Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2023
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-13419
Lindsay Corporation
(Exact name of registrant as specified in its charter)
Delaware
47-0554096
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
18135 Burke Street, Suite 100, Omaha, Nebraska
68022
(Address of principal executive offices)
(Zip Code)
402‑829-6800
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $1.00 par value
LNN
New York Stock Exchange, Inc.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer
☒
Accelerated filer
☐
Non‑accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of June 26, 2023, 11,008,945 shares of the registrant’s common stock were outstanding.
INDEX FORM 10-Q
Page
Part I – FINANCIAL INFORMATION
3
ITEM 1 – Financial Statements
Condensed Consolidated Statements of Earnings for the three and nine months ended May 31, 2023 and May 31, 2022
Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended May 31, 2023 and May 31, 2022
4
Condensed Consolidated Balance Sheets as of May 31, 2023, May 31, 2022, and August 31, 2022
5
Condensed Consolidated Statements of Shareholders’ Equity for the three and nine months ended May 31, 2023 and May 31, 2022
6
Condensed Consolidated Statements of Cash Flows for the nine months ended May 31, 2023 and May 31, 2022
8
Notes to the Condensed Consolidated Financial Statements
9
ITEM 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
17
ITEM 3 – Quantitative and Qualitative Disclosures about Market Risk
25
ITEM 4 – Controls and Procedures
26
Part II – OTHER INFORMATION
27
ITEM 1 – Legal Proceedings
ITEM 1A – Risk Factors
ITEM 2 – Unregistered Sales of Equity Securities and Use of Proceeds
ITEM 3 – Defaults Upon Senior Securities
ITEM 4 – Mine Safety Disclosures
ITEM 5 – Other Information
ITEM 6 – Exhibits
28
SIGNATURES
29
- 2 -
ITEM 1 - Financial Statements
LINDSAY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three months ended
Nine months ended
($ and shares in thousands, except per share amounts)
May 31,2023
May 31,2022
Operating revenues
$
164,553
214,259
506,953
580,547
Cost of operating revenues
111,332
152,579
346,454
438,486
Gross profit
53,221
61,680
160,499
142,061
Operating expenses:
Selling expense
8,681
8,148
27,092
24,070
General and administrative expense
13,061
14,647
41,237
40,548
Engineering and research expense
4,522
3,723
13,350
10,582
Total operating expenses
26,264
26,518
81,679
75,200
Operating income
26,957
35,162
78,820
66,861
Other income (expense):
Interest expense
(948
)
(1,006
(2,895
(3,345
Interest income
680
118
1,545
456
Other income (expense), net
(957
1,282
(2,000
264
Total other income (expense)
(1,225
394
(3,350
(2,625
Earnings before income taxes
25,732
35,556
75,470
64,236
Income tax expense
8,851
10,483
22,320
16,696
Net earnings
16,881
25,073
53,150
47,540
Earnings per share:
Basic
1.53
2.28
4.83
4.34
Diluted
4.80
4.31
Shares used in computing earnings per share:
11,008
10,978
11,001
10,960
11,052
11,021
11,063
11,020
Cash dividends declared per share
0.34
0.33
1.02
0.99
See accompanying notes to condensed consolidated financial statements.
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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ in thousands)
Other comprehensive (loss) income:
Defined benefit pension plan adjustment, net of tax
39
49
119
146
Foreign currency translation adjustment, net of hedging activities and tax
(507
991
(1,385
(362
Unrealized gain (loss) on marketable securities, net of tax
60
(65
132
(227
Total other comprehensive (loss) income, net of tax (benefit) expense of ($134), $257, ($552), and $238 respectively
(408
975
(1,134
(443
Total comprehensive income
16,473
26,048
52,016
47,097
- 4 -
CONDENSED CONSOLIDATED BALANCE SHEETS
($ and shares in thousands, except par values)
August 31,2022
ASSETS
Current assets:
Cash and cash equivalents
131,577
81,757
105,048
Marketable securities
12,806
13,930
11,460
Receivables, net of allowance of $5,113, $4,197, and $4,118, respectively
154,167
155,518
138,200
Inventories, net
166,759
195,566
193,776
Other current assets, net
25,943
28,663
28,617
Total current assets
491,252
475,434
477,101
Property, plant, and equipment:
Cost
252,741
239,001
240,981
Less accumulated depreciation
(155,749
(144,560
(146,509
Property, plant, and equipment, net
96,992
94,441
94,472
Intangibles, net
16,860
18,769
18,208
Goodwill
67,441
67,476
67,130
Operating lease right-of-use assets
17,378
20,263
19,181
Deferred income tax assets
11,518
7,857
9,313
Other noncurrent assets
22,177
27,676
25,248
Total assets
723,618
711,916
710,653
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
42,207
72,350
60,036
Current portion of long-term debt
225
221
222
Other current liabilities
90,616
101,243
100,684
Total current liabilities
133,048
173,814
160,942
Pension benefits liabilities
4,653
5,474
4,892
Long-term debt
115,209
115,384
115,341
Operating lease liabilities
18,119
20,688
19,810
Deferred income tax liabilities
689
730
1,054
Other noncurrent liabilities
15,104
15,056
15,256
Total liabilities
286,822
331,146
317,295
Shareholders' equity:
Preferred stock of $1 par value - authorized 2,000 shares; no shares issued and outstanding
—
Common stock of $1 par value - authorized 25,000 shares; 19,092, 19,063, and 19,063 shares issued, respectively
19,092
19,063
Capital in excess of stated value
96,627
92,516
94,006
Retained earnings
620,922
564,805
579,000
Less treasury stock - at cost, 8,083 shares
(277,238
Accumulated other comprehensive loss, net
(22,607
(18,376
(21,473
Total shareholders' equity
436,796
380,770
393,358
Total liabilities and shareholders' equity
- 5 -
Lindsay Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Shares ofcommonstock
Shares oftreasurystock
Commonstock
Capital inexcess ofstatedvalue
Retainedearnings
Treasurystock
Accumulatedothercomprehensiveloss,net
Totalshareholders’equity
Balance at August 31, 2021
18,991
8,083
86,495
528,130
(17,933
338,445
Comprehensive income:
Other comprehensive loss
Cash dividends ($.99) per share
(10,865
Issuance of common shares under share compensation plans, net
72
1,960
2,032
Share-based compensation expense
4,061
