Lindsay Corporation (LNN)
F1Q10 Earnings Call
December 22, 2009 11:00 am ET
Richard W. Parod – President, Chief Executive Officer & Director
David B. Downing – Chief Financial Officer & President Lindsay International
Ned Borland – Next Generation Equity Research
Michael Cox – Piper Jaffray
Brian Drab – William Blair & Company
Ryan Connors – Boenning & Scattergood, Inc.
Paul Mammola – Sidoti & Company
Jason Kraft – Cato Partners
Steve Gambuzza – Longbow Capital
Michael Coleman – Sterne Agee
[Omar Havez] – SunTerra Capital
Previous Statements by LNN
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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 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. Rick Parod, President and Chief Executive Officer.
Richard W. Parod
Revenues for the first quarter of fiscal 2010 were $86 million, 24% below the same prior year quarter and up 17% from the fourth quarter of fiscal 2009. Net earnings were $6.7 million or $0.53 per diluted share compared with $6.3 million or $0.51 per diluted share in the prior year’s first quarter. US irrigation revenues were $32.8 million for the first quarter decreasing 39% over the same quarter last year and rising 12% over the fourth quarter of fiscal 2009.
The first fiscal quarter is traditionally a low revenue quarter for irrigation equipment as farmers are typically focused on harvest activities. It is likely that the late and protracted harvest this fall also negatively impacted equipment demand. The comparable first quarter of fiscal 2009 reflected a record first quarter irrigation revenue working off a record backlog from the end of the previous fiscal year.
Agricultural commodity prices were relatively stable when compared to the same time last year and in general lenders for irrigation equipment purchases in the US remained willing and able to finance purchases. However, there are indications that requirements for obtaining financing have become somewhat more stringent.
International irrigation revenues were $20.5 million for the first quarter, 37% lower than the same period last year and 20% lower than the fourth quarter of fiscal 2009. Irrigation revenues decreased in most regions outside of the US partially offset by increases in Mexico, Brazil and Europe. The Brazilian market has shown fairly strong signs of recovery driven by increased sugarcane production for sugar and ethanol. Cane production in Brazil is estimated to be up approximately 7% over the previous year.
In Europe the higher revenues were in the traditional markets of Spain and France and revenues were lower in the CIS countries still impacted by funding availability. For all markets irrigation segment revenues were $53.3 million, down 38% from the same quarter last year. Approximately 85% of the revenue reduction was in unit volume due to the significant changes in the economic environment and the remainder in lower unit prices passing through reductions in input materials. Long term market drives of expanding fuel and bio fuel production and improving water use efficiencies through mechanized irrigation systems remains very positive.
Infrastructure revenues were $32.7 million in the quarter increasing 20% from the first quarter of last year and up more than 75% over the fourth quarter of fiscal 2009. Approximately 80% of the revenue for the $19.6 million project in Mexico City was realized in the first quarter and the remainder is expected to be realized in the second fiscal quarter of 2010. The anticipated project lists for barrier systems, traffic mitigation systems remains very strong. The timing of orders for these projects is uncertain and currently difficult to forecast in the present economic environment. Numerous projects have been delayed during the past year due to funding limitations or uncertainties.
While additional roadway projects have resulted from the federal stimulus package, future projects may be impacted by the uncertainties surrounding the passage of the new multiyear federal highway funding bill. Multiple short term extensions of funding are expected before any serious activity is undertaken to pass a multiyear bill due to apparent other priorities. While barrier system revenues were significantly higher in the quarter due to the project in Mexico, diversified manufacturing revenues were down approximately $5 million from the same quarter last year on lower commercial tubing and contract manufacturing revenues.
Overall gross profit was $25.8 million for the first quarter versus $28.6 million in the same quarter last year. Gross margins increased to 30% compared to 25.3% for the first quarter last year. Infrastructure gross margins increased on higher revenues and a favorable product mix while irrigation models remain stable. During the quarter, steal prices remained relatively low and average irrigation equipment prices remain unchanged from the fourth quarter of fiscal 2009.
Recently, steel prices have moved higher and are expected to rise further in future months. Total operating expenses for the quarter were $14.6 million versus $16.8 million in the same quarter last year. The $2.2 million lower expense level reflects the reductions made last fiscal year primarily in personnel related expenses. Our order backlog was $36.1 million on November 30, 2009 as compared to $43.6 million on August 31, 2009 and $40.1 million on November 30, 2008. Irrigation equipment backlog was up slightly from the same time last year.