Lindsay(LNN) - 2020 Q4 - Annual Report

Part I Business Lindsay Corporation operates in water management and road infrastructure, with key segments: Irrigation and Infrastructure - The company operates through two primary reporting segments: Irrigation and Infrastructure[8] - The Irrigation segment manufactures and markets center pivot, lateral move, and hose reel irrigation systems under brands including Zimmatic®, Perrot™, and Greenfield®, enhanced with technologies like GPS guidance and FieldNET® remote management[9][11][17] - The Infrastructure segment focuses on manufacturing and marketing products like the Quickchange® Moveable Barrier™ (Road Zipper System®), crash cushions, and other road safety equipment[10][28][32] International Irrigation Sales Contribution | Fiscal Year | Percentage of Total Irrigation Segment Revenues | | :--- | :--- | | 2020 | ~36% | | 2019 | ~38% | Order Backlog (as of August 31) | Year | Total Backlog ($ in millions) | Amount Not Expected to be Fulfilled in Next Fiscal Year ($ in millions) | | :--- | :--- | :--- | | 2020 | $58.7 | $6.3 | | 2019 | $55.4 | $10.0 | Capital Expenditures | Fiscal Year | Amount ($ in millions) | | :--- | :--- | | 2020 | $21.4 | | 2019 | $23.2 | | 2018 | $11.1 | | 2021 (Est.) | $15.0 - $20.0 | Risk Factors Agricultural industry, international operations, government funding, and product liability litigation present key risks to the company - Irrigation revenues are highly cyclical and dependent on factors like agricultural commodity prices, farm income, and weather conditions[70][71] - International sales are subject to risks from foreign market conditions, trade barriers (such as U.S.-China tariffs), and currency exchange rate fluctuations[74][75][78] - The COVID-19 pandemic presents risks related to workforce, customer demand, supply chain disruptions, and potential economic downturns[78] - Infrastructure revenues depend heavily on government spending for transportation projects, which can be subject to reduction or delay[80] - The company is defending product liability lawsuits and a Department of Justice investigation related to its X-Lite® end terminal product, which could result in significant damages and reputational harm[88][89] Properties Corporate headquarters are leased in Omaha, with owned and leased manufacturing facilities located across the U.S. and internationally Significant Company Properties | Segment | Location | Ownership | Size (sq. ft.) | Description | | :--- | :--- | :--- | :--- | :--- | | Corporate | Omaha, NE | Lease | 55,000 | Corporate headquarters | | Irrigation | Lindsay, NE | Own | 300,000 | Principal U.S. manufacturing plant | | Irrigation | Corlu, Turkey | Lease | 283,000 | Manufacturing plant | | Irrigation | Tianjin, China | Lease | 163,000 | Manufacturing plant | | Infrastructure | Milan, Italy | Own | 45,000 | Manufacturing plant | | Infrastructure | Rio Vista, CA | Own | 30,000 | Manufacturing plant | Legal Proceedings Routine legal proceedings are ongoing, with specific disclosures for environmental remediation and infrastructure products litigation - The company is involved in routine commercial, product liability, and other legal proceedings, which are not expected to have a material effect on the business[100] - Specific disclosures regarding significant legal matters, including infrastructure products litigation and environmental remediation, are provided in Note 16 to the consolidated financial statements[100][101] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common stock trades on NYSE (LNN); a share repurchase program is active, and dividends were paid during the fiscal year - The company's common stock trades on the New York Stock Exchange (NYSE) under the ticker symbol LNN[105] - As of August 31, 2020, $63.7 million remained available under the company's share repurchase program, with no shares repurchased during fiscal years 2020, 2019, or 2018[106] Dividends Paid | Fiscal Year | Total Dividends Paid ($ in millions) | | :--- | :--- | | 2020 | $13.6 | | 2019 | $13.4 | Selected Financial Data A five-year summary of key financial and operational data highlights fiscal 2020's significant increase in profitability Selected Financial Data (Years ended August 31) | ($ in millions, except per share data) | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Operating revenues | $474.7 | $444.1 | $547.7 | | Gross profit | $152.5 | $114.6 | $151.5 | | Operating income | $54.2 | $6.1 | $39.0 | | Net earnings | $38.6 | $2.2 | $20.3 | | Diluted net earnings per share | $3.56 | $0.20 | $1.88 | | Cash dividends per share | $1.26 | $1.24 | $1.21 | | Total assets | $570.5 | $500.3 | $499.8 | | Long-term debt | $115.9 | $116.1 | $116.3 | Management's Discussion and Analysis of Financial Condition and Results of Operations Fiscal 2020 revenues grew 7% to $474.7 million, driven by a 42% Infrastructure segment surge, resulting in dramatically improved net earnings Fiscal 2020 vs. 2019 Performance Highlights | Metric | Fiscal 2020 | Fiscal 2019 | % Change | | :--- | :--- | :--- | :--- | | Operating Revenues | $474.7M | $444.1M | +7% | | - Irrigation Revenues | $343.5M | $351.5M | -2% | | - Infrastructure Revenues | $131.2M | $92.6M | +42% | | Gross Margin | 32.1% | 25.8% | +6.3pp | | Operating Income | $54.2M | $6.1M | +786% | | Net Earnings | $38.6M | $2.2M | +1678% | | Diluted EPS | $3.56 | $0.20 | +1680% | - The increase in infrastructure revenue was primarily driven by higher Road Zipper System® sales, including approximately $27.0 million from a single project in the United