CUSTOMER-FIRST
INNOVATION
PROVIDING REAL-WORLD SOLUTIONS
2018 Annual Report
FI N A N CI A L A N D O PE R AT I N G H I G H LI G H T S
REVENUE
OPERATING INCOME
DILUTED EARNINGS PER SHARE
617.9
560.2
516.4
518.0
547.7
78.4
50.7
34.4
40.2
38.6
4.00
2.22
1.85
2.17
1.88
48.31
2.942
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
(Dollars in millions, except per share amounts)
2018
2017
2016
OPERATING RESULTS
Operating revenues
Operating income1
Net earnings 2
Effective tax rate3
Diluted earnings per share 2
Cash dividends per share
FINANCIAL POSITION
Working capital
Total assets
Long-term debt, including current installments
Total shareholders' equity
Invested capital 4
FINANCIAL MEASURES
Gross margin
Operating margin
Return on invested capital 5
Return on beginning shareholders' equity 6
OTHER DATA
Diluted weighted average shares
Number of employees
547.7
38.6
20.3
40.1%
1.88
1.21
251.0
500.3
116.8
276.9
393.6
27.7%
7.0%
5.9%
7.5%
10,772
1,412
518.0
40.2
23.2
35.1%
2.17
1.17
200.9
506.0
117.0
270.1
387.1
28.0%
7.8%
6.9%
9.2%
10,694
1,410
516.4
34.4
20.3
30.8%
1.85
1.13
204.2
487.5
117.2
251.6
368.8
28.8%
6.7%
6.1%
7.0%
10,930
1,366
1. Fiscal 2018 operating income includes costs of $9.7 million in connection with the Foundation for Growth initiative (“FFG costs”). On an adjusted basis, operating income was $48.3 million and
operating margin was 8.8%.
2. Fiscal 2018 net earnings and diluted earnings per share include after-tax FFG costs of $8.8 million, or $0.82 per diluted share, and income tax expense attributed to the enactment of U.S. tax
reform of $2.5 million, or $0.23 per diluted share. On an adjusted basis, net earnings were $31.6 million, or $2.94 per diluted share.
3. Fiscal 2018 effective income tax rate includes the impact of FFG costs and U.S. tax reform. On an adjusted basis, the effective income tax rate was 27.4%.
4. Defined as current and long-term debt plus shareholders’ equity.
5. Defined as operating income after-tax (using effective tax rate) divided by the average of beginning and ending invested capital. On an adjusted basis, 2018 return on invested capital was 9.0%.
6. Defined as net earnings divided by beginning of period shareholders’ equity. On an adjusted basis, 2018 return on beginning shareholders’ equity was 11.7%.
TO OUR SHAREHOLDERS
Fiscal 2018 was a pivotal year for Lindsay Corporation. The Company
delivered improved financial results against a backdrop of challenging market
conditions, as the cyclical downturn in the agriculture industry continued for
a fifth year. At the same time, we introduced self-help initiatives to better
position the Company for profitability in any market conditions.
In fiscal year 2018, Lindsay achieved revenue growth for the second
consecutive year. We were pleased with our irrigation segment performance,
posting consecutive quarters of revenue growth in a commodity market that
remained suppressed, although conditions moderated somewhat over the
course of the fiscal year. The infrastructure segment posted record results,
securing two large Road Zipper System® projects.
As I mentioned in last year’s annual report, I took my first 100 days as
President and Chief Executive Officer of Lindsay Corporation to examine
and evaluate the Company’s strategies, processes, operations and key
differentiation points to determine what, if any, refinement or realignment
might be needed. I visited all of Lindsay’s key locations around the globe
and spoke with more than 1,000 employees, customers and suppliers.
Some of my primary observations are that Lindsay has a long and storied
history in the irrigation sector, with strong connections to its dealer network
and customer base. The Company has a highly motivated and engaged
employee base with a true passion for the industries we work in. I was
greatly encouraged by the amount of innovation and the extent of Lindsay’s
capabilities, both in irrigation and infrastructure.
