Lindsay Corporation (LNN) — Q3 FY2021 Form 10-Q
Reporting period: Quarter and nine months ended May 31, 2021; comparisons are with the same periods in 2020. Lindsay operates in irrigation and infrastructure products.
Financial performance
| Metric | Q3 FY2021 | Q3 FY2020 | Nine months FY2021 | Nine months FY2020 |
|---|---|---|---|---|
| Revenue | $161.9 million | $123.1 million | $414.0 million | $346.3 million |
| Gross profit | $44.1 million | $39.7 million | $116.6 million | $107.2 million |
| Gross margin | 27.2% | 32.2% | 28.2% | 31.0% |
| Operating income | $21.3 million | $15.8 million | $44.7 million | $36.7 million |
| Operating margin | 13.2% | 12.9% | 10.8% | 10.6% |
| Net earnings | $17.8 million | $10.1 million | $36.8 million | $24.0 million |
| Diluted earnings per share | $1.61 | $0.93 | $3.35 | $2.21 |
Q3 revenue rose 32% and net earnings rose 76%; nine-month revenue rose 20% and net earnings rose 53%. Irrigation drove growth: Q3 segment revenue increased 47% to $140.2 million, while infrastructure revenue declined 21% to $21.8 million. For the nine months, irrigation revenue increased 27% to $346.1 million and infrastructure revenue declined 8% to $67.9 million.
Irrigation segment operating income increased 55% in Q3 and 49% year to date. Infrastructure segment operating income fell 54% in Q3 and 37% year to date. Consolidated gross margin declined as irrigation represented a larger share of revenue, and higher raw-material and freight costs pressured margins.
Cash flow, liquidity and debt
- Nine-month operating cash flow was $30.7 million, versus $16.0 million a year earlier. Investing used $25.0 million, including $22.5 million in capital expenditures; financing used $8.1 million.
- Cash and cash equivalents were $120.8 million at May 31, 2021; marketable securities were $19.7 million. Net working capital was $273.6 million.
- Total debt principal was $116.2 million, including $115.0 million of senior notes; there were no revolving-credit borrowings. The company reported $50.0 million of available revolver capacity and compliance with its financial covenants.
- Dividends declared were $0.33 per share in Q3. No shares were repurchased during the quarter or nine-month period; $63.7 million remained under the repurchase authorization.
Outlook, commentary and material risks
- Management cited stronger irrigation demand amid higher agricultural commodity prices and improved farmer sentiment. Unshipped backlog was $120.8 million, versus $78.6 million a year earlier; management cautioned backlog is not a reliable indicator of next-quarter revenue.
- Fiscal 2021 capital expenditures were expected to be $25–$27 million. The filing provides no specific revenue or earnings-per-share guidance.
- Higher steel and other input prices, freight and logistics costs, labor constraints, and limited component availability were causing margin pressure and longer delivery lead times. Management said selling-price increases may take time to offset higher costs.
- COVID-19 had not materially affected demand or manufacturing to date, but its future effects remained uncertain. Infrastructure demand also faces road-construction delays and government-spending uncertainty; international irrigation results can fluctuate with project timing, currency, and regional conditions.
- Environmental remediation liabilities were $16.1 million. The proposed plan for the Nebraska site had not been approved; actual costs could exceed the accrual, though management did not expect additional expense to materially affect liquidity or financial condition.
- The company is defending X-Lite end-terminal product-liability lawsuits, including a Missouri transportation commission action seeking damages and other relief. No loss was considered probable and no accrual was recorded; the company could not estimate a loss range. A federal investigation concerning possible False Claims Act violations was ongoing, with outcome and potential loss not estimable.
Notable items and period comparisons
- Nine-month results included a $1.2 million gain on the sale of a building held for sale in the prior-year comparison; the gain benefited FY2020 gross profit.
- Nine-month FY2021 tax expense included a $1.7 million benefit from releasing a valuation allowance on foreign tax-loss carryforwards. The reported effective tax rate was 13.7%, compared with 21.2% a year earlier.
- Nine-month FY2021 operating expenses included a $1.5 million one-time equity-award expense related to the CEO’s retirement.
- The filing reported no material changes to previously disclosed risk factors, market-risk disclosures, or contractual obligations.
Key facts for investors to verify
- Whether price increases and operating improvements offset continued materials, freight, and labor cost inflation.
- Whether irrigation demand and the elevated backlog convert into shipments and cash, and whether infrastructure weakness persists.
- Progress, final regulatory requirements, timing, and potential cost changes for Nebraska environmental remediation.
- Developments in the X-Lite lawsuits and federal investigation, including any change in the company’s assessment of exposure.
- Availability and terms of financing after the $50 million revolver’s stated May 31, 2022 expiration.