Lindsay Corporation — Form 10-K Summary
Reporting period: Fiscal year ended August 31, 2021. This is an annual report, not a standalone fourth-quarter filing. Lindsay makes irrigation and water-management equipment and road-infrastructure products, reported in Irrigation and Infrastructure segments.
Financial performance
- Revenue: $567.6 million, up 20% from $474.7 million. Irrigation revenue rose 35% to $471.4 million; Infrastructure revenue fell 23% to $96.3 million.
- Profit and margins: Net earnings were $42.6 million, up 10%, and diluted EPS was $3.88 versus $3.56. Operating income was nearly flat at $54.1 million. Gross margin declined to 26.5% from 32.1%; operating margin declined to 9.5% from 11.4%.
- Segments: Irrigation operating income increased 53% to $63.2 million, with a 13.4% margin versus 11.8%. Infrastructure operating income decreased 53% to $20.2 million, with a 21.0% margin versus 34.1%.
- Cash flow: Operating cash flow was $44.0 million versus $46.0 million. Capital expenditures were $26.5 million versus $21.4 million; cash and cash equivalents at year-end were $127.1 million. Cash plus marketable securities totaled $146.7 million.
- Liquidity and debt: Net working capital was $277.9 million versus $245.5 million. Debt was approximately $116.1 million, primarily $115 million of unsecured senior notes due 2030; the $50 million revolving facility was undrawn, with the full stated amount available. The company reported covenant compliance.
- Shareholder returns: Dividends paid were $14.2 million, or $1.30 per share. No shares were repurchased; $63.7 million remained under the repurchase authorization.
Material changes and drivers
- Irrigation growth reflected higher unit volumes and selling prices in North America and international markets, particularly Brazil, Europe, and the Middle East. Stronger agricultural commodity prices supported demand.
- Infrastructure revenue declined mainly because a roughly $27 million U.K. Road Zipper project recorded in 2020 did not recur; some projects were also delayed. Lower revenue and margin, along with a less favorable business mix, weighed on consolidated profitability.
- Higher steel, zinc, freight, and other input costs reduced gross profit; management cited about $6 million of gross-profit impact from LIFO accounting amid rising raw-material costs. The 2020 comparison also included a $1.2 million gain on sale of an infrastructure building.
- Fiscal 2021 included a $1.1 million gain from selling IRZ Consulting and a $1.5 million one-time expense for equity awards related to the former CEO’s retirement. The lower effective tax rate, 15.5% versus 20.9%, reflected earnings mix and tax items including release of a foreign tax valuation allowance.
Outlook, risks, and contingencies
- Management expected fiscal 2022 capital expenditures of approximately $20 million to $25 million and said it could adjust timing or amount. It described long-term drivers including food production, water conservation, and road safety, but did not provide numerical revenue or earnings guidance.
- Backlog was $149.1 million at year-end versus $58.7 million a year earlier, driven by higher irrigation backlog; management cautioned that backlog fluctuates and is not a reliable forecast of near-term revenue.
- COVID-19 had limited direct impact on manufacturing and demand to date, but contributed to project delays and uncertainty. Supply-chain constraints, longer lead times, raw-material inflation, and labor and logistics limitations were affecting operations.
- Key demand risks include farm income, crop prices, weather and water availability, and government infrastructure funding. Additional risks include foreign exchange, tariffs and trade restrictions, supplier concentration, and the ability to pass cost increases to customers.
- The company accrued $16.1 million for environmental remediation at its Lindsay, Nebraska site. The proposed plan was not yet approved by regulators; estimates may change and revisions could materially affect a quarter or year’s results.
- Lindsay is defending X-Lite end-terminal product-liability lawsuits, including a Missouri transportation commission lawsuit, and faces a Department of Justice investigation concerning potential False Claims Act violations. No loss accrual was recorded for the lawsuits because management did not consider a loss probable; the company said it could not estimate potential loss. The investigation’s outcome and potential exposure were also not estimable.
- Auditors issued unqualified opinions on the financial statements and internal controls. The product warranty accrual of $12.7 million was identified as a critical audit matter.
Important facts for investors to verify
- Whether irrigation growth and pricing can offset inflation, freight costs, and supply constraints without further margin deterioration.
- Whether the elevated backlog converts to revenue on schedule, and how much infrastructure demand depends on future government funding and project timing.
- Updates to the environmental remediation plan, regulatory approval, total cost estimates, and timing of expenditures.
- Developments in X-Lite litigation and the DOJ investigation, including any changes to estimated exposure, insurance coverage, or product qualifications.
- Cash generation, working-capital and inventory trends, and the company’s ability to fund planned investment, dividends, and potential acquisitions.