Lindsay Corp (NYSE:LNN) Q3 2019 Earnings Conference Call July 9, 2019 11:00 AM ET
Timothy Hassinger - President, CEO & Director
Brian Ketcham - SVP & CFO
- Timothy Hassinger - 总裁，首席执行官兼董事
- Brian Ketcham - 高级副总裁兼首席财务官
Nathan Jones - Stifel, Nicolaus & Company
Joseph Mondillo - Sidoti & Company
Brian Drab - William Blair & Company
Ryan Connors - Boenning and Scattergood
Christopher Shaw - Monness, Crespi, Hardt & Co.
- Nathan Jones - Stifel，Nicolaus＆Company
- Joseph Mondillo - Sidoti＆Company
- Brian Drab - William Blair＆Company
- Ryan Connors - Boenning和Scattergood
- Christopher Shaw - Monness，Crespi，Hardt＆Co。
Good morning. My name is Gary, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lindsay Corporation Third Quarter 2019 Earnings Call. [Operator Instructions]. Please note, this event is being recorded.
During this call, management may make forward-looking statements that are subject to risks and uncertainties, which reflect management's current beliefs, estimates of future economic circumstances, industry conditions, company performance and financial results. Forward-looking statements include the information concerning possible or assumed future results of operations of the company and those statements preceded by, followed by or including the words expectation, outlook, could, may, should or similar expressions. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
I would now like to turn the call over to Mr. Tim Hassinger, President and Chief Executive Officer. Please go ahead.
Good morning, and thank you for joining our call. With me on today's call is Brian Ketcham, Chief Financial Officer; and Lori Zarkowski, our Chief Accounting Officer. The objective of this call is to discuss our quarter 3 results.
Before we go to that overview, I'll make a few introductory comments. The ag market conditions this past quarter continued to be a challenging environment, given the continued lower commodity prices, uncertainty surrounding the trade disputes and an unusually wet spring throughout many parts of the U.S., all of this caused a carryover of a low farmer sentiment from the prior quarter. As we said in the prior earnings call, with all of this uncertainty going on, we were seeing a wait-and-see buying attitude for mechanized irrigation. Our March sales reflected a continuation of the market environment that we witnessed in Q2. However, we did see a sales uptick in April and May versus the prior year as many farmers waited to address their irrigation needs shortly before planning. Given the importance of March in this quarter, the sales increases in April and May were not able to offset the low sales in March. However, it was encouraging to see an increase in demand in the last 2 months of the quarter. In addition, with the recent increase in commodity prices, it's our expectation that this will favorably impact farmer sentiment going forward.
A highlight in innovation for Lindsay is the recent launch of Pivot Watch. This product offers a low-cost entry point for many farmers to help manage their irrigation operation. This offering helps us reach a group of farmers that have not ever used a telemetry-based product before and it positions us for further penetration of FieldNET Advisor. Something that we are focused on doing and getting better at is leveraging technology across our various markets that we serve. Pivot Watch is a great example of taking technology that has been effectively used in the oil and gas market that Alexis serves in leveraging its use in our irrigation market. For me, this is a positive proof point that Lindsay is becoming a more innovative company. In my prior company, we were able to successfully leverage technologies and resources across different markets, and this is a good example of Lindsay rapidly moving in this direction as well.
For the infrastructure business, the transition to MASH-approved road safety products continues to progress in a positive manner. Throughout this fiscal year, we have had portfolio gaps to address due to the transition timing to MASH. Currently, the new MASH-compliant products that have been launched this fiscal year, such as the TAU-M crash cushion are exceeding expectations, and we are close to having to complete MASH-compliant portfolio approved. We expect to launch yet this fiscal year ABSORB-M, a crash cushion which we believe will be over best-selling road safety product in fiscal year 2020.
The product that I want to highlight, and specifically, the change in strategic direction that I have talked about before on these calls, is Road Zipper and the associated shift-left strategy. We have been very open about the fact that we recognize the need to address the lumpiness of this business. Our position continues to be that the lumpiness can be improved by growing the business and earning a higher percentage of our business from leasing, making meaningful progress, increasing our leasing portion of the business. Currently, we have more machines being leased than we have ever had before, and we have expanded our global reach capability with Europe being a good example of where our project pipeline is growing. Also a key change we have made in our sales approach is that we are focusing on customer needs earlier in the project planning and design stage than we have done in the past. A good example of the shift-left strategy is the recent success with the Indiana Department of Transportation. The Road Zipper System is now being used there in selected construction zones where high traffic volumes and worker exposure created the need for increased safety and motorists' mobility. Through the design and planning process, we were able to identify the areas which caused the most concern and delivered a solution which will enable the customer to mitigate congestion and keep workers and motorists safely separated.
早上好，谢谢你加入我们的电话。我今天的电话是首席财务官Brian Ketcham;和我们的首席会计官Lori Zarkowski。本次电话会议的目的是讨论我们的第3季度结果。
Lindsay的创新亮点是最近推出的Pivot Watch。该产品为许多农民提供了一个低成本的切入点，帮助他们管理灌溉作业。此产品帮助我们吸引了一群以前从未使用过基于遥测的产品的农民，并为我们进一步渗透FieldNET顾问提供了便利。我们专注于做和改进的东西是利用我们服务的各个市场的技术。 Pivot Watch是一个很好的例子，它采用了有效用于石油和天然气市场的技术，Alexis在其灌溉市场中的应用。对我而言，这是Lindsay正在成为一家更具创新精神的公司的积极证据。在我之前的公司中，我们能够成功地利用不同市场的技术和资源，这也是Lindsay在这个方向上迅速发展的一个很好的例子。
Also, we have secured another order from our partner in Japan, Nexco East for a new reactive tension barrier to use with their existing Road Zipper Systems, which is a good indicator that our technology is growing in adoption. The total order value is approximately $15 million and delivery is expected to begin Q4 fiscal year '19 with the majority being recognized in fiscal year '20.
