LINDSAY CORP

Previous wording

The Company’s accounting policies that are most important to the presentation of its results of operations and financial condition, and which require the greatest use of judgments and estimates by management, are designated as its critical accounting policies. See discussion of the Company’s critical accounting policies under Item 7 in the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended August 31, 2023. Management periodically re-evaluates and adjusts its critical accounting policies as circumstances change. There were no significant changes in the Company’s critical accounting policies during the nine months ended May 31, 2024.

Current wording

The Company’s accounting policies that are most important to the presentation of its results of operations and financial condition, and which require the greatest use of judgments and estimates by management, are designated as its critical accounting policies. See discussion of the Company’s critical accounting policies under Item 7 in the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended August 31, 2024. Management periodically re-evaluates and adjusts its critical accounting policies as circumstances change. There were no significant changes in the Company’s critical accounting policies during the three months ended November 30, 2024.

Previous wording

Operating revenues for the three months ended May 31, 2024 were $139.2 million, a decrease of 15 percent compared to $164.6 million for the three months ended May 31, 2023. Irrigation segment revenues for the three months ended May 31, 2024 decreased 19 percent to $114.8 million from the same prior year period, while infrastructure segment revenues increased 11 percent to $24.4 million. Net earnings for the three months ended May 31, 2024 were $20.4 million, or $1.85 per diluted share, compared to net earnings of $16.9 million, or $1.53 per diluted share, for the three months ended May 31, 2023.

Current wording

Operating revenues for the three months ended November 30, 2024 were $166.3 million, an increase of 3 percent compared to $161.4 million for the three months ended November 30, 2023. Irrigation segment revenues increased 5 percent to $147.1 million and infrastructure segment revenues decreased 9 percent to $19.2 million. Net earnings for the three months ended November 30, 2024 were $17.2 million, or $1.57 per diluted share, compared to net earnings of $15.0 million, or $1.36 per diluted share, for the three months ended November 30, 2023. While operating income was similar to the prior year, net earnings were positively impacted by higher other income, driven primarily by an increase in interest income and favorable foreign currency translation results, and by a lower effective income tax rate.

Previous wording

Agricultural commodity prices – As of May 2024, U.S. corn prices have decreased approximately 24 percent and U.S. soybean prices have decreased approximately 7 percent from price levels prevailing in May 2023. The reduction in commodity prices is due primarily to higher production levels in calendar 2023 that resulted in increased supply and higher inventory levels at the end of the year. Agriculture commodity prices fluctuate based on supply factors, such as global production and inventory levels and the ongoing conflict between Ukraine and Russia, and demand factors such as food and feed consumption, biofuel production and the level of China's demand for agricultural imports.

Current wording

Agricultural commodity prices – As of November 2024, U.S. corn prices have decreased approximately 8 percent and U.S. soybean prices have decreased approximately 27 percent from November 2023. The reduction in commodity prices is due primarily to higher production levels in calendar 2024 that are resulting in increased supply and higher commodity inventory levels. Agriculture commodity prices continue to fluctuate based on supply factors such as global production and inventory levels and demand factors such as food and feed consumption, biofuel production and the level of China's demand for agricultural imports.

Previous wording

Net farm income –As of February 2024, the U.S. Department of Agriculture (the “USDA”) estimated 2024 U.S. net farm income to be $116.1 billion, a decrease of 26 percent from forecasted 2023 U.S. net farm income of $155.9 billion. The majority of this projected decrease is expected to come from a reduction in government support payments while cash receipts for crops is projected to decrease by 6 percent and cash expenses are projected to increase by 4 percent.

Current wording

Net farm income –As of December 2024, the U.S. Department of Agriculture (the “USDA”) estimated 2024 U.S. net farm income to be $140.7 billion, a decrease of 4 percent from 2023 U.S. net farm income of $146.7 billion. This projected decrease is resulting primarily from a reduction in government support payments and cash receipts for crops that is being partially offset by lower input costs.

Previous wording

The Agriculture Improvement Act of 2018 (the “Farm Bill”) was signed into law in December 2018 and provides a degree of certainty to growers, including funding for the Environmental Quality Incentives Program, which provides financial assistance to farmers to implement conservation practices, and is frequently used to assist in the purchase of center pivot irrigation systems. In November 2023, Congress voted to extend the Farm Bill, which is now set to expire at the end of September 2024.

