Lindsay Corporation

Good morning. My name is Vaishnavi, 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 2022 earnings call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star, then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw a question, please press star, then 2. Please note this event is being recorded. 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. Randy Wood, President and Chief Executive Officer. Please go ahead.

Thank you and good morning, everyone. Welcome to our first quarter earnings call. With me today is Brian Ketchum, our Chief Financial Officer. I'd like to start by once again thanking our employees around the world for their continued resiliency and focus during the global pandemic. Our manufacturing teams continue to operate safely and efficiently around the world. while our non-manufacturing resources continue to maintain productivity and efficiency while working from home or the office. We greatly appreciate all you're doing to support our dealers, distributors, and customers around the world. Turning to the current operating environment. Material cost increases and supply chain constraints continue to impact our business, and we expect that to persist through the spring and summer seasons for our irrigation and infrastructure products. Our teams continue to work diligently to offset these risks while minimizing customer impact. We have been able to leverage our sourcing talent and global footprint to take advantage of the strong market demand, and we continue to pass through cost increases and see a rational pricing environment in the market. In the area of innovation, we continue to enhance both the FieldMed and RoadConnect platforms. We see growth and adoption of these technologies that reduce labor and improve efficiency for our customers. We're also pleased to announce that Mike Stern, former head of the Climate Corporation and Digital Farming for Bayer, has joined our team as an innovation advisor reporting directly to me. Mike is a pioneer and trusted expert in the ag tech space, and his guidance will prove invaluable as we continue to expand our product offering and leverage partnerships to deliver value for our customers. And Mike's personal views on sustainability and environmentally sound management practices align well with our mission and purpose. We're also very pleased to welcome Pablo DC to our board of directors. Pablo is currently the executive chairman for Volkswagen Latin America. His previous experience includes finance leadership roles at CNH Global, Kimberly Clark and Monsanto. Pablo's experience in international operations and business management as well as his knowledge of corporate finance brings tremendous value to our board and our company and we look forward to his contributions. Pablo fills the board opening created by the departure of Michael Nall, who announced his retirement at the end of last year. Michael has been a significant contributor to Lindsay since he joined our board in 2003. We thank him for his dedication to our company and wish him the best in the future. Turning to market conditions. In the domestic U.S. irrigation market, demand remains strong as commodity prices and net farm income continue to be positive market drivers. Net farm income is projected to approach $117 billion in 2021. This is up 23% from the prior year and would be the highest farm income level since 2013. In international irrigation, we see some of the same positive market drivers linked to strong commodity prices and farm income in the developed markets, including Brazil, where we continue to set shipping records, Australia, New Zealand, and Western Europe. The developing project-oriented markets of Central and Eastern Europe, the Middle East, and Africa are also showing signs of continued strength linked to food security, economic diversification, and private investments. We have continued shipments of our $36 million project into Egypt and expect those deliveries will carry into the first half of our second quarter. We continue to be well positioned to compete for and win additional project business in this region. Moving to infrastructure. Consistent with discussions on our fourth quarter earnings call, we did not see any significant road zipper projects exit the sales funnel in the first quarter, and we have similar expectations for our second quarter. However, we do expect to see projects beginning to close and deliver in the second half of the year. The project funnel remains robust, and we are seeing signs of progress as we've been able to get back into the market to visit customers and actively move projects along. Maintaining the ability to travel will be key to managing the sales process an exiting project from the sales funnel. The Infrastructure and Investment Job Act was signed into law on November 15th. This legislation adds $110 billion in incremental funding to repair our roads and bridges and support major transformational projects. The bill also includes a $370 billion reauthorization of the Fixing America's Surface Transportation or FAST Act, This reauthorization, coupled with the increased infrastructure bill funding, provides long-term stability for surface transportation investments. We expect this will support project funding over the next several months, and we should see some market lift in the 2022 summer construction season. I'll now turn the call over to Brian to review our first quarter financial results.

Thank you, Randy, and good morning, everyone. Total revenues for the first quarter of fiscal 2022 increased 53% to $166.2 million, compared to $108.5 million in the prior year quarter. Net earnings for the quarter were $7.9 million, or 72 cents per diluted share, compared to net earnings of $7.1 million, or 65 cents per diluted share, in the prior year quarter. Net earnings for the quarter were reduced by an after-tax LIFO impact of approximately $4.5 million, or 41 cents per diluted share, while net earnings in the prior year quarter included an income tax benefit of $1.7 million, or 16 cents per diluted share, related to the release of a valuation allowance in a foreign jurisdiction. Irrigation segment revenues for the first quarter increased 67% to $145.9 million compared to $87.4 million in the prior year quarter. North America irrigation revenues of $79 million increased 50% compared to the prior year quarter. The increase in North America irrigation revenues resulted from a combination of higher irrigation equipment unit sales volume, and higher average selling prices. In the international irrigation markets, revenues of $66.9 million increased 94% compared to the prior year quarter. The increase in international irrigation revenues resulted primarily from higher unit sales volume, along with higher selling prices and a favorable foreign currency translation impact of $1.1 million. The largest sales volume increases were in the Brazil, Middle East, and Europe markets. Total irrigation segment operating income for the first quarter was $17.2 million, an increase of 62% compared to the prior year quarter. And operating margin was 11.8% of sales compared to 12.2% of sales in the prior year. The impact of higher irrigation system unit volume was partially offset by the impact of higher costs of raw materials and other inputs. While we have been successful in passing along most of our cost increases through higher prices, during the quarter we continued to experience additional inflation in a number of areas. First quarter operating results for irrigation were reduced by approximately $5 million, resulting from the impact of the LIFO method of accounting for inventories. under which more recent and more expensive raw material costs are included in cost of goods sold rather than in ending inventory values. We would expect to realize some benefit of this LIFO impact in future periods as the current inventory quantities decline. Infrastructure segment revenues for the first quarter were $20.2 million, a decrease of 4% compared to $21.1 million in the prior year quarter. The decrease resulted from lower road zipper system sales, which were partially offset by higher road zipper lease revenue and increased sales of road safety products compared to the prior year quarter. Infrastructure segment operating income for the first quarter was $2.8 million compared to $4.3 million in the prior year quarter. Infrastructure operating margin for the quarter was 13.7% of sales compared to 20.1% of sales in the prior year. Current year results reflect lower revenues and a less favorable margin mix of revenues compared to the prior year quarter and were also reduced by approximately $1 million resulting from the impact of LIFO. Turning to the balance sheet and liquidity, Our total available liquidity at the end of the first quarter was $164.9 million, with $114.9 million in cash, cash equivalents and marketable securities, and $50 million available under our revolving credit facility. Our total debt was $115.7 million, almost all of which matures in 2030. At the end of our first quarter, we were well within the financial covenants of our borrowing facilities, including a gross funded debt to EBITDA leverage ratio of 1.4 compared to a covenant limit of 3.0. We are well positioned going forward to invest in growth opportunities that create value for our shareholders. At this time, I'd like to turn the call over to the operator to take your questions.