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Lindsay's CEO Discusses Q1 2012 Results - Earnings Call Transcript

In the first quarter of fiscal 2012, we continued to experience growth in irrigation equipment demand in both domestic and international markets. We leveraged those sales gains into increased cash flows and higher margins from operations.

The margin gains were offset by an accrual in the quarter of $7.2 million or $0.37 per diluted share and expenses that we expect will be incurred in future years for environmental remediation at our Lindsay, Nebraska facility. Consolidated revenues for the quarter were a record $119 million, increasing 34% from $89 million in the same quarter last year. Net earnings were $2.9 million or $0.23 per diluted share, compared with $4.3 million or $0.34 per diluted share in the prior year's first quarter. Excluding the environmental accrual, net earnings were $7.7 million or $0.60 per diluted share.

I intend on devoting the majority of my comments to the underlying performance of our business, excluding the impact of the environmental accrual. Before doing so, let me spend a few minutes on the situation with our environmental liability. In 1992, the company entered into a consent decree with the EPA specifying monitoring and remediation actions regarding contamination that occurred in the '80s. Since that time, we have worked with Nebraska Department of Environmental Quality and the EPA, including numerous 5-year reviews and adjustments to the monitoring and remediation actions.

We have accrued expenses over the years based on the discussions with the EPA and the plans developed from the 5-year reviews. As a result of the most recent review, we've been discussing potential actions that could result in more permanent remediation solutions on the site. Based on preliminary findings of our environmental advisors, we determined in recent days that it was appropriate to accrue $7.2 million of expense that we expect will be incurred over the next 5 to 10 years in remediation activity in accordance with appropriate accounting treatment.

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