Lastly, on our Foundation for Growth initiative. We remain committed to our objective of achieving 11% to 12% operating income in the trough of the market. This target was based on our view at the time that we announced it that fiscal year 2017 represented the trough of the market. As you have seen, the market conditions in our fiscal year 2019 have been negatively impacted by several factors, including tariffs, unresolved trade disputes and flooding conditions. However, we do not believe this is a sustained market environment. Of course, the challenge is knowing when the timing of these factors will be resolved. What we do know? Our Foundation for Growth initiative has continued to progress and is creating positive change for Lindsay. We are meeting the milestones that we laid out more than 1 year ago, and the financial impact of the actions we have taken since the launch of our Foundation for Growth initiative are starting to take hold.
So now let's move to over Q3 results. For that, I'll turn the call over to Brian.
此外，我们还从日本的合作伙伴Nexco East获得了另一个订单，用于新的反应式张力屏障，与现有的Road Zipper系统配合使用，这是我们的技术在采用中不断增长的一个很好的指标。总订单价值约为1500万美元，交付预计将从'19财年'开始，其中大部分将在'20财年确认。
Thank you, Tim, and good morning, everyone. To begin, I would like to cover the costs incurred in the third quarter related to our Foundation for Growth initiative. Total pretax costs of $3.9 million were incurred in the quarter, of which $3 million represents professional consulting fees. These fees are performance-based and correspond to workstream projects that have advanced through a stage gate process to the implementation stage. We expect to incur a smaller amount of consulting fees in the fourth quarter as the remaining identified projects reach implementation. We do not expect to incur any further consulting fees beyond the fourth quarter.
Other Foundation for Growth costs during the third quarter consisted primarily of severance expenses related to organizational changes. The remainder of my comments regarding the third quarter are based on adjusted results, which are detailed in the Regulation disclosure at the end of the press release.
Total revenues for the third quarter of fiscal 2019 were $121.1 million, a decrease of $48.5 million or 29% over the same quarter last year. Net earnings for the quarter were $5.5 million or $0.50 per diluted share compared to net earnings of $17.9 million or $1.66 per diluted share in the prior year.
The previously announced business divestitures accounted for approximately $27.2 million of the decline in revenues, with the net earnings impact of $1.5 million or $0.14 per diluted share.
Irrigation segment revenues for the third quarter were $98.6 million, a decrease of $29.8 million or 23% compared to the same quarter last year. Excluding the impact of the divestitures, North America irrigation revenues increased $2.8 million or 5% compared to the prior year. Higher revenue from engineering project services and the impact of higher average selling prices were partially offset by lower irrigation equipment unit volume and lower sales of replacement parts.
Higher revenue from engineering project services in the quarter were connected to an irrigation development project in the Pacific Northwest that began in the prior quarter. Demand for irrigation equipment continued to be constrained by market conditions, and above-average rainfall and wet conditions contributed to lower sales of replacement parts.
In the international markets, revenues decreased $5.4 million or 13% compared to last year's third quarter. Revenues were negatively impacted by $2.7 million from differences in foreign currency translation rates compared to the prior year. Excluding the impact of foreign currency translation, international irrigation revenues decreased $2.7 million or 7%. Increased sales in Brazil and Europe were more than offset by declines in other markets.
Total irrigation segment operating income for the third quarter was $11.6 million compared to $18.1 million in the prior year, and operating margin was 11.7% compared to 14.1% in the prior year. The prior year benefited from the recovery of $2.5 million in previously reserved accounts receivable. In addition, lower sales of irrigation equipment and replacement parts in North America resulted in a lower margin mix compared to the prior year.
Infrastructure segment revenues for the third quarter were $22.4 million, a decrease of $18.7 million or 45% compared to the same quarter last year. The decrease resulted almost entirely from lower Road Zipper System sales as the prior year benefited from 2 large projects that did not repeat this year. Sales of road safety and other products were flat overall compared to the prior year.
Infrastructure segment operating income for the third quarter was $3.6 million compared to $14.4 million in the prior year and operating margin was 16.0% compared to 35.0% in the prior year. The decrease resulted from lower Road Zipper System sales that carried higher margins.
Cash and cash equivalents were $110.8 million at the end of the quarter compared to $160.8 million at the end of the prior fiscal year. Cash was utilized in the quarter to fund working capital increases as well as capital expenditures and dividend payments. No share repurchases were made during the quarter and a total of $63.7 million remains available under our current share repurchase authorization.
At this time, I'd like to turn the call back over to the operator to take your questions.
[Operator Instructions]. Our first question comes from Nathan Jones with Stifel.
[操作员说明]。 我们的第一个问题来自Nathan Jones和Stifel。
Wonder if we could talk a little bit more about the North American irrigation number. I think probably people are surprised how good that was, frankly, being up 5% organically, given the pretty atrocious weather that farmers had to deal with during the quarter. I'm specifically interested in your commentary that April and May picked back up. I think the weather was pretty lousy then, there's was lot of flooding going on. Is there any color you can give us on what you think was underlying that? Whether there are differences geographically with some of the flooded areas pretty poor and there was strength in other areas of the country? Or just any other color you can give us on what I think is, frankly, a pretty strong number here.
不知道我们是否可以多谈一下北美的灌溉数量。 考虑到农民在本季度必须处理的相当恶劣的天气，我认为可能有人会感到惊讶的是，坦率地说，有机地增加了5％。 我对4月和5月的评论特别感兴趣。 我觉得天气很糟糕，那里发生了很多洪水。 你有什么颜色可以告诉我们你认为的基础吗？ 地理上是否存在差异，一些被洪水淹没的地区相当贫穷，而且该国其他地区是否有实力？ 或者你可以根据我的想法给我们任何其他颜色，坦率地说，这里有一个非常强大的数字。
Yes. Nathan, this is Brian. I think when you look at across the U.S. during the quarter, we were clearly down in the Central U.S., that Nebraska, Missouri area, kind of the -- where a lot of the flooding took place. We did see gains in the Pacific Northwest, South Central region, which is going to be primarily Texas and then also Great Lakes and eastern part of the U.S. So that -- the increases of some of those regions compensated for the lower sales in the central part of the U.S. And then the engineering project services that we called out in the Pacific Northwest clearly helped offset the lower overall irrigation equipment and parts volume.
