Lindsay Corporation (NYSE: LNN) — FY2023 Form 10-K
Reporting period: Fiscal year ended August 31, 2023. This is an annual filing, not a standalone fourth-quarter report. Lindsay manufactures agricultural irrigation systems and road-safety and transportation infrastructure products.
Financial performance
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $674.1 million | $770.7 million |
| Gross profit / margin | $213.0 million / 31.6% | $199.2 million / 25.8% |
| Operating income / margin | $102.2 million / 15.2% | $94.6 million / 12.3% |
| Net earnings | $72.4 million | $65.5 million |
| Diluted EPS | $6.54 | $5.94 |
| Operating cash flow | $119.7 million | $3.0 million |
| Capital expenditures | $18.8 million | $15.6 million |
Revenue declined 13%. Irrigation revenue fell 12% to $586.0 million, and Infrastructure revenue fell 16% to $88.1 million. Despite lower sales, gross profit and earnings increased; management attributed the margin improvement mainly to better price realization, reduced inflationary pressure on inputs, and a more favorable international irrigation mix. Operating expenses rose 6% to $110.8 million, including higher incentives, product-development spending, and personnel costs. The effective tax rate increased to 27.9% from 25.5%, primarily reflecting a greater share of earnings in higher-tax foreign jurisdictions.
Liquidity, debt and capital allocation
- Cash, cash equivalents and marketable securities totaled $166.3 million at year-end, versus $116.5 million a year earlier. Net working capital was $351.4 million, compared with $316.2 million.
- Current assets were $487.5 million and current liabilities were $136.1 million. Operating cash flow improved substantially, aided by higher earnings and a $41.0 million inventory-related cash source, versus an inventory cash use in FY2022.
- Total debt was approximately $115.7 million, principally $115.0 million of unsecured notes bearing 3.82% fixed interest and due in 2030. The company had no borrowings on its $50 million revolving facility, which expires in 2026, and reported compliance with its loan covenants.
- FY2023 included a $30.8 million cash acquisition of FieldWise, a precision-irrigation technology business. Dividends paid were $15.1 million, or $1.37 per share. No shares were repurchased; $63.7 million remained under the repurchase authorization.
Outlook, commentary and notable matters
- Management expects FY2024 capital expenditures of $35 million to $40 million, including facility modernization, productivity improvements, replacement equipment, product development and growth investments; timing and amount may be adjusted for economic conditions.
- Management expects a more positive contribution from U.S. infrastructure funding in FY2024 and beyond as projects under the Infrastructure Investment and Jobs Act are appropriated and implemented. The Act includes $110 billion in incremental planned funding for roads, bridges and other transportation projects.
- U.S. irrigation demand softened as farmers delayed investment amid lower projected farm income, higher interest rates, inflation concerns and economic uncertainty. International opportunities remain, but project timing, currency movements and regional political and economic conditions make demand difficult to forecast. New business activity in Russia and Belarus remains suspended.
- Year-end order backlog was $78.7 million, down from $96.8 million. The filing cautions that backlog fluctuates and is not a reliable indicator of revenue in succeeding quarters.
- The company accrued $11.5 million for groundwater remediation at its Lindsay, Nebraska site. The proposed remediation plan has not received final regulatory approval; actual costs could exceed the accrual.
- Lindsay is defending product-liability lawsuits involving its X-Lite end terminal, including a Missouri transportation commission lawsuit, and faces a U.S. 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 could not estimate a potential loss range. It states that the investigation’s outcome could have a material adverse effect.
- Other significant risks include agricultural commodity prices and weather, government infrastructure spending, raw-material availability and costs, foreign exchange, cybersecurity, product liability, and environmental and regulatory obligations.
Key facts for investors to verify
- Whether irrigation demand stabilizes or declines further, particularly in North America, and whether international project sales offset weakness.
- Whether higher margins and earnings remain sustainable as revenue changes and input costs, pricing and product mix evolve.
- Execution and expected returns from the FieldWise acquisition and the planned FY2024 capital-spending increase.
- Progress and potential financial exposure from the X-Lite litigation and DOJ investigation, and any changes to the $11.5 million remediation estimate.
- Actual timing and effect of infrastructure funding on Lindsay’s orders and revenue; backlog alone does not assure near-term sales.