LINDSAY CORP - Quarter Report: 2023 May (Form 10-Q)

10-Q

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

☐ 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.

Table of Contents

Lindsay Corporation

INDEX FORM 10-Q


		Page

Part I – FINANCIAL INFORMATION		3

	ITEM 1 – Financial Statements	3

	Condensed Consolidated Statements of Earnings for the three and nine months ended May 31, 2023 and May 31, 2022	3

	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	27

	ITEM 1A – Risk Factors	27

	ITEM 2 – Unregistered Sales of Equity Securities and Use of Proceeds	27

	ITEM 3 – Defaults Upon Senior Securities	27

	ITEM 4 – Mine Safety Disclosures	27

	ITEM 5 – Other Information	27

	ITEM 6 – Exhibits	28

SIGNATURES		29

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Part I – FINANCIAL INFORMATION

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			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	$	1.53		$	2.28		$	4.80		$	4.31

Shares used in computing earnings per share:
Basic		11,008			10,978			11,001			10,960
Diluted		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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LINDSAY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three months ended						Nine months ended
($ in thousands)	May 31, 2023			May 31, 2022			May 31, 2023			May 31, 2022
Net earnings	$	16,881		$	25,073		$	53,150		$	47,540
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

See accompanying notes to condensed consolidated financial statements.

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LINDSAY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


($ and shares in thousands, except par values)	May 31, 2023			May 31, 2022			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			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	)		(277,238	)		(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	$	723,618		$	711,916		$	710,653

See accompanying notes to condensed consolidated financial statements.

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Lindsay Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
($ and shares in thousands, except per share amounts)
(Unaudited)
	Shares of common stock		Shares of treasury stock		Common stock		Capital in excess of stated value			Retained earnings			Treasury stock			Accumulated other comprehensive loss, net			Total shareholders’ equity
Balance at August 31, 2021		18,991		8,083	$	18,991	$	86,495		$	528,130		$	(277,238	)	$	(17,933	)	$	338,445
Comprehensive income:
Net earnings		—		—		—		—			47,540			—			—			47,540
Other comprehensive loss		—		—		—		—			—			—			(443	)		(443	)
Total comprehensive income		—		—		—		—			—			—			—			47,097
Cash dividends ($.99) per share		—		—		—		—			(10,865	)		—			—			(10,865	)
Issuance of common shares under share compensation plans, net		72		—		72		1,960			—			—			—			2,032
Share-based compensation expense		—		—		—		4,061			—			—			—			4,061
Balance at May 31, 2022		19,063		8,083	$	19,063	$	92,516		$	564,805		$	(277,238	)	$	(18,376	)	$	380,770


Balance at August 31, 2022		19,063		8,083	$	19,063	$	94,006		$	579,000		$	(277,238	)	$	(21,473	)	$	393,358
Comprehensive income:
Net earnings		—		—		—		—			53,150			—			—			53,150
Other comprehensive loss		—		—		—		—			—			—			(1,134	)		(1,134	)
Total comprehensive income		—		—		—		—			—			—			—			52,016
Cash dividends ($1.02) per share		—		—		—		—			(11,228	)		—			—			(11,228	)
Issuance of common shares under share compensation plans, net		29		—		29		(2,154	)		—			—			—			(2,125	)
Share-based compensation expense		—		—		—		4,775			—			—			—			4,775
Balance at May 31, 2023		19,092		8,083	$	19,092	$	96,627		$	620,922		$	(277,238	)	$	(22,607	)	$	436,796

See accompanying notes to condensed consolidated financial statements.