Balance at May 31, 2022
Balance at August 31, 2022
Cash dividends ($1.02) per share
(11,228
(2,154
(2,125
4,775
Balance at May 31, 2023
- 6 -
Balance at February 28, 2022
19,061
90,711
543,355
(19,351
356,538
Other comprehensive income
Cash dividends ($.33) per share
(3,623
2
155
157
1,650
Balance at February 28, 2023
19,091
94,834
607,784
(22,199
422,272
Cash dividends ($0.34) per share
(3,743
1
106
107
1,687
- 7 -
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
May 31, 2023
May 31, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization
14,466
14,930
Provision for uncollectible accounts receivable
985
734
Deferred income taxes
(1,548
514
Unrealized foreign currency transaction loss (gain)
2,045
(754
Other, net
574
645
Changes in assets and liabilities:
Receivables
(15,842
(63,365
Inventories
25,289
(49,209
Other current assets
4,401
1,669
(17,953
26,319
(11,865
822
Other noncurrent assets and liabilities
691
(8,840
Net cash provided by (used in) operating activities
59,168
(24,934
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, and equipment
(13,283
(12,222
Purchases of marketable securities
(4,932
(18,468
Proceeds from maturities of marketable securities
3,675
23,592
Other investing activities, net
(4,399
(2,952
Net cash used in investing activities
(18,939
(10,050
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options
2,894
Common stock withheld for payroll tax obligations
(2,471
(1,181
Proceeds from employee stock purchase plan
346
319
Principal payments on long-term debt
(166
(163
Dividends paid
Net cash used in financing activities
(13,519
(8,996
Effect of exchange rate changes on cash and cash equivalents
(181
(1,370
Net change in cash and cash equivalents
26,529
(45,350
Cash and cash equivalents, beginning of period
127,107
Cash and cash equivalents, end of period
- 8 -
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Basis of Presentation
The condensed consolidated financial statements are presented in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and do not include all of the disclosures normally required by U.S. generally accepted accounting principles (“U.S. GAAP”) as contained in Lindsay Corporation’s (the “Company”) Annual Report on Form 10-K. Accordingly, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s most recent Annual Report on Form 10-K for the fiscal year ended August 31, 2022.
In the opinion of management, the condensed consolidated financial statements of the Company reflect all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position and the results of operations and cash flows for the periods presented. The results for interim periods are not necessarily indicative of trends or results expected by the Company for a full year. The condensed consolidated financial statements were prepared using U.S. GAAP. These principles require us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Actual results could differ from these estimates.
Recent Accounting Guidance Adopted
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting and related disclosure requirements for income taxes. The Company adopted this standard in the first quarter of its fiscal 2022. The adoption of this ASU did not have a material impact on its condensed consolidated financial statements.
Recent Accounting Guidance Not Yet Adopted
In September 2022, the FASB issued ASU No. 2022-04, Liabilities - Supplier Finance Programs, which requires annual and interim disclosures for entities that finance its purchases with supplier finance programs. These amendments are effective for the Company beginning in its fiscal 2024, except for the amendment on rollforward information, which is effective for the Company beginning in its fiscal 2025. The adoption of this ASU is not expected to have a material impact on its condensed consolidated financial statements.
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Note 2 – Revenue Recognition
Disaggregation of Revenue
A breakout by segment of revenue recognized over time versus at a point in time for the three and nine months ended May 31, 2023 and 2022 is as follows:
Irrigation
Infrastructure
Total
Point in time
135,990
16,817
152,807
183,085
22,083
205,168
Over time
6,581
1,383
7,964
5,608
1,750
7,358
Revenue from the contracts with customers
142,571
18,200
160,771
188,693
23,833
212,526
Lease revenue
3,782
1,733
Total operating revenues
21,982
25,566
423,212
51,743
474,955
498,468
52,806
551,274
19,218
4,494
23,712
16,892
3,959
20,851
442,430
56,237
498,667
515,360
56,765
572,125
8,286
8,422
64,523
65,187
Further disaggregation of revenue is disclosed in the Note 13 – Industry Segment Information.
For contracts with an initial length longer than twelve months, the unsatisfied performance obligations were $1.6 million at May 31, 2023.
Contract Balances
Contract assets arise when recorded revenue for a contract exceeds the amounts billed under the terms of such contract. Contract liabilities arise when billed amounts exceed revenue recorded. Amounts are billable to customers upon various measures of performance, including achievement of certain milestones and completion of specified units of completion of the contract. At May 31, 2023, May 31, 2022, and August 31, 2022, contract assets amounted to $1.3 million, $1.0 million, and $0.9 million, respectively. These amounts are included within other current assets on the condensed consolidated balance sheets.
Contract liabilities include advance payments from customers and billings in excess of delivery of performance obligations. At May 31, 2023, May 31, 2022, and August 31, 2022, contract liabilities amounted to $21.2 million, $35.0 million, and $30.6 million, respectively. Contract liabilities are included within other current liabilities and other noncurrent liabilities on the condensed consolidated balance sheets. During the Company’s nine months ended May 31, 2023 and 2022, the Company recognized $26.3 million and $32.7 million of revenue that were included in the liabilities as of August 31, 2022 and 2021 respectively. The revenue recognized was due to applying advance payments received for the performance obligations completed during the quarter.