The Foundation for Growth strategic initiative was developed to implement
structural and strategic changes to meet the challenges of one of the longest
and harshest agriculture industry downturns in recent history.
It would start by sharpening Lindsay’s strategic focus, simplifying operations
and improving business processes. The intent was to achieve greater
efficiency and profitability even in the trough cycles of the agriculture market
rather than merely waiting for the cycle to improve. These actions would also
make the Company even more profitable when the industry returns to its
peak cycles.
1
After conducting a diagnostic review of the entire Company, we identified
five primary workstreams with opportunities to create value.
Manufacturing footprint – Improving productivity and optimizing our
network of facilities.
General and administrative expenses – Integrating and leveraging back
office activities.
Sourcing – Moving toward a “centralized” approach for our
buying activities.
Commercial – Creating value through channel optimization.
Strategic Choices – Setting strategic direction and conducting a
portfolio assessment.
The overall goals are to simplify the way we conduct business and improve
our productivity to build a Foundation for Growth. We set a target of 11
percent to 12 percent operating margin in fiscal 2020 without any assumed
improvement in the market.
As a concrete step in reducing our manufacturing footprint, we announced
the closure of an infrastructure manufacturing facility to consolidate capacity
with an existing irrigation facility.
In addition, we conducted a portfolio assessment of our existing businesses,
focusing on operating margin and contribution to our core businesses
of irrigation and infrastructure. Based on these criteria, we committed to
divest four businesses: Lakos; Watertronics; SPF Engineering; and Irrigation
Specialists. We secured a commercial agreement with the buyers of Lakos
and Watertronics in order to maintain our strategy of providing turnkey
irrigation solutions. These divestments allow Lindsay to eliminate the
complexity of owning and operating these businesses and to contribute to
improved operating margin.
In the irrigation sector, technological innovation has provided Lindsay an
important competitive edge as it has provided growers with powerful tools
that help achieve higher yields and reap the most benefit out of every
drop of water used. In fiscal 2018, the Company further strengthened that
position. FieldNET Advisor ®, our industry-leading, wireless management tool,
was upgraded with new features and capabilities that provide growers even
more precise control when deciding when, where and how much to irrigate.
The FieldNET Advisor market was also greatly expanded to reach new users.
In 2017, FieldNET Advisor was introduced in the U.S. for two crops. In fiscal
2018, it is now covering 21 crops in 18 countries.
Foundation for Growth initiatives
have sharpened strategic focus,
simplified operations and
improved business processes.
2
For the first time, in fiscal 2018 Lindsay entered into strategic agreements
with third parties to deliver greatly enhanced, value-added user experiences
to our growers. We aligned with the John Deere Operations Center to
make their vast agricultural database accessible to users of FieldNET
Advisor. In addition, we are collaborating with Farmers Edge to provide our
FieldNET Advisor customers access to their comprehensive suite of digital
agronomic tools including exclusive daily, high-resolution satellite imagery.
These unprecedented capabilities further solidify FieldNET Advisor as the
intelligent, remote irrigation management tool of choice.
In yet another example of innovative leveraging of technology, our Elecsys
subsidiary introduced Light Guard Pulse, a real-time monitoring system for
light poles and bulbs on highways and streets. Light Guard Pulse reduces
losses caused by theft of expensive copper wire and fiber optic cables. When
acquired by Lindsay, Elecsys specialized in remote monitoring of oil and
gas equipment, pipelines and facilities. That expertise was leveraged into
irrigation applications, and we are exploring expansion opportunities within
the infrastructure vertical channel.
In conclusion, fiscal 2018 will be remembered as a significant time in the life
of Lindsay Corporation. After extensive assessment and analysis, we made
strategic changes that will affect every area of the Company, and we believe
they will position it for greater performance in all market conditions. We have
set aggressive goals, but I have utmost confidence in the people of Lindsay
and their skill, dedication, creativity and enthusiasm that inform our culture. I
would like to express my appreciation to our customers and our shareholders
for your important roles and valued support in this exciting and rewarding
time for your Company.
