Lindsay CEO Discusses Q1 2011 Results - Earnings Call Transcript
Lindsay Corporation (LNN)
Q1 2011 Earnings Call
December 22, 2010 11:00 AM ET
Executives
Rick Parod – President and CEO
Dave Downing –
President, International Operations and CFO
Analysts
Ned Borland – Hudson Securities
Brian Drab – William Blair
Ryan Connors – Janney Montgomery
Schon Williams – BB&T Capital Markets
Jon Braatz – Kansas City Capital
David Rose – Wedbush Securities
Michael Coleman – Sterne, Agee
Sean Boyd – Westcliff Capital Management
Presentation
Operator
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Good morning. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lindsay Corporation First Quarter 2011 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions)
During this call, management may make forward-looking statements that are subject to risks and uncertainties, and which reflect management’s current beliefs and 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 expect -- expectation, outlook, could, may, should, or similar expressions. For these statements, we claim the protections of the Safe Harbor or forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
I would now like to turn the call over to Mr. Rick Parod, President and Chief Executive Officer. Please go ahead, sir.
Rick Parod
Good morning and thank you for joining us today. Revenues for the first quarter of fiscal 2011 were $89.2 million, increasing 4% over the same quarter last year. Net earnings were $4.3 million or $0.34 per diluted share, compared with $6.7 million or $0.53 per diluted share in the prior year’s first quarter.
In the U.S. irrigation market, revenues were $36.6 million for the first quarter, increasing 14% over the same quarter last year. Agricultural commodity prices remain strong with corn increasing 60%, soybeans up 25% and wheat increasing over 35% from the same time last year.
The most recent USDA projections for 2010 net farm income show a 31% increase over 2009 and project it to be the third highest on record. That coupled with the rising commodity prices has created positive economic conditions for U.S. farmers, enhancing their investment perspective. Irrigation equipment order flow is strong as we head into the peak selling season.
International irrigation revenues were $23.4 million for the first quarter, increasing 11% from the same period last year. Revenues increased significantly in exports to the Latin American and Australia and New Zealand markets, and we realized notable revenue increases in our irrigation business units in China and Brazil.
Long-term market drivers of improving diets and a growing worldwide population, combined with water use efficiencies available from mechanized irrigation systems, continue to be positive drivers for global irrigation equipment demand.
Infrastructure business segment revenues were $29.2 million, decreasing 11% from the same quarter last year. The first quarter of the prior year included approximately $16 million of the $20 million Mexico City barrier project, which was completed in the second quarter of that year.
During the first fiscal quarter of 2011, we completed and shipped approximately $8 million of a major QuickChange Moveable Barrier project on the east coast of U.S., worth approximately $15 million in total and we expect to ship the remainder of that project in the second fiscal quarter of 2011.
The lower revenues in the quarter on a year-to-year comparative basis also adversely impacted operating margin for the infrastructure segment as the QMB product line earns the highest margin in that business segment. We continue to see strong interest in our moveable barrier products and maintain a healthy ongoing potential project lift.
However, the overall outlook for highway infrastructure spending remains uncertain with a multiyear U.S. highway bill not expected until sometime in 2011 and given global governmental budget constraints.
Gross profit was $24.2 million for the first quarter versus $25.8 million in the same quarter last year. Gross margins were 27.2%, compared to 30% for the first quarter of last year.
Infrastructure gross margins were lower in the quarter resulting from the lower QuickChange Moveable Barrier project revenues. Irrigation revenue -- irrigation gross margins were approximately the same as the first quarter of the previous year.
Operating expenses for the first quarter were $17.6 million versus $14.6 million for the first quarter of fiscal 2010. The quarter included $700,000 of incremental expense for environmental monitoring and remediation which is part of an ongoing EPA work plan at our Lindsay, Nebraska facility.
In addition, the quarter included higher product development costs, higher personnel related costs, sales commissions for the QMB project and incremental expenses from Digitec, the small technology acquisition made at the end of fiscal 2010. Many of the increased operating expenses in the quarter reflect investments related to growth initiatives for both business segments.
Our order backlog was $59.7 million on November 30, 2010, as compared to $36.1 million November 30, 2009. While the first fiscal quarter is typically not indicative of the irrigation equipment demand for the fourth coming selling season, the November 2010 or 2011 -- November 2010 backlog represents a record first quarter backlog in total and for irrigation. The infrastructure backlog is also higher versus the same time last year.
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