Note 3 – Net Earnings per Share
Basic earnings per share is calculated on the basis of weighted average outstanding common shares. Diluted earnings per share is calculated on the basis of basic weighted average outstanding common shares adjusted for the dilutive effect of stock options, restricted stock unit awards and other dilutive securities.
- 10 -
The following table shows the computation of basic and diluted net earnings per share for the three and nine months ended May 31, 2023 and 2022:
Numerator:
Denominator:
Weighted average shares outstanding
Diluted effect of stock awards
44
43
62
Weighted average shares outstanding assuming dilution
Basic net earnings per share
Diluted net earnings per share
Certain stock options and restricted stock units were excluded from the computation of diluted net earnings per share because their effect would have been anti-dilutive. Performance stock units are excluded from the calculation of dilutive potential common shares until the threshold performance conditions have been satisfied. The number of securities excluded from the computation of earnings per share because their effect would have been anti-dilutive was not significant for the three and nine months ended May 31, 2023 and 2022.
Note 4 – Income Taxes
The Company recorded income tax expense of $8.9 million and $10.5 million for the three months ended May 31, 2023 and 2022, respectively, and recorded income tax expense of $22.3 million and $16.7 million for the nine months ended May 31, 2023 and 2022, respectively.
It is the Company’s policy to report income tax expense for interim periods using an estimated annual effective income tax rate. The estimated annual effective income tax rate was 30.7 percent and 28.2 percent for the nine months ended May 31, 2023 and 2022, respectively. The increase in the estimated annual effective income tax rate relates primarily to the change in earnings mix among foreign operations and the finalization of U.S. tax regulations related to foreign tax credits in calendar 2022.
The tax effects of significant or unusual items are not considered in the estimated annual effective income tax rate. The tax effects of such discrete events are recognized in the interim period in which the events occur. The Company recorded discrete items resulting in an income tax benefit of $0.8 million and $1.4 million for the nine months ended May 31, 2023 and 2022, respectively. The discrete items recorded primarily relate to the vesting of share-based compensation awards.
Note 5 – Inventories
Inventories consisted of the following as of May 31, 2023, May 31, 2022, and August 31, 2022:
Raw materials and supplies
82,323
93,956
93,469
Work in process
12,720
18,941
12,603
Finished goods and purchased parts, net
95,847
105,042
110,022
Total inventory value before LIFO adjustment
190,890
217,939
216,094
Less adjustment to LIFO value
(24,131
(22,373
(22,318
Of the $166.8 million, $195.6 million, and $193.8 million of net inventories at May 31, 2023, May 31, 2022, and August 31, 2022, respectively, $45.3 million, $53.7 million, and $55.5 million, respectively, was valued on the last-in, first-out ("LIFO") basis, and $121.5 million, $141.9 million, and $138.3 million, respectively, was valued on the first-in, first-out ("FIFO") or average cost methods.
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Note 6 – Long-Term Debt
The following table sets forth the outstanding principal balances of the Company’s long-term debt as of the dates shown:
Series A Senior Notes
115,000
Elecsys Series 2006A Bonds
766
931
Total debt
115,766
115,985
115,931
Less current portion
(225
(221
(222
Less unamortized debt issuance costs
(332
(380
(368
Total long-term debt
Principal payments on the debt are due as follows:
Due within
$ in thousands
1 year
2 years
229
3 years
234
4 years
78
Thereafter
Note 7 – Fair Value Measurements
The following table presents the Company’s financial assets and liabilities measured at fair value, based upon the level within the fair value hierarchy in which the fair value measurements fall, as of May 31, 2023, May 31, 2022, and August 31, 2022. There were no transfers between any levels for the periods presented.
Level 1
Level 2
Level 3
Marketable securities:
Corporate bonds
11,360
U.S. treasury securities
1,446
Derivative asset
2,817
10,754
3,176
1,080
August 31, 2022
9,668
1,792
5,505
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The Company’s investment in marketable securities consists of United States treasury bonds and investment grade corporate bonds. The marketable securities are classified as available-for-sale and are carried at fair value with the change in unrealized gains and losses reported as a separate component on the condensed consolidated statements of comprehensive income until realized. The Company determines fair value using data points that are observable, such as quoted prices and interest rates. The amortized cost of the investments approximates fair value. Investment income is recorded within other income (expense) on the condensed consolidated statements of earnings. As of May 31, 2023, approximately 70 percent of the Company’s marketable securities investments mature within one year and 30 percent mature within one to two years.
The Company enters into derivative instrument agreements to manage risk in connection with changes in foreign currency. The Company only enters into derivative instrument agreements with counterparties who have highly rated credit and does not enter into derivative instrument agreements for trading or speculative purposes. The fair values are based on inputs other than quoted prices that are observable for the asset or liability and are determined by standard calculations and models that use readily observable market parameters. These inputs include foreign currency exchange rates and interest rates. Industry standard data providers are the primary source for forward and spot rate information for both interest rates and foreign currency exchange rates.
On March 28, 2022, the Company entered into a fixed-to-fixed cross currency swap with a notional amount of $50.0 million, or €45.6 million, that is set to mature on March 30, 2027. The Company elected the spot method for designating this contract as a net investment hedge. Changes in the fair value of this contract are reported in accumulated other comprehensive loss on the condensed consolidated balance sheets. The fair value of this contract as of May 31, 2023, is disclosed in the table above, and is recorded within other noncurrent assets on the condensed consolidated balance sheets.
There were no required fair value adjustments for assets and liabilities measured at fair value on a non-recurring basis for the nine months ended May 31, 2023 or 2022.