是。 内森，这是布莱恩。 我想当你在本季度期间看到整个美国时，我们显然是在美国中部，那是密苏里州内布拉斯加州的地区，那里发生了很多洪水。 我们确实看到了太平洋西北地区，中南部地区的收益，主要是德克萨斯州，然后是大湖区和美国东部地区。因此 - 其中一些地区的增长弥补了中部地区的销售额下降 美国的一部分然后我们在太平洋西北地区召集的工程项目服务显然有助于抵消较低的整体灌溉设备和零件数量。
Okay. That's helpful. Maybe if we could concentrate on some of those, I guess, softer areas in Nebraska, Missouri where the flooding was pretty bad. Can you talk about what your expectations are for any catch-up there? Is this something where farmers are unlikely to plant those fields? You probably don't see any catch-up of that in the back half of the year, you maybe have to wait till next year for that to catch up? And would you expect to see some catch-up spending even if it stretches out into the next selling season?
好的。 这很有帮助。 也许如果我们可以专注于其中的一些，我猜，在密苏里州内布拉斯加州的地区，洪水非常糟糕。 你能谈谈你对那里赶超的期望吗？ 这是农民不太可能种植这些田地的东西吗？ 你可能在今年下半年没有看到任何追赶，你可能要等到明年才能赶上？ 即使它延伸到下一个销售季节，您是否会期待看到一些赶超消费？
Nathan, it's Tim. Couple comments on that. Typically, floods do not require replacement of the entire machine as we would see in tornado damage as an example, but an increase in part replacement will typically occur, motors and panels are the primary parts that typically need to be replaced. Now on the acreage, let's even broaden out beyond your question. We're continuing to hear that estimates range anywhere from 6 million to 10 million acres were not planted this year depending on the source that you use. So really highlight, the key point here is that a high percent of the acres that are not planted this year are in areas where mechanized irrigation does not have a high penetration percent. In other words, if the heavier impact from the weather was on the eastern Corn Belt as opposed to where the heavier percent of mechanized irrigation occurs. So it's still to play out yet on when we'll know in terms of number of acres that were not planted. As we're aware USDA is going to be resurveying the actual planted acres in July and they plan to release an updated figures on August 12. So I think it's likely that there will not be a real clear indication of actual planted acres until that date and the report comes out.
Okay. So I think the message there is that the severe weather that we've had to hear is maybe not as big an impact on your business as I -- certainly, I was expecting?
好的。 所以我认为那里的信息是，我们不得不听到的恶劣天气可能对我的业务没有那么大的影响 - 当然，我在期待？
Yes. If you look at where the -- all the news around the late planted, it was heavily in Ohio, Indiana, Illinois, and those are not the states that have the higher percent of mechanized irrigation in them.
是。 如果你看一下 - 所有关于已经种植的新闻的地方，它在俄亥俄州，印第安纳州，伊利诺伊州都很重要，那些不是那些拥有较高机械化灌溉百分比的州。
The next question comes from Joseph Mondillo with Sidoti & Company.
I just wanted to sort of follow-up on sort of the comments on engineering products -- project services. Just wondering if that was at all unnormal or abnormal regarding the size of those projects?
我只想对工程产品的评论 - 项目服务进行跟进。 只是想知道这些项目的规模是否完全不正常或异常？
Yes. Joe, this is Brian. It was clearly a -- not a normal-sized project. It's a larger project where they're really redeveloping Timberland in the Pacific Northwest for farming and it involves a lot of infrastructure work and moving water from Columbia River to where the land is. So it's -- our engineering services business does similar work, but not to the scale generally. This is a pretty unique project.
是。 乔，这是布莱恩。 这显然是一个 - 不是一个正常规模的项目。 这是一个更大的项目，他们真正重新开发太平洋西北地区的Timberland用于农业，它涉及大量的基础设施工作，并将水从哥伦比亚河转移到土地所在地。 所以它 - 我们的工程服务业务做了类似的工作，但不是一般的规模。 这是一个非常独特的项目。
Okay. And so if you exclude that sort of abnormal project, where would sort of the organic growth look like? And also just to sort of add on to that in terms of the backlog. You mentioned in the press release that backlog in irrigation is up. Is any of that increased backlog related to some of this project work that's skewing into the fourth quarter?
好的。 因此，如果你排除那种异常项目，有机增长的类型会是什么样的呢？ 而且只是在积压方面加以补充。 你在新闻稿中提到灌溉的积压工作正在增加。 是否有任何与此项目工作相关的积压增加与第四季度有关？
I would say that this project is primarily a second quarter, third quarter project. There will be a small amount in the fourth quarter, but backlog increase that we've seen in irrigation is primarily the domestic market. If you take up away the engineering project services revenue for this quarter, our equipment and parts volume was down overall, probably upper single digits when you combine the 2.
我想说这个项目主要是第二季度，第三季度项目。 第四季度将有少量，但我们在灌溉中看到的积压增加主要是国内市场。 如果您拿走本季度的工程项目服务收入，我们的设备和零件总量将整体下降，当您合并2时，可能是上个位数。
Okay. And you said upper single?
Okay. Great. And then the international market outlook. Just wondering if you could sort of go through sort of the countries and sort of your outlook overall. That segment continues to be very lumpy, which is understandable given that it's large project work. But just wondering, considering what you have in the backlog and sort of your visibility, just wondering what your sort of thoughts are on the next few quarters in terms of international irrigation.
