Lindsay Corporation

Good morning. My name is Andrea, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lindsay Corporation first quarter fiscal year 2020 earnings call. During this call, management may make forward-looking statements that are subject to risks and uncertainties which reflect management's current beliefs, estimates of future economic circumstances, industry conditions, company performance, and financial results. Forward-looking statements include the information concerning possible or assumed future results of operations of the company, and those statements preceded by, followed by, or including the words expectation, outlook, could, may, should, or similar expressions. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. I would now like to turn the call over to Mr. Tim Hassinger, President and Chief Executive Officer, please go ahead.

Good morning, and thank you for joining our call. With me on today's call is Brian Ketchum, Chief Financial Officer, and Lori Zarkowski, our Chief Accounting Officer. The objective of this call is to discuss our quarter one results. Before we go to that overview, I'll make a few introductory comments. For the domestic irrigation business in the first quarter, farmer sentiment continued to be impacted by the unresolved trade issues and lower commodity prices. On the positive side, the recent market facilitation payments administered through USDA have helped farmer income in this challenging environment. In addition, The expected U.S.-China phase one trade deal completion this month does provide potential for stronger commodity prices moving forward. Our innovate and collaborate strategic direction in irrigation continues to progress. Last fiscal year, we launched PivotWatch, and it is exciting to see the market interest continue to increase for this product. In addition to the farmer interest for this product, that is sold through the Lindsay Dealer Network, Farmer's Edge will be deploying PivotWatch to their irrigated customers to support their agronomic capabilities. This will allow as applied irrigation information to be fed to their farm command platform through FieldNet. By integrating these two digital platforms, the goal is to have this fully connected water management solution on 2 million acres by the end of 2021. Our collaboration partnerships continue to expand, and we see them as key enablers to further the current field net market leadership position. Our sales data shows a direct correlation of our field net penetration percent to the market share of our pivot business. For this reason, we see our technology leadership position as being an important part of our overall growth strategy. For the infrastructure business, we continue to see favorable signs that the road zipper business is moving in a positive direction. In our first quarter, we secured a multi-year lease in Germany. Also, Currently there are potential projects in our sales funnel across significantly more countries than we've had in prior years, which reflects our desire to expand our geographical footprint. We also continue to focus on our shift left strategy. A key U.S. Midwest partner state is planning to more than double the number of projects and miles of barrier for this upcoming summer construction season. These are great examples that we are successfully addressing the need to grow this business and increase the leasing business. As we have said before, by addressing these two objectives, we can help to reduce the lumpiness associated with this business. Our focus on these two objectives is moving this business forward at an accelerated rate. Our overall sales funnel, projects based on a 50% probability of success, is at the highest level it has ever been. Also, the number of machines being leased is at the highest level ever. As these projects progress to the signed agreement stage, we will announce them on future updates. Our innovate and collaborate strategy is also advancing in the infrastructure business. Our focus on innovating and making the road zipper system a more attractive option is rapidly moving forward. We will be launching a new machine design this fiscal year for Nexco East, a company engaged in the construction, management, and operation of expressways in the eastern part of Japan, which will allow the machine to be transported between work sites without having to secure and load the machine onto special trailers to handle this task. This ease of use improvement will make the road zipper system even more attractive in that market as well as other markets around the world. Lastly, regarding our foundation for growth initiative, we have previously stated that we expect to realize 13 to 18 million in margin improvement from the four work streams that have been highlighted. Since the beginning of this transformational journey, our goal was to have these margin improvement projects implemented by the beginning of our fiscal year 2020. While we recognize that market conditions will have an impact on our ability to achieve our goal of 11% to 12% operating income, I can confirm that these margin improvement projects have been implemented and are delivering as we expected. What is clear to us, our Foundation for Growth initiative has led to a transformational change for Lindsay. So now, let's move to our Q1 results. For that, I'll turn the call over to Brian.

Thank you, Tim, and good morning, everyone. My comments regarding first quarter comparisons will refer to adjusted results for the prior year, which omit the impact of Foundation for Growth costs. Adjusted results from the for the prior year are detailed in the Regulation G disclosure at the end of the press release. No adjustments were made to current period results. Total revenues for the first quarter of fiscal 2020 were $109.4 million, compared to $112 million in the same quarter last year. Net earnings for the quarter were $8.3 million, or 77 cents per diluted share, compared to net earnings of $4.1 million or 38 cents per diluted share in the same quarter last year. Prior year revenues included $3.3 million associated with a company-owned irrigation dealership that was divested in the first quarter of fiscal 2019, while the net earnings impact of this divestiture was insignificant. Irrigation segment revenues for the first quarter of fiscal 2020 were $82.4 million compared to $87.6 million in the same quarter last year. North America irrigation revenues of $52.6 million were relatively flat compared to the prior year after excluding the impact of the divestiture. Higher irrigation system unit volume was offset by the impact of lower average selling prices and lower sales of replacement parts. Higher irrigation system unit volume came from regions supported by potato and dairy markets and was partially offset by lower volume in regions supported by grain and cotton markets. Average selling prices were lower than the first quarter last year as a result of the pass-through of lower steel costs. Domestic steel prices were approaching peak levels during the first quarter last year before starting to decline and moderate. Lower sales of replacement parts were the result of a timing difference in deliveries under our fall restocking program compared to the prior year. In the international irrigation markets, revenues of $29.7 million compared to $31.7 million in the same quarter last year, with approximately $1.1 million of the decrease resulting from differences in foreign currency translation rate. Increased sales in Brazil and certain other markets were offset by lower sales in developing markets. Although we continue to see a healthy amount of project opportunities in developing markets, delays in start dates have continued during the first quarter, pushing these projects to later in the fiscal year and creating risk to their eventual start date. Total irrigation segment operating income for the first quarter of $9.8 million was $1.9 million higher than the prior year. And operating margin improved to 11.8% compared to 9% in the prior year. Improved operating margin performance was driven by the execution of various margin improvement initiatives. The impact of these improvements was partially offset by the negative mix impact from lower sales of replacement parts. Infrastructure segment revenues for the first quarter of fiscal 2020 were $27 million, an increase of $2.7 million, or 15%, compared to the same quarter last year. The increase resulted from higher sales of road safety products and an increase in road zipper system lease revenue. A higher than expected portion of the Japan road zipper order was delivered during the quarter, with the remainder expected to be delivered in the second quarter. The prior year quarter included the majority of the revenue associated with the San Rafael Bridge project. Infrastructure segment operating income for the first quarter of $8.8 million increased $4.5 million compared to the prior year. Operating margin for the quarter was 32.4% of sales compared to 17.6% of sales in the prior year. Improved operating margin resulted from a more favorable mix of higher margin revenue and from improved cost and pricing performance. Cash and cash equivalents were $120.9 million at the end of the quarter compared to $127.2 million at the end of the prior fiscal year. Cash was utilized in the quarter to fund working capital increases in support of sales growth, as well as capital expenditures and dividend payments. No share repurchases were made during the quarter. However, a total of $63.7 million remains available under our share repurchase authorization. At this time, I'd like to turn the call over to the operator to take your questions.