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Note 8 – Commitments and Contingencies
In the ordinary course of its business operations, the Company enters into arrangements that obligate it to make future payments under contracts such as lease agreements. Additionally, the Company is involved, from time to time, in commercial litigation, employment disputes, administrative proceedings, business disputes and other legal proceedings. The Company has established accruals for certain proceedings based on an assessment of probability of loss. The Company believes that any such currently-pending proceedings are either covered by insurance or would not have a material effect on the business or its consolidated financial statements if decided in a manner that is unfavorable to the Company. Such proceedings are exclusive of environmental remediation matters which are discussed separately below.
Infrastructure Products
The Company is currently defending a number of product liability lawsuits arising out of vehicle collisions with highway barriers incorporating the Company’s X-Lite® end terminal. Despite the September 2018 reversal of a sizable judgment against a competitor, the Company expects that the significant attention brought to the infrastructure products industry by the original judgment may lead to additional lawsuits being filed against the Company and others in the industry.
The Company, certain of its subsidiaries, and certain third parties which originally designed the X-Lite end terminal have also been named in a lawsuit filed on June 9, 2020 in the Circuit Court of Cole County, Missouri by Missouri Highways and Transportation Commission (“MHTC”). MHTC alleges, among other things, that the X-Lite end terminal was defectively designed and failed to perform as designed, intended, and advertised, leading to MHTC’s removal and replacement of X-Lite end terminals from Missouri’s roadways. MHTC alleges strict liability (defective design and failure to warn), negligence, breach of express warranties, breach of implied warranties (merchantability and fitness for a particular purpose), fraud, and public nuisance. MHTC seeks compensatory damages, interest, attorneys’ fees, and punitive damages.
The Company believes it has meritorious factual and legal defenses to each of the lawsuits discussed above and is prepared to vigorously defend its interests. Based on the information currently available to the Company, the Company does not believe that a loss is probable in any of these lawsuits; therefore, no accrual has been included in the Company’s consolidated financial statements. While it is possible that a loss may be incurred, the Company is unable to estimate a range of potential loss due to the complexity and current status of these lawsuits. However, the Company maintains insurance coverage to mitigate the impact of adverse exposures in these lawsuits and does not expect that these lawsuits will have a material adverse effect on its business or its consolidated financial statements.
In June 2019, the Company was informed by letter that the Department of Justice, Civil Division and U.S. Attorney’s Office for the Northern District of New York, with the assistance of the Department of Transportation, Office of Inspector General, are conducting an investigation of the Company relating to the Company’s X-Lite end terminal and potential violations of the federal civil False Claims Act. Depending on the outcome of this matter, there could be a material adverse effect on the Company’s business or its consolidated financial statements. Given the current posture of the matter, the Company is unable to estimate a range of potential loss, if any, or to express an opinion regarding the ultimate outcome.
Environmental Remediation
In previous years, the Company committed to a plan to remediate environmental contamination of the groundwater at and adjacent to its Lindsay, Nebraska facility (the “site”). The current estimated aggregate accrued cost of $13.1 million is based on consideration of remediation options which the Company believes could be successful in meeting the long-term regulatory requirements of the site. The Company submitted a revised remedial alternatives evaluation report to the U.S. Environmental Protection Agency (“EPA”) and the Nebraska Department of Environment and Energy (the “NDEE”) in August 2020 to review remediation alternatives and proposed plans for the site. While the proposed remediation plan is preliminary and has not been approved by the EPA or the NDEE, an in situ thermal remediation pilot study has been approved to be conducted by the Company at a specific location on the site. The Company commenced implementation of the pilot program in the second half of calendar 2022 and expects to complete the pilot program in calendar 2023. Of the total liability as of May 31, 2023, $8.7 million was calculated on a discounted basis using a discount rate of 1.2 percent, which represents a risk-free rate. This discounted portion of the liability amounts to $9.8 million on an undiscounted basis.
The Company accrues the anticipated cost of investigation and remediation when the obligation is probable and can be reasonably estimated. While a definitive plan has not been formally approved by the EPA, the Company believes the current accrual is a good faith estimate of the long-term cost of remediation at this site; however, the estimate of costs and their timing could change as a result of a number of factors, including but not limited to (1) EPA input on the proposed remediation plan and any changes which the EPA may subsequently require, (2) effectiveness of the in situ thermal remediation pilot study, (3) refinement of cost estimates and length of time required to complete remediation and post-remediation operations and maintenance, (4) effectiveness of the technology chosen in remediation of the site as well as changes in technology that may be available in the future, and (5) unforeseen circumstances existing at the site. As a result of these factors, the actual amount of costs incurred by the Company in connection with the remediation of contamination of its Lindsay, Nebraska site
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could exceed the amounts accrued for this expense at this time. While any revisions could be material to the operating results of any fiscal quarter or fiscal year, the Company does not expect such additional expenses would have a material adverse effect on its liquidity or financial condition.
The following table summarizes the environmental remediation liability classifications included in the condensed consolidated balance sheets as of May 31, 2023, May 31, 2022, and August 31, 2022:
2,483
4,934
4,179
9,817
10,967
Total environmental remediation liabilities
12,300
15,901
15,146
Note 9 – Warranties
The following table provides the changes in the Company’s product warranties:
Product warranty accrual balance, beginning of period
14,172
12,818
14,080
12,736
Liabilities accrued for warranties during the period
3,686
3,317
7,814
7,536
Warranty claims paid during the period
(3,369
(2,600
(7,405
(6,601
Changes in estimates
(58
(194
Product warranty accrual balance, end of period
14,489
13,477
Note 10 – Share-Based Compensation
The Company’s current share-based compensation plans, approved by the stockholders of the Company, provides for awards of stock options, restricted shares, restricted stock units (“RSUs”), stock appreciation rights, performance shares, and performance stock units (“PSUs”) to employees and non-employee directors of the Company. The Company measures and recognizes compensation expense for all share-based payment awards made to employees and directors based on estimated fair values. Share-based compensation expense was $1.7 million for the three months ended May 31, 2023 and 2022, and $5.0 million and $4.3 million for the nine months ended May 31, 2023 and 2022, respectively.
