Lindsay Corporation (LNN)
F3Q10 (Qtr End 05/31/10) Earnings Call Transcript
June 30, 2010 11:00 am ET
Rick Parod – President and CEO
Dave Downing – CFO, President - International Operations and IR Officer
Alex Potter – Piper Jaffray
Brian Drab – William Blair
Ned Borland – Hudson Securities
Paul Mammola – Sidoti & Company
Jon Braatz – Kansas City Capital
Jason Kraft – Cato Partners
Previous Statements by LNN
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Good morning. My name is Regina and I will be your conference operator today. At this time I would like to welcome everyone to the Lindsay Corporation’s third quarter 2010 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 “expectations,” “outlook,” “could,” “may,” “should” or similar expressions.
For these statements, we claim the protection of the Safe Harbor 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.
Good morning and thank you for joining us today. Revenues for the third quarter of fiscal 2010 were $100.1 million, up 18% over the same quarter last year. Net earnings were $6.2 million or $0.50 per diluted share compared with $5.3 million or $0.42 per diluted share in the same prior year third quarter.
Total revenues for the first nine months of fiscal 2010 were $271.2 million, up 3% increase from the same period of last year. Net earnings for the first nine months were $18.9 million or $1.50 per diluted share compared to $11.7 million or $0.94 per diluted share for the first nine months of fiscal 2009.
In the domestic irrigation market, revenues were $48.5 million for the third quarter, increasing 17% over the same quarter last year. While commodity prices for corn, soy beans and wheat were down 20% to 30% compared to the same time last year; commodity prices were relatively stable through the past six months to nine months, resulting in an improved farmer’s sentiments regarding capital goods purchases.
In addition, USDA projections for 2010 net farm income reflects a 12% increase over 2009 estimates and project farm income to be near the ten-year average. For the first nine months of fiscal 2010, domestic irrigation revenues were 120.1 million, down 7% from the same time last year. The comparable nine months period of fiscal 2009 reflected a record first quarter irrigation revenue resulting from a record backlog at the end of fiscal 2008.
International irrigation revenues were $31.9 million for the third quarter, 29% higher than the same period last year. Significant increases in exports to Australia and Mexico along with strong revenues from our South American, South African business unit drove the revenue increase in the quarter.
For the first nine months of fiscal 2010, international irrigation revenues were $81.4 million, up 13% from the same time last year; improving diets in a growing worldwide population combined with achieving water use efficiencies for mechanized irrigation systems continue to be positive market drivers globally.
Infrastructure revenues increased 8% over the third quarter of last year driven by increased sales of rail road structures and lights and commercial tubing. Road safety products revenue rose in the quarter and we have experienced somewhat higher core activity related to stimulus funded projects.
Year to date, as of the end of the third quarter, infrastructure revenues were $69.7 million, an increase of 12% over the same time last year, driven by the large Quickchange Moveable Barrier project completed in Mexico City earlier in the year.
The infrastructure segment revenue increased from that period was partially offset for the nine months period by lower revenues in contract manufacturing and commercial tubing in the previous two quarters.
For the company in total gross profit was $25.3 million for the third quarter versus $21.1 million in the same quarter last year. Gross margins increased to 25.2% compared to 24.9% for the third quarter last year.
Irrigation margins were higher in the quarter due to improved factory efficiencies at our Lindsay Nebraska facility and favorable regional mix compared to the same period last year. Infrastructure margins were lower than the comparable period last year due to less favorable product mix.
Total operating expenses for the quarter were $15.2 million versus $13.5 million in the same quarter last year. The higher operating expense level was due to increased incentive compensation and R&D expenses. For the quarter operating expenses were 15.2% of sales compared to 16% in the prior year’s third quarter.
Our order backlog was $33.9 million on May 31, 2010 as compared to $33.6 million on February 28, 2010 and $40.2 million on May 31, 2009. The May 2009 backlog included $19.6 million for the Mexico City road project that was completed in the first half of fiscal 2010.
Our balance sheet has continued to strengthen. Cash and cash equivalents were $20.3 million higher, while long term debt has been reduced by $13.2 million, improving our net cash position by 33.5 million. During the quarter the company repaid 7.1 million note related to the acquisition of Snoline in Italy.