好的。 大。 然后是国际市场前景。 只是想知道你是否可以通过各种各样的国家和整体的前景。 这一部分仍然非常庞大，这是可以理解的，因为它是大型项目工作。 但只是想知道，考虑到你积压的内容以及你的可见度，只是想知道在接下来的几个季度你对国际灌溉的看法是什么。
Yes. Joe, this is Tim. Let me just go through each of the regions across and give you a perspective of what we're seeing across the entire international business. Let me start with Middle East, Africa. This market continues to be driven by large projects and government investment. Activity overall is good. We have visibility of several projects moving forward in the region. A recent highlight in this region for us, we were just granted another large order in the Middle East. So a portion of those sales will be realized this current quarter with the remaining amount being delivered in fiscal year '20.
Moving to Brazil. We continue to see strong market fundamentals there linked to export demand, driven by global trade disputes and the weakened currency. Their early soybean harvest supported early planning of the safrinha corn crop. The early planning along with the favorable weather conditions has increased the projected safrinha yield. It's estimated what we're picking up to be as much as 31% up versus prior year. There were some market delays during their fall season caused by the exploration of last year's crop plan. Bank approvals were delayed and customers deferred purchase decisions until the new plan was available on July 1. The financing plan for this year's crop is in place and includes an 8% finance rate. Now something to watch, a settlement of the U.S.-China trade dispute could temper some of the optimism in Brazil, but overall, for this market, we remain optimistic for the remainder of this year and early into the next fiscal year. Western Europe. This region has been a strong market on a year-to-date basis for us. We've seen a sizable increase in demand linked to the hot, dry weather that was in place during the last growing season.
Moving to the CIS region. We continue to see stable demand from large and small accounts in this region, connected food security and investments and rehabilitating the irrigation infrastructure. Russian subsidies continue to be in place for irrigation investments to continue forward, which has been helpful.
Now the other side of the story, Australia, New Zealand. Sales continue to be slow in this region due to drought in Eastern Australia and low dairy prices in New Zealand. We're hearing that lenders are starting to tighten requirements for financing approvals, which has limited the market opportunity.
So Joe, when I step back and look at the international business, what's the overall message, we're encouraged by the Brazil market and the project opportunities in the Middle East, Africa region that are being realized, and we're hoping to see some market recovery in the Australia, New Zealand region.
Okay. So just to follow up on your sort of final summation there. It seems like you're fairly optimistic, but this is sort of more commentary going forward. Is that correct? Because your year-to-date sort of financials, they're actually down slightly year-to-date from a year ago. So this is sort of projects that are picking up in volume and you're hoping to win in the future? Is that...
好的。 所以只是跟进那里的最终总结。 看起来你很乐观，但这有点更加评论。 那是对的吗？ 因为您今年迄今为止的财务类型，它们实际上与一年前相比略有下降。 所以这是一些正在大量增加的项目，你希望在未来获胜？ 就是它...
Yes. We've been real open about the project opportunity we see there is -- there's a large amount of activity going on. We had announced in prior -- 2 quarters ago that we have received a large order. We're now announcing that we've received another one this quarter. So they're difficult to predict when they're going to happen, but we see good activity.
是。 我们对于我们看到的项目机会一直非常开放 - 有大量的活动正在进行中。 我们之前 - 2个季度前宣布我们收到了一笔大订单。 我们现在宣布，本季度我们又收到了另一个。 所以他们很难预测何时会发生，但我们看到了良好的活动。
Okay. And then just last question for me. Just in terms of your balance sheet and sort of use of cash. At this point in time in the cycle, 6 years -- 5 years, 6 years in this downturn and then sort of this, this year certainly, it seems like, hopefully, you're sort of establishing a bottom of some sort. Cyclically, it seems like your positioned quite well and your balance sheet is extremely very strong. I'm just wondering sort of what your sort of overall long-term thoughts are aside from keeping up with the dividend and your annual CapEx and such. Just sort of -- is there any acquisition opportunities? Or any other opportunities that you see that you can utilize your balance sheet?
好的。 然后对我来说只是最后一个问题。 就资产负债表和现金的使用而言。 在这个周期的这个时间点，6年 - 5年，在这次经济衰退中的6年，然后对此，今年肯定，似乎，希望，你有点建立某种底层。 周期性地，您的定位似乎很好，您的资产负债表非常强大。 我只是想知道除了跟上股息和年度资本支出等等之外你还有什么样的整体长期想法。 只是 - 有没有任何收购机会？ 或者您认为可以利用资产负债表的任何其他机会？
Yes. Let me address the acquisition and then Brian, if you want to add a few further comments after that. Joe, on the acquisition side, we can say confidently, we know what we want. We're active in those spaces. Our key focus is that we want to expand and leverage our technology capability in our core businesses. We see this as a strength for Lindsay, and the goal is to fully exploit this with our internal capability. In terms of how we're viewing the use of our cash, Brian will give an overview of how we prioritize that.
是。 如果你想在此之后添加一些进一步的评论，让我谈谈收购，然后是Brian。 乔，在收购方面，我们可以自信地说，我们知道我们想要什么。 我们活跃在这些空间。 我们的主要关注点是我们希望在我们的核心业务中扩展和利用我们的技术能力。 我们认为这是Lindsay的优势，目标是利用我们的内部能力充分利用它。 就我们如何看待现金的使用而言，Brian将概述我们如何优先考虑这些现金。
Yes. Yes, I think that the priorities remain the same. I think internally our CapEx this year is up and a lot of that is supporting new product development, manufacturing, tooling, things like that. In addition is with the growing lease opportunity on the Road Zipper side, we are increasing the size of the barrier fleet and also producing MASH-compliant barrier so that's taking some additional CapEx. I think that after the M&A then you fall to share repurchase. And I think that is clearly something that we continue to have in our priorities. I think with the uncertainty we've had over the last few quarters just with the unsettled trade and not knowing where that's going has probably made us a little bit more cautious there from a timing standpoint. But it's something that we continue to evaluate.