Note 11 – Other Current Liabilities
Other current liabilities:
Contract liabilities
19,362
33,833
29,494
Compensation and benefits
19,214
18,243
23,148
Warranties
Tax related liabilities
11,082
7,730
7,820
Dealer related liabilities
9,108
7,046
8,396
Deferred revenue - lease
3,194
1,022
1,064
2,980
3,329
3,159
Accrued environmental liabilities
Accrued insurance
1,138
1,274
1,193
Other
7,566
10,355
8,151
Total other current liabilities
Note 12 – Share Repurchases
There were no shares repurchased during the three or nine months ended May 31, 2023 and 2022 under the Company’s share repurchase program. The remaining amount available under the repurchase program was $63.7 million as of May 31, 2023.
Note 13 – Industry Segment Information
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The Company manages its business activities in two reportable segments: irrigation and infrastructure. The Company evaluates the performance of its reportable segments based on segment revenues, gross profit and operating income, with operating income for segment purposes excluding unallocated corporate general and administrative expenses, interest income, interest expense, other income and expenses and income taxes. Operating income for segment purposes includes general and administrative expenses, selling expenses, engineering and research expenses and other overhead charges directly attributable to the segment. There are no inter-segment sales included in the amounts disclosed. The Company had no single customer who represented 10 percent or more of its total revenues during the three or nine months ended May 31, 2023 or 2022.
Irrigation – This reporting segment includes the manufacture and marketing of center pivot, lateral move and hose reel irrigation systems and large diameter steel tubing as well as various innovative technology solutions such as GPS positioning and guidance, variable rate irrigation, remote irrigation management and scheduling technology, irrigation consulting and design and industrial internet of things, or “IIoT”, solutions. The irrigation reporting segment consists of one operating segment.
Infrastructure – This reporting segment includes the manufacture and marketing of moveable barriers, specialty barriers, crash cushions and end terminals, and road marking and road safety equipment. The infrastructure reporting segment consists of one operating segment.
Operating revenues:
Irrigation:
North America
75,027
96,153
249,315
275,601
International
67,544
92,540
193,115
239,759
Irrigation total
Operating income:
30,727
39,567
92,188
81,513
3,556
3,779
8,947
6,869
Corporate
(7,326
(8,184
(22,315
(21,521
Total operating income
Interest and other expense, net
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ITEM 2 ‑ Management's Discussion and Analysis of Financial Condition and Results of Operations
Concerning Forward‑Looking Statements
This Quarterly Report on Form 10-Q contains not only historical information, but also forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are not historical are forward-looking and reflect information concerning possible or assumed future results of operations and planned financing of the Company. In addition, forward-looking statements may be made orally or in press releases, conferences, reports, on the Company's web site, or otherwise, in the future by or on behalf of the Company. When used by or on behalf of the Company, the words “expect,” “anticipate,” “estimate,” “believe,” “intend,” “will,” “plan,” “predict,” “project,” “outlook,” “could,” “may,” “should” or similar expressions generally identify forward-looking statements. The entire section entitled “Executive Overview and Outlook” should be considered forward-looking statements. For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve a number of risks and uncertainties, including but not limited to those discussed in the “Risk Factors” section in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2022. Readers should not place undue reliance on any forward-looking statement and should recognize that the statements are predictions of future results or conditions, which may not occur as anticipated. Actual results or conditions could differ materially from those anticipated in the forward-looking statements and from historical results, due to the risks and uncertainties described herein and in the Company’s other public filings with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended August 31, 2022, as well as other risks and uncertainties not now anticipated. The risks and uncertainties described herein and in the Company’s other public filings are not exclusive and further information concerning the Company and its businesses, including factors that potentially could materially affect the Company's financial results, may emerge from time to time. Except as required by law, the Company assumes no obligation to update forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.
COVID-19 Impact
In March 2020, the World Health Organization declared coronavirus (COVID-19) a global pandemic. COVID-19 has had a limited impact on the Company’s manufacturing operations to date. While the Company implemented new procedures to protect the health and well-being of employees and customers, costs associated with these procedures have not been material. In addition, the pandemic has not had a material adverse effect on demand for the Company’s irrigation or infrastructure products; however, the COVID-19 pandemic did result in a slowdown of road construction activity and delays in certain project implementations. As pandemic conditions improved and economic activity increased, the Company experienced a number of supply chain challenges including increased lead times and limited availability of certain components, significant raw material inflation, and labor and logistics constraints.
The ongoing effects of the COVID-19 pandemic on the Company’s business, results of operations, or cash flows in future periods remain uncertain and will depend on numerous evolving factors that the Company may not be able to accurately predict or effectively respond to, including, without limitation: the duration and scope of any outbreak; the transmissibility and severity of new variants of COVID-19; actions taken by governments, businesses, and individuals in response to any outbreak; the effect on economic activity and actions taken in response; the effect on customers and their demand for the Company’s products and services; and the Company’s ability to manufacture, sell, and service its products, including without limitation as a result of supply chain challenges, facility closures, social distancing, restrictions on travel, fear or anxiety by the populace, and shelter-in-place orders.
Accounting Policies
In preparing the Company’s condensed consolidated financial statements in conformity with U.S. GAAP, management must make a variety of decisions which impact the reported amounts and the related disclosures. These decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. In making these decisions, management applies its judgment based on its understanding and analysis of the relevant circumstances and the Company’s historical experience.
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, 2022. Management periodically re-evaluates and
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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, 2023.