Current wording

The Agriculture Improvement Act of 2018 (the “Farm Bill”) was signed into law in December 2018 and provides a degree of certainty to growers, including funding for the Environmental Quality Incentives Program, which provides financial assistance to farmers to implement conservation practices, and is frequently used to assist in the purchase of center pivot irrigation systems. In November 2023, Congress voted to extend the Farm Bill through September 30, 2024, at which date it expired without new legislation or another extension.

Previous wording

Changes to U.S. income tax laws enacted in December 2017 increased the benefit of certain tax incentives, such as the Section 179 income tax deduction and Section 168 bonus depreciation, which are intended to encourage equipment purchases by allowing 100 percent of the cost of equipment to be treated as an expense in the year of purchase rather than amortized over its useful life. This benefit is being phased out by 20 percent per year over a five-year period, beginning in 2023. For calendar 2023, the allowable deduction is 80 percent of the cost of equipment and in calendar 2024 the allowable deduction drops to 60 percent.

Current wording

Changes to U.S. income tax laws enacted in December 2017 increased the benefit of certain tax incentives, such as the Section 179 income tax deduction and Section 168 bonus depreciation, which are intended to encourage equipment purchases by allowing 100 percent of the cost of equipment to be treated as an expense in the year of purchase rather than amortized over its useful life. This benefit is being phased out by 20 percent per year over a five-year period, beginning in 2023. For calendar 2024, the allowable deduction is 60 percent of the cost of equipment and in calendar 2025 the allowable deduction drops to 40 percent.

Previous wording

U.S. net farm income levels in calendar 2023, although lower than historically high 2022 levels, supported farmer profitability and demand for investment in the first half of fiscal 2024. However, the forecasted decline in estimated 2024 net farm income has led to tempered demand for irrigation equipment during the third quarter of fiscal 2024, which is expected to continue until the outlook for net farm income improves. The Company has been able to maintain its pricing for irrigation equipment while inflationary pressure on steel and other raw material costs, as well as freight and logistics costs, have moderated compared to the same prior year period.

Current wording

The forecasted decline in estimated 2024 net farm income led to tempered demand for irrigation equipment which is expected to continue until the outlook for net farm income improves. The Company has been able to maintain its pricing for irrigation equipment for the most part, while inflationary pressure on steel and other raw material costs, as well as freight and logistics costs, have moderated.

Previous wording

The most significant opportunities for growth in irrigation sales over the next several years continue to be in international markets where irrigation use is less developed and demand is driven not only by commodity prices and net farm income, but also by food security, water scarcity and population growth. While international irrigation markets remain active with opportunities for further development and expansion, regional political and economic factors, including armed conflict, currency conditions and other factors can create a challenging environment. The Company continues to monitor the Ukraine and Russia conflict for both short and long-term implications and has suspended new business activity in Russia and Belarus since February 2022. Sales with Russian, Ukrainian and Belarusian customers historically have represented less than 5 percent of consolidated revenues. Additionally, international results are heavily dependent upon project sales which tend to fluctuate and can be difficult to forecast accurately. In May 2024, the Company announced a multi-year supply agreement to provide irrigation systems and remote management and scheduling technology for a large project in the Middle East and North Africa (MENA) region. The project is valued at more than $100 million in revenue, and is expected to be recognized over the period beginning in the fourth quarter of fiscal 2024 and continuing through the first quarter of fiscal 2026.

Current wording

The most significant opportunities for growth in irrigation sales over the next several years continue to be in international markets where irrigation use is less developed and demand is driven not only by commodity prices and net farm income, but also by food security, water scarcity and population growth. While international irrigation markets remain active with opportunities for further development and expansion, regional political and economic factors, including armed conflict, currency conditions and other factors can create a challenging environment. Additionally, international results are influenced by large project sales which tend to fluctuate and can be difficult to forecast accurately. In the fourth quarter of fiscal 2024, the Company began shipment under a multi-year supply agreement to provide irrigation systems and remote management and scheduling technology for a large project in the Middle East and North Africa (MENA) region. The project is valued at over $100 million in revenue, with equipment deliveries expected to continue throughout fiscal 2025.