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Lindsay Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
($ and shares in thousands, except per share amounts)
(Unaudited)
	Shares of common stock		Shares of treasury stock		Common stock		Capital in excess of stated value		Retained earnings			Treasury stock			Accumulated other comprehensive loss, net			Total shareholders’ equity
Balance at February 28, 2022		19,061		8,083	$	19,061	$	90,711	$	543,355		$	(277,238	)	$	(19,351	)	$	356,538
Comprehensive income:
Net earnings		—		—		—		—		25,073			—			—			25,073
Other comprehensive income		—		—		—		—		—			—			975			975
Total comprehensive income		—		—		—		—		—			—			—			26,048
Cash dividends ($.33) per share		—		—		—		—		(3,623	)		—			—			(3,623	)
Issuance of common shares under share compensation plans, net		2		—		2		155		—			—			—			157
Share-based compensation expense		—		—		—		1,650		—			—			—			1,650
Balance at May 31, 2022		19,063		8,083	$	19,063	$	92,516	$	564,805		$	(277,238	)	$	(18,376	)	$	380,770


Balance at February 28, 2023		19,091		8,083	$	19,091	$	94,834	$	607,784		$	(277,238	)	$	(22,199	)	$	422,272
Comprehensive income:
Net earnings		—		—		—		—		16,881			—			—			16,881
Other comprehensive income		—		—		—		—		—			—			(408	)		(408	)
Total comprehensive income		—		—		—		—		—			—			—			16,473
Cash dividends ($0.34) per share				—		—		—		(3,743	)		—			—			(3,743	)
Issuance of common shares under share compensation plans, net		1		—		1		106		—			—			—			107
Share-based compensation expense		—		—		—		1,687		—			—			—			1,687
Balance at May 31, 2023		19,092		8,083	$	19,092	$	96,627	$	620,922		$	(277,238	)	$	(22,607	)	$	436,796

See accompanying notes to condensed consolidated financial statements.

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LINDSAY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine months ended
($ in thousands)	May 31, 2023			May 31, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	53,150		$	47,540
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
Share-based compensation expense		4,775			4,061
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
Accounts payable		(17,953	)		26,319
Other current liabilities		(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		(11,228	)		(10,865	)
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		105,048			127,107
Cash and cash equivalents, end of period	$	131,577		$	81,757

See accompanying notes to condensed consolidated financial statements.

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LINDSAY CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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:


	Three months ended						Three months ended
	May 31, 2023						May 31, 2022
($ in thousands)	Irrigation		Infrastructure		Total		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		3,782		—		1,733		1,733
Total operating revenues	$	142,571	$	21,982	$	164,553	$	188,693	$	25,566	$	214,259


	Nine months ended						Nine months ended
	May 31, 2023						May 31, 2022
($ in thousands)	Irrigation		Infrastructure		Total		Irrigation		Infrastructure		Total
Point in time	$	423,212	$	51,743	$	474,955	$	498,468	$	52,806	$	551,274
Over time		19,218		4,494		23,712		16,892		3,959		20,851
Revenue from the contracts with customers		442,430		56,237		498,667		515,360		56,765		572,125

Lease revenue		—		8,286		8,286		—		8,422		8,422
Total operating revenues	$	442,430	$	64,523	$	506,953	$	515,360	$	65,187	$	580,547

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.

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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:


	Three months ended				Nine months ended
($ and shares in thousands, except per share amounts)	May 31, 2023		May 31, 2022		May 31, 2023		May 31, 2022
Numerator:
Net earnings	$	16,881	$	25,073	$	53,150	$	47,540

Denominator:
Weighted average shares outstanding		11,008		10,978		11,001		10,960
Diluted effect of stock awards		44		43		62		60
Weighted average shares outstanding assuming dilution		11,052		11,021		11,063		11,020

Basic net earnings per share	$	1.53	$	2.28	$	4.83	$	4.34
Diluted net earnings per share	$	1.53	$	2.28	$	4.80	$	4.31

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:


($ in thousands)	May 31, 2023			May 31, 2022			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	)
Inventories, net	$	166,759		$	195,566		$	193,776

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:


($ in thousands)	May 31, 2023			May 31, 2022			August 31, 2022
Series A Senior Notes	$	115,000		$	115,000		$	115,000
Elecsys Series 2006A Bonds		766			985			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	$	115,209		$	115,384		$	115,341

Principal payments on the debt are due as follows:


Due within	$ in thousands
1 year	$	225
2 years		229
3 years		234
4 years		78
Thereafter		115,000
	$	115,766

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.


