II – OTHER INFORMATION
ITEM 1 – Legal Proceedings
See the disclosure in Note 8 – Commitments and Contingencies to the condensed consolidated financial statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q, which disclosure is hereby incorporated herein by reference.
ITEM 1A – Risk Factors
There have been no material changes from risk factors previously disclosed in the Company’s most recent Annual Report on Form 10-K. See the discussions of the Company’s risk factors under Part I, Item 1A in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2021.
ITEM 2 – Unregistered Sales of Equity Securities and Use of Proceeds
None.
ITEM 3 – Defaults Upon Senior Securities
None.
ITEM 4 – Mine Safety Disclosures
Not applicable.
ITEM 5 – Other Information
None.
- 27 -
ITEM 6 – Exhibits
Exhibit |
|
|
No. |
|
Description |
|
|
|
3.1 |
|
|
3.2 |
|
|
4.1 |
|
|
31.1* |
|
|
31.2* |
|
|
32.1* |
|
|
101* |
|
Interactive Data Files pursuant to Rule 405 of Regulation S-T formatted in Inline Extensible Business Reporting Language ("Inline XBRL"). |
104* |
|
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101). |
|
|
|
* Filed herein.
- 28 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 5th day of April 2022.
|
|
|
LINDSAY CORPORATION |
|
|
|
|
|
By: |
|
/s/ BRIAN L. KETCHAM |
|
Name: |
|
Brian L. Ketcham |
|
Title: |
|
Senior Vice President and Chief Financial Officer |
|
|
|
(on behalf of the registrant and as principal financial officer) |
|
|
|
|
- 29 -
EXHIBIT 31.1
CERTIFICATION
I, Randy A. Wood, certify that:
|
|
|
/s/ RANDY A. WOOD |
|
President and Chief Executive Officer |
Randy A. Wood |
|
April 5, 2022 |
EXHIBIT 31.2
CERTIFICATION
I, Brian L. Ketcham, certify that:
|
|
|
/s/ BRIAN L. KETCHAM |
|
Senior Vice President and Chief Financial Officer |
Brian L. Ketcham |
|
April 5, 2022 |
EXHIBIT 32.1
CERTIFICATION
In connection with the accompanying Quarterly Report on Form 10-Q (the “Report”) of Lindsay Corporation (the “Company”) for the quarter ended February 28, 2022, I, Randy A. Wood, Chief Executive Officer of the Company and I, Brian L. Ketcham, Chief Financial Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:
|
|
|
|
/s/ RANDY A. WOOD |
|
|
Randy A. Wood |
|
|
President and Chief Executive Officer |
|
|
|
|
|
/s/ BRIAN L. KETCHAM |
|
|
Brian L. Ketcham |
|
|
Senior Vice President and Chief Financial Officer |
|
|
|
|
|
April 5, 2022 |
|
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.