Kingdom[144] - Fiscal 2019 results were negatively impacted by $15.1 million in pre-tax costs related to the 'Foundation for Growth' initiative, which did not repeat in fiscal 2020[130][131][146] - The company's cash, cash equivalents, and marketable securities increased to $140.9 million at year-end, with net cash from operations totaling $46.0 million for fiscal 2020[149][151] - The company has $115.0 million in Senior Notes due 2030 and an undrawn $50.0 million revolving credit facility[157][158] Quantitative and Qualitative Disclosures about Market Risk Foreign currency exchange rate volatility is the primary market risk, mitigated by derivative instruments used for hedging - The company's main market risk is foreign currency exchange rate volatility; a hypothetical 10% adverse change in exchange rates is estimated to decrease operating income by approximately $0.6 million[168] - The company uses derivative financial instruments, such as forward exchange contracts, to hedge exposures in the ordinary course of business and does not engage in speculative trading[166][169] Financial Statements and Supplementary Data Audited consolidated financial statements for fiscal year 2020, along with the independent auditor's report, are presented here Consolidated Statements of Earnings This section presents the company's consolidated statements of earnings for the fiscal years ended August 31, 2020, 2019, and 2018 Consolidated Earnings (Years ended August 31) | ($ in thousands) | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Operating revenues | 474,692 | 444,072 | 547,705 | | Gross profit | 152,543 | 114,608 | 151,462 | | Operating income | 54,202 | 6,115 | 39,012 | | Net earnings | 38,629 | 2,172 | 20,277 | Consolidated Balance Sheets This section provides the company's consolidated balance sheets as of August 31, 2020 and 2019, detailing assets, liabilities, and equity Consolidated Balance Sheet Highlights (as of August 31) | ($ in thousands) | 2020 | 2019 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | 121,403 | 127,204 | | Inventories, net | 104,792 | 92,287 | | Total current assets | 347,935 | 313,490 | | Total assets | 570,526 | 500,314 | | Liabilities & Equity | | | | Total current liabilities | 102,395 | 82,131 | | Long-term debt | 115,682 | 115,846 | | Total liabilities | 272,008 | 232,105 | | Total shareholders' equity | 298,518 | 268,209 | Consolidated Statements of Cash Flows This section presents the company's consolidated statements of cash flows for the fiscal years ended August 31, 2020, 2019, and 2018 Consolidated Cash Flows (Years ended August 31) | ($ in thousands) | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | 46,034 | 3,797 | 33,934 | | Net cash (used in) provided by investing activities | (38,514) | (21,219) | 18,105 | | Net cash used in financing activities | (13,438) | (14,642) | (11,252) | Notes to Consolidated Financial Statements Notes detail accounting policies, new standards, legal contingencies, and segment performance, including X-Lite® litigation and environmental liabilities - The company adopted ASC 842 (Leases) in fiscal 2020, recording a right-of-use asset of $26.2 million and a lease liability of $29.5 million upon adoption[233] - The company is defending multiple product liability lawsuits and a Department of Justice investigation related to its X-Lite® end terminal; no loss has been deemed probable, so no accrual has been made[295][297][298] - An environmental remediation liability of $16.1 million is accrued for the cleanup of the Lindsay, Nebraska facility site[299][302] Segment Operating Income (Fiscal Year 2020) | ($ in thousands) | Operating Revenues | Operating Income | | :--- | :--- | :--- | | Irrigation | 343,529 | 40,214 | | Infrastructure | 131,163 | 43,771 | | Corporate | N/A | (29,783) | | Total | 474,692 | 54,202 | Controls and Procedures Disclosure controls were effective as of August 31, 2020, and a prior material weakness was successfully remediated - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of August 31, 2020[335] - A material weakness related to indirect tax credits in a foreign jurisdiction, identified in fiscal 2019, was remediated as of August 31, 2020[336][337] - Management concluded that the company's internal control over financial reporting was effective as of August 31, 2020, and received an unqualified opinion from its independent auditor, KPMG LLP[339][340] Part III Directors, Executive Officers, Corporate Governance, and Related Matters Information on directors, executive compensation, and corporate governance is incorporated by reference from the 2020 Proxy Statement - Information required for Items 10 through 14 is incorporated by reference from the company's definitive Proxy Statement to be filed for its 2020 Annual Meeting of Stockholders[354][357][358] - The company has adopted a Code of Ethical Conduct applicable to its principal executive officer and senior financial officers, which is available on its website[356] Part IV Exhibits, Financial Statement Schedules Financial statements, schedules, and exhibits, including consolidated statements and an Exhibit Index, are listed as part of the Form 10-K - This section contains the list of financial statements and schedules included in the report, such as the Consolidated Statements of Earnings and the Valuation and Qualifying Accounts schedule[364][365][367] - An Exhibit Index is provided, listing all documents filed with the Form 10-K, including corporate governance documents, material contracts, and certifications[373]