是。 是的，我认为优先事项保持不变。 我认为今年我们的资本支出是在内部，其中很多都支持新产品开发，制造，工具等。 此外，随着Road Zipper方面不断增加的租赁机会，我们正在增加屏障机队的规模，并且还生产符合MASH标准的屏障，因此需要额外增加资本支出。 我认为在并购之后你会分享回购。 而且我认为这显然是我们在优先事项中继续存在的事情。 我认为，过去几个季度我们的不确定因为交易尚未解决，而且从时间的角度来看，不知道这种情况可能会让我们更加谨慎。 但这是我们继续评估的东西。
The next question comes from Brian Drab with William Blair.
接下来的问题来自Brian Dir与William Blair。
So first, just wanted to ask on the margin front. The goal of 11% to 12% operating margin and -- that's for fiscal 2020, and to date, this year, 4.4%. I know it's, obviously, very tough environment, but is that apples-to-apples, first of all? Can you just remind me? And 4.4% going to 11% to 12% is the goal next year? And is that goal still doable? And what kind of is the bridge from where we are so far this year to that level, if it is doable?
首先，只是想在保证金方面询问。 营业利润率为11％至12％的目标 - 即2020财年，到目前为止，今年为4.4％。 我知道这显然是非常艰难的环境，但首先是苹果对苹果吗？ 你能提醒我吗？ 明年的目标是4.4％达到11％到12％？ 这个目标仍然可行吗？ 从今年到目前为止我们到达那个级别的桥梁是什么样的，如果可行的话？
Yes. This is Brian. When you look at where we have established the goal back in first, second quarter of 2018, it was using 2017 as a baseline, which we were close to the 8% operating margin. This year has definitely been a transitional year. We've had a lot of extra expenses going through, especially with the consulting fees and those kinds of things. But I think when you look at the market conditions that we're in place at '17, we would expect that the market is going to get back to at least those kinds of conditions. I think what we remain confident in is that we see the $13 million to $18 million of value opportunity that we have, which was, again, based on getting from 8% to the 11% to 12%. So the timing of the recovery is probably going to have the biggest impact on the full fiscal year. But I would say, at this point, we still see a path forward to the -- to those objectives.
是。 这是布莱恩。 当你看看我们在2018年第一季度确定目标的地方时，它将2017年作为基准，我们接近8％的营业利润率。 今年绝对是过渡的一年。 我们经历了很多额外费用，特别是咨询费和这些费用。 但我认为，当你看看我们在17年所处的市场状况时，我们预计市场将至少回到这些条件。 我认为我们仍然充满信心的是，我们看到了1300万美元到1800万美元的价值机会，这再次基于从8％上升到11％到12％。 因此，复苏的时机可能会对整个财政年度产生最大的影响。 但我想说，在这一点上，我们仍然看到了向这些目标前进的道路。
Okay. Great. And in terms of the $13 million to $18 million that you just mentioned in just the cost cutting in general, setting the market conditions aside, how -- where do you stand with the status of achieving those hard cost savings?
好的。 大。 就你刚才提到的1300万美元到1800万美元的成本削减而言，将市场条件放在一边，你如何 - 在哪里实现节省成本的难度？
I'd say as we indicated last quarter in our walk there, I think, the biggest opportunity was in sourcing, second largest manufacturing footprint. I would say we're progressing along and by the end of the fourth quarter, we'll have all of those initiatives to the implementation stage. I think the timing of realization, I think, by the end of the fiscal year, we'll have realized close to $5 million of that run rate as we see an additional incremental opportunity on top of that. Commercial is another big area of the workstreams. And I think the -- what we're seeing on the Road Zipper side with the shift-left strategy is part of that as well. And so we're pleased with what we're -- the progress we're seeing there.
我认为，正如我们在上一季度所说的那样，我认为，最大的机会是采购，第二大制造业足迹。 我想说我们正在取得进展，到第四季度末，我们将把所有这些举措都纳入实施阶段。 我认为，到本财政年度结束时，我认为实现的时机已经实现了接近500万美元的运行率，因为我们看到了额外的增量机会。 商业是工作流的另一个重要领域。 而且我认为 - 我们在Road Zipper一侧看到的左移策略也是其中的一部分。 所以我们对我们所取得的成就感到满意 - 我们在那里看到的进展。
Got it. And then just a last question for me. Is the -- pricing was a positive for irrigation, and does that apply to the mechanized irrigation piece and kind of -- is that a comment that's separate from the positive engineering project services revenue that you had in the period? And what would -- I'm just a little surprised that pricing is positive for mechanized irrigation equipment and if you could give some explanation as to what's going on there.
得到它了。 然后对我来说只是最后一个问题。 - 定价是否对灌溉是积极的，并且这是否适用于机械化灌溉项目和那种 - 是否与您在此期间的正面工程项目服务收入分开？ 什么会 - 我只是有点惊讶，机械化灌溉设备的价格是正面的，如果你能解释一下那里发生了什么。
Yes. No, that relates to irrigation equipment. And year-over-year, we still see price being up compared to prior year. I think going forward, we'll see that dynamic change as we saw the acceleration in steel costs occur -- start to occur in our fourth quarter and first quarter periods. But year-over-year, it's still up over last year. I'd say it's probably comparable to what we saw in our second quarter. So steel costs have moderated somewhat. They continued to be a little bit volatile, but that's still year-over-year price on irrigation equipment being up.