Previous wording

The infrastructure business continues to be driven by the Company's transportation safety products, the demand for which largely depends on government spending for road construction and improvements. The enactment of the Infrastructure Investment and Jobs Act in November 2021 marked the largest infusion of federal investment into infrastructure projects in more than a decade. This legislation introduced $110 billion in incremental federal funding, planned for roads, bridges, and other transportation projects. The Company expects this additional funding to support higher demand in the U.S. for its transportation safety products.

Current wording

The infrastructure business continues to be driven by the Company's transportation safety products, the demand for which largely depends on government spending for road construction and improvements. The enactment of the Infrastructure Investment and Jobs Act ("IIJA") in November 2021 introduced $110 billion in incremental federal funding for roads, bridges, and other transportation projects, which the Company anticipates may support higher demand for its transportation safety products as states utilize these funds in construction projects. The federal programs under IIJA run through September 2026 with funding anticipated to extend up to two years beyond that date.

Previous wording

The backlog of unshipped orders at May 31, 2024 was $246.9 million compared with $94.5 million at May 31, 2023. Included in these backlogs are amounts of $62.0 million and $5.2 million, respectively, for orders that are not expected to be fulfilled within the subsequent twelve months. The backlog in both segments was higher compared to the prior year, with the increase in irrigation backlog resulting from the addition of the large project in the MENA region. The Company’s backlog can fluctuate from period to period due to the seasonality, cyclicality, timing and execution of contracts. Backlog typically represents long-term projects as well as short lead-time orders, and therefore is generally not a good indication of the next fiscal quarter’s revenues.

Current wording

The backlog of unshipped orders at November 30, 2024 was $168.2 million compared with $86.8 million at November 30, 2023. Included in these backlogs are amounts of $17.4 million and $2.8 million, respectively, for orders that are not expected to be fulfilled within the subsequent 12 months. The backlog in both segments was higher compared to the prior year, with the increase in irrigation backlog resulting from the addition of the large project in the MENA region. The Company’s backlog can fluctuate from period to period due to the seasonality, cyclicality, timing and execution of contracts. Backlog typically represents long-term projects as well as short lead-time orders, and therefore is generally not a good indication of the next fiscal quarter’s revenues.

Previous wording

Includes $5.9 million and $7.3 million of corporate operating expenses for the three months ended May 31, 2024 and May 31, 2023, respectively.

Current wording

Includes $8.0 million and $7.9 million of corporate operating expenses for the three months ended November 30, 2024 and 2023, respectively.

Previous wording

Operating revenues for the three months ended May 31, 2024 decreased 15 percent to $139.2 million from $164.6 million for the three months ended May 31, 2023, as irrigation revenues decreased $27.7 million and infrastructure revenues increased $2.4 million compared to the prior year period. The irrigation segment provided 83 percent of the Company’s revenue during the three months ended May 31, 2024 as compared to 87 percent for the three months ended May 31, 2023.

Current wording

Operating revenues for the three months ended November 30, 2024 increased 3 percent to $166.3 million from $161.4 million for the three months ended November 30, 2023, as irrigation revenues increased $6.9 million and infrastructure revenues decreased $2.0 million. The irrigation segment provided 88 percent of the Company’s revenue during the three months ended November 30, 2024 as compared to 87 percent for the three months ended November 30, 2023.

Previous wording

North America irrigation revenues for the nine months ended May 31, 2024 of $240.4 million decreased $8.9 million, or 4 percent, from $249.3 million for the nine months ended May 31, 2023. Slightly higher unit sales volume in the current year period was more than offset by lower sales of replacement parts, the impact of a less favorable mix of shorter machines, and slightly lower average selling prices compared to the same prior year period.

Current wording

North America irrigation revenues for the three months ended November 30, 2024 of $77.7 million decreased $11.7 million, or 13 percent, from $89.4 million for the three months ended November 30, 2023. The decrease resulted primarily from lower unit sales volume, as well as a less favorable mix of shorter machines, and slightly lower average selling prices compared to the prior year. An anticipated reduction in net farm income for calendar 2024 has resulted in lower demand for irrigation equipment.