	May 31, 2023
($ in thousands)	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	131,577	$	—	$	—	$	131,577
Marketable securities:
Corporate bonds		—		11,360		—		11,360
U.S. treasury securities		—		1,446		—		1,446
Derivative asset		—		2,817		—		2,817

	May 31, 2022
($ in thousands)	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	81,757	$	—	$	—	$	81,757
Marketable securities:
Corporate bonds		—		10,754		—		10,754
U.S. treasury securities		—		3,176		—		3,176
Derivative asset		—		1,080		—		1,080

	August 31, 2022
($ in thousands)	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	105,048	$	—	$	—	$	105,048
Marketable securities:
Corporate bonds		—		9,668		—		9,668
U.S. treasury securities		—		1,792		—		1,792
Derivative asset		—		5,505		—		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:


($ in thousands)	May 31, 2023		May 31, 2022		August 31, 2022
Other current liabilities	$	2,483	$	4,934	$	4,179
Other noncurrent liabilities		9,817		10,967		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:


	Three months ended						Nine months ended
($ in thousands)	May 31, 2023			May 31, 2022			May 31, 2023			May 31, 2022
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		$	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


($ in thousands)	May 31, 2023		May 31, 2022		August 31, 2022
Other current liabilities:
Contract liabilities	$	19,362	$	33,833	$	29,494
Compensation and benefits		19,214		18,243		23,148
Warranties		14,489		13,477		14,080
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
Operating lease liabilities		2,980		3,329		3,159
Accrued environmental liabilities		2,483		4,934		4,179
Accrued insurance		1,138		1,274		1,193
Other		7,566		10,355		8,151
Total other current liabilities	$	90,616	$	101,243	$	100,684

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.


	Three months ended						Nine months ended
($ in thousands)	May 31, 2023			May 31, 2022			May 31, 2023			May 31, 2022
Operating revenues:
Irrigation:
North America	$	75,027		$	96,153		$	249,315		$	275,601
International		67,544			92,540			193,115			239,759
Irrigation total		142,571			188,693			442,430			515,360
Infrastructure		21,982			25,566			64,523			65,187
Total operating revenues	$	164,553		$	214,259		$	506,953		$	580,547

Operating income:
Irrigation	$	30,727		$	39,567		$	92,188		$	81,513
Infrastructure		3,556			3,779			8,947			6,869
Corporate		(7,326	)		(8,184	)		(22,315	)		(21,521	)
Total operating income		26,957			35,162			78,820			66,861

Interest and other expense, net		(1,225	)		394			(3,350	)		(2,625	)
Earnings before income taxes	$	25,732		$	35,556		$	75,470		$	64,236

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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:

•

Agricultural commodity prices – As of May 2023, U.S. corn prices have increased approximately 15 percent and U.S. soybean prices have decreased approximately 15 percent from May 2022. Commodity price volatility continues to be impacted by weather conditions in various regions of the world, China's demand for U.S. exports, and the continued conflict between Ukraine and Russia.

•

Net farm income – As of February 2023, the U.S. Department of Agriculture (the “USDA”) estimated U.S. 2023 net farm income to be $136.9 billion, a decrease of 15.9 percent from the USDA’s estimated U.S. 2022 net farm income of $162.7 billion. Most of this projected decrease is coming from a reduction in government support payments while cash receipts for crops is projected to decrease by 3.1 percent. Following record net farm income in 2022, projected net farm income in 2023 remains at a relatively high level historically.

•

Weather conditions – Demand for irrigation equipment is often positively affected by storm damage and prolonged periods of drought conditions as producers look for ways to reduce the risk of low crop production and crop failures. Conversely, demand for irrigation equipment can be negatively affected during periods of more predictable or excessive natural precipitation.

•

Governmental policies – A number of governmental laws and regulations can affect the Company’s business, including:

•

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

•

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

•

Biofuel production continues to be a major demand driver for irrigated corn, sugar cane and soybeans as these crops are used in high volumes to produce ethanol and biodiesel. In December 2022, the U.S. Environmental Protection Agency (“EPA”) proposed the Renewable Fuels Standard (RFS) volume requirements for 2023, 2024, and 2025. The proposed volumes for 2023 are comparable to the volume of renewable fuel estimated to be used in 2022, with years 2024 and 2025 increasing 5 percent and 4 percent, respectively.

