Lindsay Corporation — Form 10-Q Summary
Business context and period: The filing reports Lindsay Corporation’s first quarter of fiscal 2022, the three months ended November 30, 2021, compared with the three months ended November 30, 2020. The company operates in irrigation and infrastructure, with irrigation accounting for 88% of current-quarter revenue.
Financial performance
| Metric | Q1 FY2022 | Q1 FY2021 | Change |
|---|---|---|---|
| Revenue | $166.2 million | $108.5 million | +53% |
| Gross profit / margin | $37.4 million / 22.5% | $31.4 million / 29.0% | Profit +19%; margin down 6.5 points |
| Operating income / margin | $13.4 million / 8.0% | $7.5 million / 6.9% | +77% |
| Net earnings | $7.9 million | $7.1 million | +11% |
| Diluted EPS | $0.72 | $0.65 | +$0.07 |
| Operating cash flow | $(24.2) million | $15.4 million | Declined $39.6 million |
- Segments: Irrigation revenue rose 67% to $145.9 million; segment operating income increased 62% to $17.2 million, while margin eased to 11.8% from 12.2%. Infrastructure revenue fell 4% to $20.2 million; operating income declined 35% to $2.8 million and margin fell to 13.7% from 20.1%.
- Cash flow and working capital: Operating cash use reflected higher receivables and inventories, including a $31.7 million inventory cash outflow and $17.8 million receivables outflow. Investing used $14.2 million, including purchases of marketable securities; financing used $2.3 million. Cash and equivalents ended at $84.7 million.
- Liquidity and debt: Cash, cash equivalents and marketable securities totaled $114.9 million. Total debt was $116.1 million, including $115.0 million of senior notes; no revolver borrowings were outstanding, and $50.0 million was available. Management said available resources, projected operating cash flow and credit capacity should cover expected working capital, capital expenditures and dividends. Net working capital was $278.6 million.
- Other: Quarterly dividend increased to $0.33 per share from $0.32. No shares were repurchased; $63.7 million remained under the repurchase authorization.
Material changes and management commentary
- Revenue growth was driven by irrigation, with higher equipment volumes and selling prices in North America and international markets. International irrigation revenue increased 94%, including favorable currency translation of approximately $1.1 million.
- Gross margin contracted despite higher revenue. Management attributed the decline to higher raw-material and other input costs, a greater mix of lower-margin irrigation sales, and approximately $6.0 million of LIFO-related cost impact. Higher selling prices were being used to pass through input-cost increases, but management said these increases had not yet fully offset higher costs.
- Other expense, net increased to $3.9 million from $0.7 million of expense, primarily due to higher foreign-currency transaction losses. The effective tax rate was 16.6%, versus a 3.1% benefit rate in the prior-year quarter; prior-year results included a discrete foreign tax benefit.
- Unshipped-order backlog was $154.8 million, compared with $89.2 million a year earlier. Management cautioned that backlog fluctuates and is not generally a reliable indicator of next-quarter revenue.
Outlook, risks and contingencies
- Fiscal 2022 capital expenditures were expected to be $20–$25 million. The filing provides no specific revenue or earnings guidance.
- Management cited favorable agricultural commodity prices and farm-income trends supporting irrigation demand, and expected the Infrastructure Investment and Jobs Act’s planned $110 billion in incremental federal funding to support future transportation-safety demand.
- Supply-chain constraints, longer lead times, raw-material inflation, and labor and freight limitations remained material pressures. COVID-19 had limited direct impact on operations to date, but its future effects remained uncertain.
- Infrastructure product liability lawsuits involve the X-Lite highway end terminal, including a Missouri agency suit seeking damages and other relief. The company said it believes it has defenses, does not consider a loss probable, and has not accrued a loss; it cannot estimate a potential loss range. A related Department of Justice investigation into potential False Claims Act violations also remains unresolved, with no loss estimate available.
- Environmental remediation at the Lindsay, Nebraska site had an accrued liability of approximately $16.0 million. The proposed plan had not been approved by regulators; costs and timing could change and actual costs could exceed the accrual.
Most important facts for investors to verify
- Whether pricing and cost actions can recover inflation and stabilize gross margins.
- Whether irrigation demand, order backlog and international project activity convert into sustained revenue and cash generation.
- How working-capital needs, especially receivables and inventories, affect operating cash flow and liquidity.
- Developments, potential financial exposure and insurance coverage relating to X-Lite litigation and the federal investigation.
- Regulatory approval and eventual cost and timing of the environmental remediation plan.