Previous wording

International irrigation revenues for the nine months ended May 31, 2024 of $147.6 million decreased $45.6 million, or 24 percent, from $193.1 million for the nine months ended May 31, 2023. The decrease resulted primarily from lower sales volumes in Brazil and other Latin America markets compared to the same prior year period. In Brazil, market demand has declined due to a significant drop in local commodity prices that has had a negative impact on farmer profitability and liquidity. This decrease was partially offset by the favorable effects of foreign currency translation of approximately $3.9 million compared to the same prior year period.

Current wording

International irrigation revenues for the three months ended November 30, 2024 of $69.4 million increased $18.6 million, or 37 percent, from $50.8 million for the three months ended November 30, 2023. The increase resulted primarily from revenues related to shipments for a large project in the MENA region, along with higher sales in Europe and other parts of Latin America compared to the prior year. This increase was partially offset by lower sales in Brazil, where market demand remains lower than the prior year due to lower local commodity prices that have had a negative impact on farmer profitability and liquidity. The current year also includes an unfavorable impact of foreign currency translation of $2.1 million compared to the prior year.

Previous wording

Infrastructure segment revenues for the nine months ended May 31, 2024 of $64.1 million decreased $0.5 million, or 1 percent, from $64.6 million for the nine months ended May 31, 2023. The decrease resulted from lower sales of road safety products compared to the same prior year period. In addition, the decrease was partially attributable to lower Road Zipper System which more than offset higher lease revenue compared to the same prior year period. The prior year included a project that did not repeat in the current year.

Current wording

Infrastructure segment revenues for the three months ended November 30, 2024 of $19.2 million decreased $2.0 million, or 9 percent, from $21.2 million for the three months ended November 30, 2023. The decrease was primarily attributable to a difference in the timing of Road Zipper System lease revenues and lower sales of road safety products compared to the prior year.

Previous wording

Operating expenses of $26.6 million for the three months ended May 31, 2024 increased $0.3 million, or 1 percent, compared with $26.3 million for the three months ended May 31, 2023. Increased selling expense was partially offset by cost reductions in other areas.

Current wording

Operating expenses of $29.1 million for the three months ended November 30, 2024 increased $0.3 million, or 1 percent, compared with $28.8 million for the three months ended November 30, 2023. Higher administrative and selling expenses were partially offset by lower engineering and research expenses.

Previous wording

The Company recorded other income of $0.2 million for the three months ended May 31, 2024 compared to other expense of $1.2 million for the three months ended May 31, 2023. The change resulted primarily from foreign currency transaction losses of $0.1 million in the current year compared to foreign currency transaction losses of $0.9 million in the same prior year period, along with a $0.3 million increase in interest income.

Current wording

The Company recorded other income of $1.2 million for the three months ended November 30, 2024 compared to other expense of $0.1 million for the three months ended November 30, 2023. The change resulted primarily from higher foreign currency transaction gains of approximately $0.7 million compared to the prior year. The current year was also favorably impacted by higher interest income and lower interest expense totaling $0.3 million compared to the prior year.

Previous wording

The Company recorded income tax expense of $10.3 million and $22.3 million for the nine months ended May 31, 2024 and 2023, respectively. The effective income tax rate was 16.2 percent and 29.6 percent for the nine months ended May 31, 2024 and May 31, 2023, respectively. The lower effective tax rate in the current year period reflects a decreased proportion of earnings in higher rate foreign jurisdictions, along with the impact of discrete benefits totaling $6.1 million compared to discrete benefits totaling $0.8 million in the same prior year period.

Current wording

The Company recorded income tax expense of $4.9 million and $6.0 million for the three months ended November 30, 2024 and 2023, respectively. The effective income tax rate was 22.1 percent and 28.5 percent for the three months ended November 30, 2024 and 2023, respectively. The lower effective income tax rate resulted primarily from an increased proportion of earnings in lower rate foreign jurisdictions compared to the prior year. The impact of discrete items was minimal in both periods.