是。 不，这与灌溉设备有关。 与去年同期相比，我们仍然看到价格与去年相比有所上涨。 我认为，在我们看到钢铁成本加速发生时，我们会看到这种动态变化 - 在我们的第四季度和第一季度开始出现。 但与去年同期相比，它仍然高于去年。 我想它可能与我们在第二季度所看到的相当。 因此，钢铁成本有所缓和。 它们仍然有点波动，但灌溉设备的价格仍在逐年上涨。
The next question comes from Ryan Connors with Boenning and Scattergood.
I wanted to talk about the corn price a little bit there. Tim, I know you don't want to -- we're not here to be corn traders. But you do mention in the press release that the jump in corn prices supports an improved demand outlook for you, which was a real shift in tone from the past quarters. And I do think it's playing a role in moving the stock today. So I think that, obviously, getting your -- more thoughts on what's really behind that comment, I think, is important. So, I mean, it is a weather-driven move. So I guess, in theory it could move the other way if we get more favorable weather over the next 12 months. So I'm just looking to get some more perspective from you on that comment and whether it's something that's really from a planning standpoint, you now feel like we have line of sight, the commodity upcycle has begun, and we're going to start planning for that? Or is it really just a little more still speculative at this point?
我想在那里谈谈玉米价格。 蒂姆，我知道你不想 - 我们不是玉米贸易商。 但你在新闻稿中确实提到玉米价格的上涨支持你的需求前景改善，这是过去几个季度的基调。 我确实认为它在今天推动股票发挥作用。 所以我认为，显然，让我们更多地考虑这个评论的真正背后的内容是非常重要的。 所以，我的意思是，这是一个天气驱动的举动。 所以我想，从理论上讲，如果我们在未来12个月内获得更有利的天气，它可能会采取另一种方式。 因此，我只是希望从这个评论中获得更多关于你的观点，以及它是否真的从规划的角度来看，你现在感觉我们已经有了视线，商品上行周期已经开始，我们将要开始 为此计划？ 或者在这一点上真的只是一点投机吗？
Yes. No, happy to cover that, Ryan. Obviously, the wet weather did cause an increase in commodity prices. Just to give you a perspective on that. Corn as of yesterday, if you compare to corn price versus the low point in May, it was up 28%. So we have seen a good size jump in this, driven primarily due to yield concerns from the late-planted crops and less acres being planted. So it has also helped some farmers lock in crop pricing at a higher price compared to what they were saying before the planting season. So it's clearly helped farmer sentiment. And then to build on that is the point that I mentioned to Nathan in his opening question is, although the wet weather was throughout many parts of the U.S., the more severe delayed planning or even the case of not planning that occurred in that March/April time frame was really the eastern Corn Belt.
And again, that doesn't have its higher penetration percent of mechanized irrigation. So when you add all of that sitting here today, Ryan, I see we're hearing a better farmer sentiment going forward. Now as you said, they're still unknown. Right now, the good growing degree days are coming through. So the unknown right now is, I would say, one, how many acres did get planted? There's still uncertainty around that. And as I mentioned, we won't know most likely until August 12 to have at least a better data point on that. And then the other is, what will this crop in terms of going through pollination on the corn side getting later in the summer, what impact that will have and the frost date? So there's still a lot of unknowns of what impacts going to be on yield. But sitting here today, with the higher prices, we've seen a change in farmer sentiment.
Okay. That is helpful. And then the other thing I wanted to get your comments on trade. And first off, congratulations on being named to the USDA's Ag Policy Committee for the trade negotiations. I know you can't tell us much about the deliberations there. But obviously, it does give you a unique perspective on the big picture around trade and how it may impact Lindsay. So can you give us kind of your view on the trade situation as it relates to ag, irrigation? And just what we should be thinking about and watching on that front?
好的。 这很有帮助。 然后另一件事我想得到你对贸易的评论。 首先，祝贺被任命为美国农业部农业政策委员会进行贸易谈判。 我知道你不能告诉我们那里的审议情况。 但很明显，它确实为您提供了一个关于贸易的全局以及它如何影响林赛的独特视角。 那么，您能否对我们对与农业，灌溉有关的贸易情况有所了解？ 那就是我们应该在这方面思考和观察的内容？
Sure. And thank you for your comments, Ryan. It is something looking forward to be and part of. Let's break out trade and then I'll just make some comments on the tariffs. First of all, just to give you a sense of the importance, more than 20% of U.S. agricultural output is exported. So it's clearly a very important topic. Our primary concern is the U.S.-China trade dispute, especially the impact on soybeans. We are encouraged by the recent discussions at the G20 outing about China sourcing additional U.S. commodity crops. However, it looks like there's still a long way to go before the deal is finalized. The USMCA deal was a big step in a positive direction, assuming ratification occurs later this calendar year.
On the tariffs, we've been passing on the increased costs, and our intention is to continue in that direction. The elimination of the Section 232 tariffs has contributed to lower steel cost. However, with U.S. being involved in trade negotiations with so many countries, this has made supply chain redesign especially difficult for products other than steel that are being sourced from outside the U.S. and are getting impacted by these higher tariff amounts. One thing I'd highlight for Lindsay's business specifically, we have a footprint in place with various options to source from. This has been a significant strength in this time of uncertainty, and we would see that continuing going on as a strength.
The next question comes from Chris Shaw with Monness, Crespi.
Just to continue on the trade issues. You mentioned how it impacts farmer sentiment. I understand how, obviously, soybean tariffs and all impact sort of big grain crop farmers. But does it have an impact, I don't know, on things like almonds or fruit or like a vegetable grower out in California? Are those markets been impacted as well?
只是继续讨论贸易问题。 你提到它如何影响农民的情绪。 我明白，大豆关税以及所有大豆作物农民的影响。 但是，我不知道，在加利福尼亚州，像杏仁或水果或蔬菜种植者这样的东西会产生影响吗？ 这些市场是否也受到影响？
Yes. I'd hesitate to give you a blanket yes or no because it's going to depend on the crop, but there are -- some of those crops that I would say are every bit as dependent on export as soybeans have been. So the short answer would be, in most cases, yes.
