Lindsay Corporation, a Nebraska-based company, filed its annual report (Form 10-K) for the fiscal year ended August 31, 2024. The company reported total revenues of $1.23 billion, a 10% increase from the previous year. Net income was $143.8 million, a 15% increase from the previous year. The company’s cash and cash equivalents increased by 12% to $243.8 million, and its total assets increased by 9% to $1.43 billion. The company’s common stock is listed on the New York Stock Exchange under the ticker symbol LNN, and as of February 29, 2024, the aggregate market value of the company’s outstanding common stock held by non-affiliates was $1.32 billion. As of October 21, 2024, the company had 10,846,482 shares of common stock outstanding.
Financial Overview and Outlook
The Company reported operating revenues of $607.1 million in fiscal 2024, a 10% decrease compared to the prior year. Irrigation segment revenues decreased 12% to $513.9 million, while infrastructure segment revenues increased 6% to $93.2 million. Net earnings decreased 8% to $66.3 million or $6.01 per diluted share.
The key drivers for the irrigation segment include agricultural commodity prices, net farm income, weather conditions, government policies, and currency fluctuations. Commodity prices and net farm income have declined, leading to tempered demand for irrigation equipment. However, international markets remain active with opportunities for growth, though regional factors can create challenges.
In the infrastructure segment, demand is tied to government spending on road construction and improvements. The Infrastructure Investment and Jobs Act passed in 2021 has provided increased funding, supporting higher Road Zipper System leasing revenues.
As of August 2024, the Company had a backlog of $180.9 million, up from $78.7 million the prior year, with the increase driven by a large project in the Middle East and North Africa region.
Results of Operations
The following table provides highlights of the Company’s fiscal 2024 results compared to fiscal 2023:
Metric | FY 2024 | FY 2023 | % Change |
---|---|---|---|
Operating Revenues | $607,074 | $674,084 | -10% |
Cost of Operating Revenues | $416,019 | $461,069 | -10% |
Gross Profit | $191,055 | $213,015 | -10% |
Gross Margin | 31.5% | 31.6% | - |
Operating Expenses | $114,447 | $110,831 | 3% |
Operating Income | $76,608 | $102,184 | -25% |
Operating Margin | 12.6% | 15.2% | - |
Other Income (Expense) | $2,442 | $(1,809) | -235% |
Income Tax Expense | $12,793 | $27,996 | -54% |
Effective Tax Rate | 16.2% | 27.9% | - |
Net Earnings | $66,257 | $72,379 | -8% |
Revenues decreased 10% driven by a 12% decline in irrigation segment revenues, partially offset by a 6% increase in infrastructure revenues. Gross profit and operating income also declined 10% and 25%, respectively, due to the lower irrigation revenues.
The decrease in income tax expense and effective tax rate was due to one-time benefits in Brazil and a lower proportion of earnings in higher tax rate foreign jurisdictions.
Segment Performance
The irrigation segment generated $513.9 million in revenues, down 12% from the prior year. Operating income decreased 28% to $87.5 million. The decline was driven by lower sales volumes in Brazil and other Latin American markets, partially offset by higher project sales in developing markets.
The infrastructure segment reported $93.2 million in revenues, up 6% year-over-year. Operating income increased 57% to $19.0 million, primarily due to higher Road Zipper System leasing revenues.
Liquidity and Capital Resources
The Company ended fiscal 2024 with $190.9 million in cash and cash equivalents, up from $166.3 million the prior year. Net working capital was $367.4 million compared to $351.4 million.
Cash flows provided by operating activities were $95.8 million, down from $119.7 million in the prior year, due to lower net earnings and a smaller reduction in working capital. Cash used in investing activities decreased to $25.9 million from $47.4 million, as fiscal 2023 included an acquisition.
The Company’s capital allocation priorities include investing in organic growth, synergistic acquisitions, dividends, and opportunistic share repurchases. Capital expenditures for fiscal 2025 are expected to be $50-55 million, higher than recent levels for facility modernization and productivity improvements.
In fiscal 2024, the Company paid $15.5 million in dividends and repurchased $22.5 million of common stock. The remaining authorization under the share repurchase program is $41.4 million.
The Company has $115 million in senior notes outstanding and a $50 million revolving credit facility, both of which contain certain financial covenants. As of August 2024, the Company was in compliance with all loan covenants.
Market Risk
The Company uses financial derivatives to mitigate exposure to volatility in interest rates and foreign currency exchange rates. Key transactional exposures include the Euro, Brazilian real, South African rand, Turkish lira, and Chinese renminbi relative to the U.S. dollar. A 10% adverse change in exchange rates is estimated to potentially decrease operating income by $3.3 million.
Outlook and Analysis
The Company’s financial performance in fiscal 2024 was impacted by declining irrigation demand due to lower commodity prices and farm incomes. However, the infrastructure segment saw growth, benefiting from increased government spending on road projects.
Looking ahead, the key factors that will influence the Company’s results include:
The Company’s diversified business model, with both irrigation and infrastructure segments, helps mitigate some of the cyclicality in the agriculture market. The infrastructure segment provides a source of more stable revenue and profitability.
Geographically, the Company sees the greatest growth opportunities in international irrigation markets, where usage is less developed. However, regional political and economic factors can create challenges in these markets.
The Company’s strong liquidity position and access to credit facilities provide flexibility to fund organic investments, acquisitions, and returns to shareholders. The capital allocation strategy balances growth initiatives with shareholder distributions.
Overall, the Company faces near-term headwinds in the irrigation business, but the long-term drivers of global population growth and the need for efficient food production remain favorable. The infrastructure segment provides a complementary revenue stream. By executing on its strategic priorities, the Company is well-positioned to navigate the current environment and drive shareholder value over the long term.