Recent Accounting Guidance
See Note 1 – Basis of Presentation and the disclosure therein of recently adopted accounting guidance to the condensed consolidated financial statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Executive Overview and Outlook
Operating revenues for the three months ended May 31, 2023 were $164.6 million, a decrease of 23 percent compared to $214.3 million for the three months ended May 31, 2022. Irrigation segment revenues decreased 24 percent to $142.6 million and infrastructure segment revenues decreased 14 percent to $22.0 million. Net earnings for the three months ended May 31, 2023 were $16.9 million, or $1.53 per diluted share, compared to net earnings of $25.1 million, or $2.28 per diluted share, for the three months ended May 31, 2022.
The primary drivers for the Company’s irrigation segment are the need for irrigated agricultural crop production, which is tied to population growth and the attendant need for expanded food production, and the need to use water resources efficiently. These drivers are affected by a number of factors, including the following:
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Demand for irrigation equipment in the U.S. has declined over the same prior year period, as farmer sentiment has been negatively impacted by the projected decrease in net farm income, higher interest rates and concerns regarding inflation and general economic uncertainty. This has resulted in customers delaying capital investment decisions. We believe this may shift demand for irrigation equipment to later in the calendar year as customers become better-positioned to determine their level of profitability for the current crop year. During this period the Company has been able to maintain its pricing while inflationary pressure on raw material and logistics costs have moderated. The Company expects to continue to actively track these circumstances and will monitor its prices in connection with changes in raw material and other costs.
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 primarily by expansion of agricultural production, 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 and Ukrainian 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.
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, which the Company anticipates will translate into higher demand for its transportation safety products as the funds are appropriated and states begin to implement projects. A limited positive impact is expected on fiscal 2023 results and a more positive impact is expected in fiscal 2024 and beyond.
The backlog of unshipped orders at May 31, 2023 was $94.5 million compared with $98.3 million at May 31, 2022. The irrigation backlog is lower and the infrastructure backlog is higher compared to the prior year. 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.
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Results of Operations
For the Three Months ended May 31, 2023 compared to the Three Months ended May 31, 2022
The following section presents an analysis of the Company’s operating results displayed in the condensed consolidated statements of earnings for the three months ended May 31, 2023 and 2022. It should be read together with the industry segment information in Note 13 to the condensed consolidated financial statements:
Percent Change
Consolidated
-23%
-14%
Gross margin
32.3
%
28.8
Operating expenses (1)
-1%
Operating margin
16.4
-411%
-16%
Overall income tax rate
34.4
29.5
-33%
Irrigation Segment
Segment operating revenues
-24%
Segment operating income
-22%
Segment operating margin
21.6
21.0
Infrastructure Segment
-6%
16.2
14.8
Revenues
Operating revenues for the three months ended May 31, 2023 decreased 23 percent to $164.6 million from $214.3 million for the three months ended May 31, 2022, as irrigation revenues decreased $46.1 million and infrastructure revenues decreased $3.6 million. The irrigation segment provided 87 percent of the Company’s revenue during the three months ended May 31, 2023 as compared to 88 percent for the three months ended May 31, 2022.
North America irrigation revenues for the three months ended May 31, 2023 of $75.0 million decreased $21.2 million, or 22 percent, from $96.2 million for the three months ended May 31, 2022. The decrease resulted primarily from lower unit sales volumes while average selling prices were comparable to the same prior year period. Lower unit sales volume in the current year period resulted primarily from farmers delaying capital investment decisions due to a number of factors, including general economic uncertainty.
International irrigation revenues for the three months ended May 31, 2023 of $67.5 million decreased $25.0 million, or 27 percent, from $92.5 million for the three months ended May 31, 2022. The decrease resulted primarily from lower sales volumes in Brazil, Australia, Ukraine and Russia compared to the same prior year period. In Brazil, the delayed order activity experienced in the second quarter of this year, connected with the federal government transition following the presidential election in October 2022, continued in the current quarter. The current year was also impacted by the unfavorable effects of foreign currency translation of approximately $2.5 million compared to the same prior year period.
Infrastructure segment revenues for the three months ended May 31, 2023 of $22.0 million decreased $3.6 million, or 14 percent, from $25.6 million for the three months ended May 31, 2022. An increase in Road Zipper System lease revenue was more than offset by lower Road Zipper System sales and lower sales of road safety products compared to the same prior year period.
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Gross Profit
Gross profit for the three months ended May 31, 2023 of $53.2 million decreased 14 percent from $61.7 million for the three months ended May 31, 2022. Gross margin was 32.3 percent of sales for the three months ended May 31, 2023 compared with 28.8 percent of sales for the three months ended May 31, 2022. The decrease in gross profit in both irrigation and infrastructure resulted primarily from lower revenues.
Increased gross margin in irrigation resulted primarily from improved price realization and operating performance compared to the same prior year period. Increased gross margin in infrastructure resulted from a more favorable margin mix of revenue and improved price realization compared to the same prior year period.
Operating Expenses
Operating expenses of $26.3 million for the three months ended May 31, 2023 decreased $0.2 million, or 1 percent, compared with $26.5 million for the three months ended May 31, 2022. Increased selling expense and new product development costs were more than offset by expense reductions in other areas.
Other Income (Expense), net
The Company recorded other expense of $1.2 million for the three months ended May 31, 2023 compared to other income of $0.4 million for the three months ended May 31, 2022. The change resulted primarily from foreign currency transaction losses of $0.9 million in the current year compared to foreign currency transaction gains of $1.3 million in the same prior year period, which was partially offset by a $0.6 million increase in interest income.
Income Taxes
The Company recorded income tax expense of $8.9 million and $10.5 million for the three months ended May 31, 2023 and 2022, respectively. The effective income tax rate was 34.4 percent and 29.5 percent for the three months ended May 31, 2023 and 2022, respectively. The higher effective tax rate reflects an increased proportion of earnings in higher rate foreign jurisdictions, primarily Brazil, compared to the same prior year period.
