OMAHA, Neb. — Lindsay Corp. (NYSE: LNN) announced results for its second quarter ended Feb. 29, 2016.
Second Quarter Results
Second quarter fiscal 2016 revenues were $120.6 million vs. $141.1 million of revenues in the same prior year period. Including a $13.0 million increase in environmental expenses, the Company incurred a net loss of $4.1 million or $0.37 per diluted share compared with net income of $9.0 million or $0.75 per diluted share in the prior year. The environmental charge, on an after tax basis, reduced net income by $8.7 million or $0.79 per diluted share.
Total irrigation equipment revenues decreased 5% to $103.1 million from $108.3 million in the prior fiscal year’s second quarter. U.S. irrigation revenues of $72.3 million increased 6% primarily due to revenues from acquired companies, including Elecsys Corp., which was acquired in January 2015. International irrigation revenues of $30.8 million decreased 24%. Excluding the effect of currency translation, international irrigation sales declined 15%, most significantly in Brazil and several export markets. Infrastructure revenues decreased 47% to $17.5 million due primarily to the completion of the Golden Gate Bridge Road Zipper project in the prior year and decreases in Contract and Tubing markets.
Gross margin was 26.9% of sales compared to 28% of sales in the prior year’s second quarter. Gross margin in irrigation increased by approximately 1 percentage point and infrastructure gross margin decreased by approximately 8 percentage points. The increase in irrigation gross margins is primarily a result of higher margins from value added product lines such as pump stations, filtration and M2M controls, while the competitive pricing pressures on center pivot sales were largely offset by lower input costs. The decrease in infrastructure gross margin was primarily due to sales mix from the decrease in Road Zipper sales.
Operating expenses increased $12.1 million to $37.1 million compared to the second quarter of the prior fiscal year. The increase includes $13.0 million for future environmental expense which was accrued after the Company completed additional environmental testing near a building at its Lindsay, Neb., facility. The Company’s accrual relates to contamination identified in 1982. The previous accrual did not include certain areas of potential contamination because the Company had been unable to determine the extent of contamination until further testing was conducted and was uncertain as to the remediation that might be required. While the updated estimate includes a number of uncertainties including the need for any remediation plan to be approved by the EPA, it represents the Company’s best estimate of remediation and operating and maintenance costs to meet the long-term regulatory requirements of the 1992 EPA consent decree at the Lindsay, Neb., facility.
Excluding the environmental expense, operating expenses decreased $0.9 million. The addition of Elecsys Corp. and SPF added $1.7 million in operating expenses, offset by $1.2 million in lower personnel related expenses and $0.9 million of reduced acquisition and integration expenses. Operating expenses were 30.8 percent of sales in the second quarter of fiscal 2016 compared with 17.7 percent of sales in the prior year period. Operating margins were (3.9)% in the second quarter, vs. 10.3% in the prior year period.
Cash and cash equivalents of $89.5 million were $77.7 million lower compared to the prior year second quarter. The Company repurchased 332,949 shares for $23.0 million during the second quarter and a total of 469,212 shares for $32.2 million during the first six months of fiscal 2016. $79.8 million remains available under the Company’s share repurchase program.
Backlog of unshipped orders at Feb. 29, 2016 was $52.6 million compared with $74.3 million at Feb. 28, 2015 and $61.9 million at Nov. 30, 2015.
Six Month Results
Total revenues for the six months ended Feb. 29, 2016 were $242.2 million vs. $275.9 million in the same prior year period. Foreign currency translation as compared to the prior year reduced year to date revenues by $11.5 million. Net earnings were $2.8 million or $0.25 per diluted share compared with $16.6 million or $1.36 per diluted share in the prior year. The current year includes $13.0 million of estimated environmental expenses compared to $1.5 million in the prior
Total irrigation equipment revenues decreased 8% to $204.4 million from $223.0 million during the first six months of the prior fiscal year. U.S. irrigation revenues of $131.5 million increased 1%, decreasing 10 % excluding the impact of acquisitions in the prior year. International irrigation revenues of $72.8 million decreased 21%, 11% excluding the effect of foreign currency translation. Infrastructure revenues decreased 29% to $37.8 million, primarily due to the completion of the Golden Gate Bridge Road Zipper project in the prior year.
Rick Parod, president and chief executive officer, commented, “The irrigation markets continue to be constrained by lower commodity prices and foreign exchange rates. Excluding the Golden Gate Bridge project last year and the incremental environmental charge this year, our second quarter 2016 operating profits were flat with the prior year quarter.”
Parod continued, “We are now in the midst of the primary selling season for irrigation equipment in North America. While we have seen signs of stabilization, the market continues to reflect reductions from peak periods in farmers’ investments in equipment due to the lowest projected net farm income since 2002. The current environment has near-term challenges, however the longer term drivers for our markets of population growth, expanded food production, efficient water use and infrastructure upgrades and expansion remain positive.”