Previous wording

The Company's cash, cash equivalents, and marketable securities totaled $152.7 million at May 31, 2024 compared with $144.4 million at May 31, 2023 and $166.3 million at August 31, 2023. The Company requires cash for financing its receivables and inventories, paying operating expenses and capital expenditures, and for dividends and share repurchases. The Company meets its liquidity needs and finances its capital expenditures from its available cash and funds provided by operations along with borrowings under its credit arrangements described below. The Company’s investments in marketable securities are primarily comprised of United States government securities and investment grade corporate securities. The Company believes its current cash resources, investments in marketable securities, projected operating cash flow, and remaining capacity under its continuing bank lines of credit are sufficient to cover all its expected working capital needs, planned capital expenditures and dividends. The Company may require additional borrowings to fund potential acquisitions in the future.

Current wording

The Company's cash and cash equivalents totaled $194.1 million at November 30, 2024 compared with $190.9 million at August 31, 2024, and cash, cash equivalents, and marketable securities totaled $175.7 million at November 30, 2023. The increase resulted from the excess of cash provided by operating activities over the cash used in investing and financing activities. The Company requires cash for financing its receivables and inventories, paying operating expenses and capital expenditures, and for dividends and share repurchases. The Company meets its liquidity needs and finances its capital expenditures from its available cash and funds provided by operations along with borrowings under its credit arrangements described below. In the normal course of business, the Company enters into contracts and commitments which obligate the Company to make future payments. The Company does not have any additional off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. The Company believes its current cash resources, projected operating cash flow, and remaining capacity under its continuing bank lines of credit are sufficient to cover all its expected working capital needs, planned capital expenditures and dividends. The Company may require additional borrowings to fund potential acquisitions in the future.

Previous wording

The Company’s total cash and cash equivalents held by foreign subsidiaries were approximately $62.9 million, $54.6 million, and $64.6 million as of May 31, 2024, May 31, 2023, and August 31, 2023, respectively. The Company considers earnings in foreign subsidiaries to be indefinitely reinvested and would need to accrue and pay incremental state, local, and foreign taxes if such earnings were repatriated to the United States. The Company does not intend to repatriate the funds and does not expect these funds to have a significant impact on the Company’s overall liquidity.

Current wording

The Company’s total cash and cash equivalents held by foreign subsidiaries were approximately $94.1 million, $70.8 million, and $84.3 million as of November 30, 2024, November 30, 2023, and August 31, 2024, respectively. The Company considers earnings in foreign subsidiaries to be indefinitely reinvested and would need to accrue and pay incremental state, local, and foreign taxes if such earnings were repatriated to the United States. The Company does not intend to repatriate the funds and does not expect these funds to have a significant impact on the Company’s overall liquidity.

Previous wording

Cash flows used in investing activities totaled $32.4 million during the nine months ended May 31, 2024 compared to $18.9 million during the nine months ended May 31, 2023. Purchases of marketable securities amounted to $15.0 million in the current year compared to $4.9 million in the same prior year period. Purchases of property, plant, and equipment were $23.5 million, compared to $13.3 million in the same prior year period.

Current wording

Cash flows used in investing activities totaled $8.8 million during the three months ended November 30, 2024 compared to $18.2 million during the three months ended November 30, 2023. Purchases of property, plant, and equipment were $9.1 million, compared to $6.9 million in the prior year. The prior year also included net purchases of marketable securities of $10.7 million, while no such purchases or maturities occurred in the current year.

Previous wording

Cash flows used in financing activities totaled $30.2 million during the nine months ended May 31, 2024 compared to cash flows used in financing activities of $13.5 million during the nine months ended May 31, 2023. During the current year period, the Company repurchased $17.9 million of common stock.

Current wording

Cash flows used in financing activities totaled $5.3 million during the three months ended November 30, 2024 and were comparable to cash flows used in financing activities of $5.4 million during the three months ended November 30, 2023.

Previous wording

Capital expenditures for fiscal 2024 are expected to be approximately $30.0 million, including equipment replacement, productivity improvements, new product development and commercial growth investments. The increase over recent levels of capital expenditures is primarily related to modernization and productivity improvements planned at certain manufacturing facilities. The Company’s management does maintain flexibility to modify the amount and timing of some of the planned expenditures in response to economic conditions.