是。 我会毫不犹豫地给你一个肯定或否定的原因，因为它取决于作物，但有一些 - 我会说这些作物与大豆一样依赖出口。 因此，在大多数情况下，简短的回答是肯定的。
And then to go back to the pricing and the -- I guess, the steel pass-throughs. Do you have any sense on what sort of real pricing on the irrigation is, outside of what the steel pass-through is? I mean, has that been stable? Is that deteriorating a little bit, has it gone up? I mean, have you any sense if you unpacked the steel impact?
然后回到定价和 - 我想，钢铁传递。 除了钢材通过之外，您对灌溉的实际定价有什么看法吗？ 我的意思是，那是稳定的吗？ 这有点恶化吗？它涨了吗？ 我的意思是，如果你拆开钢筋冲击器，你有什么意义吗？
Yes. Chris, this is Brian. I would say most of the pricing impact that has been going on has been related to raw material cost, primarily steel. I think in the lower-demand environment, the opportunity to increase price has been limited.
是。 克里斯，这是布莱恩。 我想说，大部分定价影响都与原材料成本有关，主要是钢材。 我认为在需求较低的环境中，提价的机会有限。
Chris, just to add on. A lot of questions around the steel and of course, that's a significant factor here. But I do want to say that we still need to address the tariffs associated with the purchase materials from outside the U.S. that are not steel. So that's why I mentioned earlier, our goal is to continue to pass on cost increases that would address any cost escalation even outside of steel.
克里斯，只是补充一下。 关于钢铁的很多问题，当然，这是一个重要的因素。 但我确实想说，我们仍然需要解决与美国以外非钢材采购材料相关的关税问题。 所以这就是我之前提到的原因，我们的目标是继续传递成本增加，以解决即使在钢铁之外的任何成本上升。
The next question is a follow-up from Nathan Jones with Stifel.
Just some follow-up questions here on that 11% to 12% margin target. And you guys have said that would be on the trough volume which you thought was 2017. I think you guys have said that that 11% to 12% did contemplate the divestitures that you've made. So I assume that the revenue number has to as well. And it looks like you've divested $80 million to $90 million worth of revenue which would actually probably put 2019 revenue slightly above where that pro forma number would have been from 2017. So maybe you can comment on what the right way for us to look at that in terms of the volume -- the base volume from 2017 that you're looking at for comparison?
这里只是一些关于11％到12％保证金目标的后续问题。 而且你们已经说过这将是你认为是2017年的低谷量。我想你们已经说过，11％到12％的人确实在考虑你们已经取得的资产剥离。 所以我认为收入数字也必须如此。 看起来你已经剥离了价值8000万到9000万美元的收入，这实际上可能会使2019年的收入略高于2017年的备考数字。所以也许你可以评论一下我们看起来正确的方式 在数量方面 - 您正在寻找的2017年基数量进行比较？
Okay. Yes, Nathan, it's about $80 million roughly with the divestitures. So I think when you look at the components of the rest of the revenue, I think, irrigation equipment volume is clearly down at least on a year-to-date basis compared to where we were in 2017. But I think the 11% to 12% contemplated about an 80 basis point lift from the divestitures since they were below the company average in operating margin.
好的。 是的，Nathan，大约有8000万美元的资产剥离。 因此，我认为，当你看到其余收入的组成部分时，我认为，与2017年相比，灌溉设备的数量明显低于年初至今。但我认为11％对 12％的受访者预计剥离资金将提高80个基点，因为他们的营业利润率低于公司平均水平。
So is that the volume that you need to get back to primarily domestic irrigation volume that you're talking about? Because it would seem that the actual overall revenue number is kind of already at that base from 2017, if you include the divestitures.
Well, I think, the other component that's different at least on a year-to-date basis compared to 2017 would be on the infrastructure side with the Road Zipper volume. I mean, clearly, we've had the -- 1 project -- larger project in the first quarter, but our second and third quarters have been really well below where they had been now. Our outlook on infrastructure is also improving. So we would expect that to get back to at least that 2017 type levels. So those are the things that give us -- still give us confidence in that 11% to 12% goal.
好吧，我认为，与2017年相比，至少在年初至今不同的另一个组件将是基于Road Latper卷的基础设施方面。 我的意思是，显然，我们在第一季度已经有了一个项目 - 更大的项目，但我们的第二和第三季度已经远远低于他们现在的水平。 我们对基础设施的看法也在改善。 所以我们希望至少回到2017年的类型水平。 所以这些是给我们的东西 - 仍然让我们对11％到12％的目标充满信心。
Tim, I do just have a follow-up question on the engineering stuff in the Pacific Northwest. Is that separate and outside of any actual engineering irrigation systems? Should that be irrigation systems that follow that engineering? Or is this completely a separate thing?
蒂姆，我确实对太平洋西北地区的工程问题有一个后续问题。 这是否与任何实际的工程灌溉系统分开？ 那应该是遵循该工程的灌溉系统吗？ 或者这完全是一个单独的东西？
No. There are some irrigation systems that follow that. I think what we've recognized to date has been mostly the infrastructure work and design work that's taking place ahead of the irrigation systems work.
Okay. So there should be some higher margin revenue that follows this in future quarters?
Yes, that would go through a dealer in that area.
[Operator Instructions]. The next question is a follow-up from Joseph Mondillo with Sidoti & Company.
[操作员说明]。 接下来的问题是Joseph Mondillo和Sidoti＆Company的后续行动。
I just wanted to ask about the $15 million revenue regarding the Japan Road Zipper project that you just booked after the quarter. You mentioned that it's going to start to be shipped here in the fourth quarter. Just wondering if you could provide any more detail on what the time line of that? Is that a sort of a fourth quarter/first quarter or over multiple quarters? And I'm assuming that this is like in other projects where you've called out in the past is sort of higher margin sort of Road Zipper margin that we tend to think about. Is that -- if you can comment on any of that?