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•

Many international markets are affected by government policies such as subsidies and other agriculturally related incentives. While these policies can have a significant effect on individual markets, they typically do not have a material effect on the consolidated results of the Company.

•

Currency – The value of the U.S. dollar fluctuates in relation to the value of currencies in a number of countries to which the Company exports products and in which the Company maintains local operations. The strengthening of the dollar increases the cost in the local currency of the products exported from the U.S. into these countries and, therefore, could negatively affect the Company’s international sales and margins. In addition, the U.S. dollar value of sales made in any affected foreign currencies will decline as the value of the dollar rises in relation to these other currencies.

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:


	Three months ended
($ in thousands)	May 31, 2023			May 31, 2022			Percent Change
Consolidated
Operating revenues	$	164,553		$	214,259		-23%
Gross profit	$	53,221		$	61,680		-14%
Gross margin		32.3	%		28.8	%

Operating expenses (1)	$	26,264		$	26,518		-1%
Operating income	$	26,957		$	35,162		-23%
Operating margin		16.4	%		16.4	%

Other income (expense), net	$	(1,225	)	$	394		-411%
Income tax expense	$	8,851		$	10,483		-16%
Overall income tax rate		34.4	%		29.5	%
Net earnings	$	16,881		$	25,073		-33%

Irrigation Segment
Segment operating revenues	$	142,571		$	188,693		-24%
Segment operating income	$	30,727		$	39,567		-22%
Segment operating margin		21.6	%		21.0	%

Infrastructure Segment
Segment operating revenues	$	21,982		$	25,566		-14%
Segment operating income	$	3,556		$	3,779		-6%
Segment operating margin		16.2	%		14.8	%

(1)

Includes $7.3 million and $8.2 million of corporate operating expenses for the three months ended May 31, 2023 and 2022, respectively.

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:


	Nine months ended
($ in thousands)	May 31, 2023			May 31, 2022			Percent Change
Consolidated
Operating revenues	$	506,953		$	580,547		-13%
Gross profit	$	160,499		$	142,061		13%
Gross margin		31.7	%		24.5	%

Operating expenses (1)	$	81,679		$	75,200		9%
Operating income	$	78,820		$	66,861		18%
Operating margin		15.5	%		11.5	%

Other expense, net	$	(3,350	)	$	(2,625	)	28%
Income tax expense	$	22,320		$	16,696		34%
Overall income tax rate		29.6	%		26.0	%
Net earnings	$	53,150		$	47,540		12%

Irrigation Segment
Segment operating revenues	$	442,430		$	515,360		-14%
Segment operating income	$	92,188		$	81,513		13%
Segment operating margin		20.8	%		15.8	%

Infrastructure Segment
Segment operating revenues	$	64,523		$	65,187		-1%
Segment operating income	$	8,947		$	6,869		30%
Segment operating margin		13.9	%		10.5	%

(1)

Includes $22.3 million and $21.5 million of corporate operating expenses for the nine months ended May 31, 2023 and 2022, respectively.

Revenues

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

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

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.

Income Taxes

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:

•

Investment in organic growth including capital expenditures and expansion of international markets,

•

Dividends to stockholders, along with expectations to increase dividends over time,

•

Synergistic acquisitions that provide attractive returns to stockholders, and

•

Opportunistic share repurchases taking into account cyclical and seasonal fluctuations.

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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ITEM 4 – Controls and Procedures

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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Part II – OTHER INFORMATION

ITEM 1 – Legal Proceedings

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.

ITEM 1A – Risk Factors

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.

ITEM 2 – Unregistered Sales of Equity Securities and Use of Proceeds

None.

ITEM 3 – Defaults Upon Senior Securities

None.

ITEM 4 – Mine Safety Disclosures

Not applicable.

ITEM 5 – Other Information

None.

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ITEM 6 – Exhibits


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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SIGNATURES

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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