Current wording

Capital expenditures for fiscal 2025 are expected to be between $35.0 million and $40.0 million, including equipment replacement, productivity improvements, new product development and commercial growth investments. The increase over recent levels of capital expenditures is primarily related to modernization and productivity improvements planned at certain manufacturing facilities. The Company’s management does maintain flexibility to modify the amount and timing of some of the planned expenditures in response to economic conditions.

Previous wording

In the third quarter of fiscal 2024, the Company paid a quarterly cash dividend to stockholders of $0.35 per common share, or $3.8 million, compared to a quarterly cash dividend of $0.34 per common share, or $3.7 million, in the third quarter of fiscal 2023.

Current wording

In the first quarter of fiscal 2025, the Company paid a quarterly cash dividend to stockholders of $0.36 per common share, or $3.9 million, compared to a quarterly cash dividend of $0.35 per common share, or $3.9 million, in the first quarter of fiscal 2024.

Previous wording

During the three and nine months ended May 31, 2024, the Company repurchased 154 thousand shares of its common stock under the program in open market transactions for $17.9 million, including excise taxes of $0.2 million. There were no shares repurchased during the three or nine months ended May 31, 2023. As of May 31, 2024, the repurchased shares were held as treasury stock and $46.0 million of the authorization remained available for future share repurchases.

Current wording

During the three months ended November 30, 2024, the amount of common stock repurchased by the Company under the program in open market transactions was immaterial. There were no shares repurchased during the three months ended November 30, 2023. As of November 30, 2024, the repurchased shares were held as treasury stock and $41.4 million of the authorization remained available for future share repurchases.

Previous wording

Revolving Credit Facility. The Company has outstanding a $50.0 million unsecured Amended and Restated Revolving Credit Facility (the “Revolving Credit Facility”) with Wells Fargo Bank, National Association (“Wells Fargo”) expiring August 26, 2026. The Company intends to use borrowings under the Revolving Credit Facility for working capital purposes and to fund acquisitions. At May 31, 2024 and 2023, the Company had no outstanding borrowings under the Revolving Credit Facility. The amount of borrowings available at any time under the Revolving Credit Facility is reduced by the amount of standby letters of credit issued by Wells Fargo then outstanding. At May 31, 2024, the Company had the ability to borrow up to $50.0 million under the Revolving Credit Facility. The Revolving Credit Facility may be increased by up to an additional $50.0 million at any time, subject to additional commitment approval. Borrowings under the Revolving Credit Facility bear interest at a variable rate equal to the Secured Overnight Financing Rate ("SOFR") plus a margin of between 100 and 210 basis points depending on the Company’s leverage ratio then in effect (which resulted in a variable rate of 6.69 percent at May 31, 2024), subject to adjustment as set forth in the loan documents for the Revolving Credit Facility. Interest is paid on a monthly to quarterly basis depending on loan type. The Company currently pays an annual commitment fee on the unused portion of the Revolving Credit Facility. The fee is between 0.125 percent and 0.2 percent on the unused balance depending on the Company’s leverage ratio then in effect (which resulted in a fee of 0.125 percent at May 31, 2024).

Current wording

-23 - potential future acquisitions. At November 30, 2024 and 2023, the Company had no outstanding borrowings under the Revolving Credit Facility. The amount of borrowings available at any time under the Revolving Credit Facility is reduced by the amount of standby letters of credit issued by Wells Fargo then outstanding. At November 30, 2024, the Company had the ability to borrow up to $50.0 million under the Revolving Credit Facility. The Revolving Credit Facility may be increased by up to an additional $50.0 million at any time, subject to additional commitment approval. Borrowings under the Revolving Credit Facility bear interest at a variable rate equal to the Secured Overnight Financing Rate (“SOFR”) plus a margin of between 100 and 210 basis points depending on the Company’s leverage ratio then in effect (which resulted in a variable rate of 5.94 percent at November 30, 2024), subject to adjustment as set forth in the loan documents for the Revolving Credit Facility. Interest is paid on a monthly to quarterly basis depending on loan type. The Company currently pays an annual commitment fee on the unused portion of the Revolving Credit Facility. The fee is between 0.125 percent and 0.2 percent on the unused balance depending on the Company’s leverage ratio then in effect (which resulted in a fee of 0.125 percent at November 30, 2024).