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For the Nine Months ended May 31, 2023 compared to the Nine Months ended May 31, 2022
The following section presents an analysis of the Company’s operating results displayed in the condensed consolidated statements of earnings for the nine months ended May 31, 2023 and 2022. It should be read together with the industry segment information in Note 13 to the condensed consolidated financial statements:
-13%
13%
31.7
24.5
9%
18%
15.5
11.5
Other expense, net
28%
34%
29.6
26.0
12%
20.8
15.8
30%
13.9
10.5
Operating revenues for the nine months ended May 31, 2023 decreased 13 percent to $507.0 million from $580.5 million for the nine months ended May 31, 2022, as irrigation revenues decreased $72.9 million and infrastructure revenues decreased $0.7 million. The irrigation segment provided 87 percent of the Company’s revenue during the nine months ended May 31, 2023 as compared to 89 percent for the nine months ended May 31, 2022.
North America irrigation revenues for the nine months ended May 31, 2023 of $249.3 million decreased $26.3 million, or 10 percent, from $275.6 million for the nine months ended May 31, 2022. The decrease resulted from lower unit sales volume which was partially offset by higher average selling prices compared to the same prior year period. Lower unit sales volume in the current year period resulted primarily from farmers delaying capital investment decisions. Higher average selling prices compared to the same prior year period resulted from the pass through of higher raw material costs to customers.
International irrigation revenues for the nine months ended May 31, 2023 of $193.1 million decreased $46.6 million, or 20 percent, from $239.8 million for the nine months ended May 31, 2022. The decrease resulted primarily from the completion of a large Egypt project in the prior year that did not repeat and lower sales volumes in Brazil, Australia, Ukraine and Russia. Sales and order activity in Brazil was delayed in the second and third quarters connected with the federal government transition. The current year was also impacted by unfavorable effects of foreign currency translation of approximately $5.3 million compared to the same prior year period.
Infrastructure segment revenues for the nine months ended May 31, 2023 of $64.6 million decreased $0.5 million, or 1 percent, from $65.1 million for the nine months ended May 31, 2022. The decrease resulted from higher Road Zipper System sales and lease revenue, which was more than offset by lower sales of road safety products.
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Gross profit for the nine months ended May 31, 2023 of $160.5 million increased 13 percent from $142.1 million for the nine months ended May 31, 2022. Gross margin was 31.7 percent of sales for the nine months ended May 31, 2023 compared with 24.5 percent of sales for the nine months ended May 31, 2022. Increased gross profit and gross margin in irrigation resulted primarily from improved price realization, lower inflationary impact on input costs and a more favorable margin mix of international revenues, which more than offset the impact of lower revenues compared to the same prior year period. Prior year irrigation results were negatively impacted by the impact of higher raw material costs, including approximately $7.8 million in additional expense resulting from the impact of the LIFO method of accounting for inventory while the LIFO impact in the current year reduced expense by approximately $1.5 million. In addition, costs of approximately $1.8 million were incurred in the prior year related to non-recurring factory maintenance and outside consulting services that did not repeat. Increased gross profit and gross margin in infrastructure resulted from a more favorable margin mix of revenue, improved price realization and lower inflationary impact on input costs compared to the same prior year period. Prior year infrastructure results were negatively impacted by approximately $1.0 million in additional expense resulting from the impact of LIFO while the current year impact was minimal.
Operating expenses of $81.7 million for the nine months ended May 31, 2023 increased $6.5 million, or 9 percent, compared with $75.2 million for the nine months ended May 31, 2022. The increase resulted primarily from higher employee incentive expense attributable to improved business results, increased spending on new product development and increased personnel costs compared to the same prior year period.
Other Expense, net
Other expense for the nine months ended May 31, 2023 increased $0.8 million compared to the nine months ended May 31, 2022. The current year period includes $2.0 million of foreign currency transaction losses compared to gains of $0.9 million in the same prior year period. This impact was partially offset by lower interest expense and higher interest income compared to the same prior year period.
The Company recorded income tax expense of $22.3 million and $16.7 million for the nine months ended May 31, 2023 and 2022, respectively. The effective income tax rate was 29.6 percent and 26.0 percent for the nine months ended May 31, 2023 and 2022, respectively. The higher effective tax rate reflects an increased proportion of earnings in higher rate foreign jurisdictions, primarily Brazil, compared to the same prior year period. In addition, the same prior year period benefited from the impact of larger discrete items.
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Liquidity and Capital Resources
The Company's cash, cash equivalents, and marketable securities totaled $144.4 million at May 31, 2023 compared with $95.7 million at May 31, 2022 and $116.5 million at August 31, 2022. 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.
The Company’s total cash and cash equivalents held by foreign subsidiaries were approximately $54.6 million, $37.5 million, and $49.0 million as of May 31, 2023, May 31, 2022, and August 31, 2022, 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.
Net working capital was $358.3 million at May 31, 2023, as compared with $301.6 million at May 31, 2022 and $316.2 million at August 31, 2022. Cash provided by operating activities totaled $59.2 million during the nine months ended May 31, 2023, compared to cash used in operating activities of $24.9 million during the nine months ended May 31, 2022. The increase was primarily driven by favorable improvements in working capital, mainly receivables and inventory, partially offset by a decrease in accounts payable compared to the same prior year period.
Cash flows used in investing activities totaled $18.9 million during the nine months ended May 31, 2023 compared to $10.1 million during the nine months ended May 31, 2022. Cash proceeds from the maturities of marketable securities decreased $19.9 million while purchases of marketable securities decreased $13.5 million compared to the same prior year period. Purchases of property, plant, and equipment were $13.3 million, compared to $12.2 million in the same prior year period.