我只是想问一下你在本季度之后刚刚预订的Japan Road Zipper项目的1500万美元收入。 你提到它将在第四季度开始运到这里。 只是想知道你是否可以提供关于时间线的更多细节？ 这是第四季度/第一季度还是多季度？ 而且我假设这就像你过去曾经提到过的其他项目一样，是我们倾向于考虑的更高利润率的道路拉链边际。 那是 - 如果你能评论其中任何一个？
Yes. Joe, this is Brian. What we're anticipating is roughly 20% or $3 million of that order to ship in the fourth quarter and then the balance, probably split between first and second quarters next year. And it is all barrier product, which generally would have a higher margin than the overall business.
是。 乔，这是布莱恩。 我们预计在第四季度出货的订单大约为20％或300万美元，然后是明年第一季度和第二季度之间的平衡。 它是所有阻碍产品，通常比整体业务具有更高的利润率。
Okay. And then just lastly. In terms of the Foundation for Growth. So you've been spending quite a bit on this, and we've been going through this for several quarters now. Is there any way you can sort of estimate or tell us sort of where you are in terms of a run rate of realization of that $13 million to $18 million? Just curious where we're at in terms of a run rate of what we've already been realizing.
好的。 然后就是最后。 就增长基础而言。 所以你已经在这方面花了不少钱，我们现在已经经历了好几个季度了。 有没有什么方法可以根据1300万到1800万美元的实现率来估计或告诉我们你的位置？ 只是好奇我们在我们已经意识到的运行速度方面所处的位置。
Yes. So I mean, obviously, we're shooting for a target that's above that $13 million to $18 million in terms of the total projects that we've got in the pipeline, realizing that you're probably not going to hit a 100% on every one. But of those projects, we would expect to be north of $20 million in run rate by the end of the year. And again, the timing of realization is always little bit of a question especially when you look at things like sourcing and having to bleed through current inventory levels. But the line of sight that we would have is that we would be at that run rate by the -- at a run rate that we need to be at by the end of the fiscal year.
是。 所以我的意思是，很明显，我们正在拍摄一个超过1300万美元到1800万美元的目标，就我们已经完成的项目而言，意识到你可能不会达到100％的目标 每一个人。 但在这些项目中，我们预计年底前的运行费用将超过2000万美元。 而且，实现的时机总是有点问题，特别是当你看到采购和不得不在当前的库存水平流血时。 但我们所拥有的视线是，我们将以该运行速度 - 以我们需要在本财年结束时运行的速度运行。
By the end of our fiscal '19, the projects will be identified to get to that run rate of $13 million to $18 million.
Joe, this is Tim. And Brian mentioned it, but I want to come back on this one. We've always tried to bring some proof points of the progress that we're making and using these workstreams as wider examples within each one of them where we're making progress. On the infrastructure commercial workstream, the shift-left Road Zipper. We've talked a lot about this the last few quarters. This is a tremendous proof point, the Indiana DoT news that I mentioned earlier. Getting that, building that and recognizing this as an area where we see future growth and continuing to put more resources and efforts in that direction. So this is a good success story connected to Foundation for Growth.
乔，这是蒂姆。 Brian提到了它，但我想回到这一点。 我们一直试图为我们正在制定的进展提供一些证据，并将这些工作流作为我们正在取得进展的每个工作流中的更广泛的例子。 在基础设施商业工作流程中，左转路拉链。 在过去的几个季度里，我们已经谈了很多这个问题。 这是一个巨大的证据，我前面提到的印第安纳州DoT新闻。 做到这一点，建立并认识到这是我们看到未来增长的领域，并继续在这方面投入更多的资源和努力。 所以这是一个与成长基金会相关的成功案例。
Okay. Just a follow-up though regarding my initial question. I guess, I'm just wondering at the end of the third quarter, on a run rate in terms of the savings that we've already realized relative to the $13 million to $18 million, where we're at? Is it $2 million or $3 million run rate at this point in time and that extends to $13 million to $18 million at some point? Just wondering what we've already sort of realized in the financials as of the end of the third quarter, if there is any way to answer that or...
好的。 关于我最初的问题，只是一个跟进。 我想，我只是想知道在第三季度结束时，就我们已经实现的相对于1300万美元到1800万美元的节省的运行率而言，我们在哪里？ 目前是200万美元还是300万美元的运行率，在某些时候延伸到1300万美元到1800万美元？ 只是想知道我们已经在第三季度末的金融业中实现了什么，如果有任何方法可以回答这个或......
Yes. I would say through the end of the third quarter, it's probably in that $2 million to $3 million range. By the end of the fiscal year, it will be in -- we would expect it to be closer to $5 million that would have been realized this year.
是。 我想说到第三季度结束时，它的价格可能在200万到300万美元之间。 到本财政年度结束时，我们预计它将接近今年实现的500万美元。
At this time, there appear to be no more questions. Mr. Hassinger, I'll turn the call back to you for closing remarks.
Well, this concludes our third quarter earnings call. Thank you for your interest and participation.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
会议现已结束。 感谢您参加今天的演讲。 您现在可以断开连接。
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- 富途牛牛证券开户教程 开户即可领取1股汇丰，入金达到2万港币即可领取1股腾讯；新股一键认购，最高支持10倍杠杆融资，免新股认购手续费，暗盘交易免佣；
- 华盛通开证券户教程 开通美股或者港股， 享受现金200元,美股8折奖励。
- 微牛证券开户教程 开通后 享有200元现金奖励
- 必贝证券开户教程 开通后 享有280元现金奖励
- 玖富证券开户教程 开通后 最低入金1W港币可以领218元红包
- e投睿开户教程 开通后 可获得25美金奖励
- 友信证券开户教程 注册随机领3股，注册后可随机抽取苹果、腾讯、阿里、京东等热门股票