Cash flows used in financing activities totaled $13.5 million during the nine months ended May 31, 2023 compared to cash flows used in financing activities of $9.0 million during the nine months ended May 31, 2022. The change was primarily the result of lower proceeds from the exercise of stock options compared to the same prior year period.
Capital Allocation Plan
The Company’s capital allocation plan is to continue investing in revenue and earnings growth, combined with a defined process for enhancing returns to stockholders. Under the Company’s capital allocation plan, the priorities for uses of cash include:
Capital Expenditures
Capital expenditures for fiscal 2023 are expected to be between $15.0 million and $20.0 million, including equipment replacement, productivity improvements and new product development. The Company’s management does maintain flexibility to modify the amount and timing of some of the planned expenditures in response to economic conditions.
Dividends
In the third quarter of fiscal 2023, the Company paid a quarterly cash dividend to stockholders of $0.34 per common share, or $3.7 million, compared to a quarterly cash dividend of $0.33 per common share, or $3.6 million, in the third quarter of fiscal 2022.
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Share Repurchases
The Company’s Board of Directors authorized a share repurchase program of up to $250.0 million of common stock with no expiration date. Under the program, shares may be repurchased in privately negotiated and/or open market transactions as well as under formalized trading plans in accordance with the guidelines specified under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. There were no shares repurchased during the nine months ended May 31, 2023 or 2022. The remaining amount available under the repurchase program was $63.7 million as of May 31, 2023.
Long-Term Borrowing Facilities
Senior Notes. The Company has outstanding $115.0 million in aggregate principal amount of Senior Notes, Series A (the “Senior Notes”). The entire principal of the Senior Notes is due and payable on February 19, 2030. Interest on the Senior Notes is payable semi-annually at a fixed annual rate of 3.82 percent. Borrowings under the Senior Notes are unsecured. The Company used the proceeds of the sale of the Senior Notes for general corporate purposes, including acquisitions and dividends.
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, 2023 and 2022, 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, 2023, 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 6.43 percent at May 31, 2023), 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, 2023).
Borrowings under the Revolving Credit Facility have equal priority with borrowings under the Company’s Senior Notes. Each of the credit arrangements described above include certain covenants relating primarily to the Company’s financial condition. These financial covenants include a funded debt to EBITDA leverage ratio and an interest coverage ratio. In the event that the loan documents for the Revolving Credit Facility were to require the Company to comply with any financial covenant that is not already included or is more restrictive than what is already included in the arrangement governing the Senior Notes, then such covenant shall be deemed incorporated by reference for the benefit of holders of the Senior Notes. Upon the occurrence of any event of default of these covenants, including a change in control of the Company, all amounts outstanding thereunder may be declared to be immediately due and payable. At May 31, 2023 and 2022, the Company was in compliance with all financial loan covenants contained in its credit arrangements in place as of each of those dates.
Series 2006A Bonds. Elecsys International LLC, a wholly owned subsidiary of the Company, has outstanding $0.8 million in principal amount of industrial revenue bonds that were issued in 2006 (the “Series 2006A Bonds”). Principal and interest on the Series 2006A Bonds are payable monthly through maturity on September 1, 2026. The interest rate is adjustable every five years based on the yield of the 5-year United States Treasury Notes, plus 0.45 percent (1.72 percent as of May 31, 2023). This rate was adjusted on September 1, 2021 in accordance with the terms of the bonds, and the adjusted rate will be in force through maturity. The obligations under the Series 2006A Bonds are secured by a first priority security interest in certain real estate.
Contractual Obligations and Commercial Commitments
There have been no material changes in the Company’s contractual obligations and commercial commitments as described in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2022.
ITEM 3 – Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes from the Company’s quantitative and qualitative disclosures about market risk previously disclosed in the Company’s most recent Annual Report on Form 10-K. See discussion of the Company’s quantitative and qualitative disclosures about market risk under Part II, Item 7A in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2022.
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Disclosure Controls and Procedures
The Company carried out an evaluation under the supervision and the participation of the Company’s management, including the Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of May 31, 2023.
Changes in Internal Control over Financial Reporting
The CEO and CFO determined that there has not been any significant change to the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
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See the disclosure in Note 8 – Commitments and Contingencies to the condensed consolidated financial statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q, which disclosure is hereby incorporated herein by reference.
There have been no material changes from risk factors previously disclosed in the Company’s most recent Annual Report on Form 10-K. See the discussions of the Company’s risk factors under Part I, Item 1A in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2022.
None.
Not applicable.
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Exhibit
No.
Description
3.1
Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on December 14, 2006.
3.2
Amended and Restated By‑Laws of the Company, effective October 17, 2018, incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on October 19, 2018.
4.1
Specimen Form of Common Stock Certificate, incorporated by reference to Exhibit 4(a) of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2006.
10.1
Lindsay Corporation Nonqualified Deferred Compensation Plan, incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed on May 3, 2022. †
10.2
Lindsay Corporation Nonqualified Deferred Compensation Plan Adoption Agreement, incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K filed on May 3, 2022. †
31.1*
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 18 U.S.C. Section 1350.
31.2*
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 18 U.S.C. Section 1350.
32.1*
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 18 U.S.C. Section 1350.
101*
Interactive Data Files pursuant to Rule 405 of Regulation S-T formatted in Inline Extensible Business Reporting Language ("Inline XBRL").
104*
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).
† Management contract or compensatory plan or arrangement required to be filed as an exhibit hereto pursuant to Item 6 of Part II of Form 10-Q.
* Filed herein.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 29th day of June 2023.
LINDSAY CORPORATION
By:
/s/ BRIAN L. KETCHAM
Name:
Brian L. Ketcham
Title:
Senior Vice President and Chief Financial Officer
(on behalf of the registrant and as principal financial officer)
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