Sincerely,
Sincerely,
Tim Hassinger
Tim Hassinger
President & Chief Executive Officer
3
“The Light Guard units
worked great and alerted
us to two theft attempts
during the first six months. By
police responding quickly to the
power loss at the site, the thieves were
prevented from stealing any copper
or damaging equipment.”
GARY COVEY,
KC SCOUT TECHNICAL
& PROJECT MANAGEMENT
CONSULTANT ENGINEER
Elecsys Corporation, a subsidiary
that Lindsay originally acquired to
leverage expertise to monitor and
control irrigation equipment, has
now leveraged that technology to
provide solutions beyond irrigation
application. The Missouri Department
of Transportation (MoDOT) was seeking
to curb thefts of copper wire from
light poles along roads and highways.
Copper theft losses in Kansas City were
amounting to $500,000 annually, and
thieves often stripped a road sign or
light pole of fiber optic cable valued
at $20,000 per cable. MoDOT
attempted to use video cameras, but
thieves could hide their identities, and
animals and debris often triggered
false alerts. Elecsys developed and
patented Light Guard Pulse, a real-
time monitoring system that instantly
alerted authorities when electrical
power to a pole was being cut. In
addition to catching thieves in the act,
Light Guard Pulse also sends alerts in
the event of a power outage or burned
out bulb. Elecsys' ability to adapt
this technology is a great example of
customer-first innovation.
444
FINANCIAL OVERVIEW
NOTE: Fiscal 2018 results include
operating expenses of $9.7 million
($8.8 million after-tax, or $0.82
per diluted share) in connection
with the Foundation for Growth
initiative. Net earnings also
includes tax expense of $2.5
million, or $0.23 per diluted share,
related to the enactment of U.S.
tax reform.
The commentary that follows
is based on adjusted results,
which omit the impact of the
Foundation for Growth initiative
as well as the impact of U.S.
tax reform.
Although operating conditions
remained challenging due
to the persistent cyclical trough
in the agriculture industry,
Lindsay Corporation continued
to show the ability to generate
positive performance.
Company revenues for the fiscal
year ended August 31, 2018 were
$547.7 million, a 6 percent increase
from $518.0 million in fiscal 2017.
Total irrigation segment revenue
was $439.9 million compared to
$418.0 million in the prior year.
North America irrigation revenue
increased 16 percent to $294.6
million compared to $254.2
million in fiscal 2017. International
irrigation was $145.2 million, an
11 percent decrease from the
prior year’s $163.8 million. Total
irrigation operating income was
$46.9 million in fiscal 2018, an
increase of 10 percent from
$42.8 million in the prior year.
Infrastructure segment revenue
in fiscal 2018 was $107.8 million,
an 8 percent increase from $99.9
million in fiscal 2017. Infrastructure
operating income rose 23 percent
to $24.7 million from $20.1 million
in the prior year.
Company operating income for
fiscal 2018 was $48.3 million, an
increase of 20 percent compared
to $40.2 million in fiscal 2017.
Net earnings in fiscal 2018 were
$31.6 million, or $2.94 per diluted
share. Net earnings in the prior
year were $23.2 million, or $2.17
per diluted share.
Operating margin increased to
8.8 percent in fiscal 2018 from
7.8 percent in the prior year.
In fiscal 2018, Lindsay increased
its dividend for the seventh
consecutive year.
Lindsay continued to strengthen
its balance sheet. As of August 31,
2018, cash and cash equivalents
were $160.8 million, a significant
increase from $121.6 million
the prior year. The strength of
the balance sheet continues to
position Lindsay for investments
for organic growth, strategic and
accretive acquisitions, and other
initiatives to drive improved
returns for shareholders.
5
“The advantage of
FieldNET Advisor is that
I can look at it on a day-to-day
basis or minute-by-minute basis
without having to call someone or
wait for a report to show
up once a week.”
NICK HATCHER,
LIBERAL, KS
6
“ Lindsay is at the forefront of irrigation technology. We will continue
to build on our long history of delivering innovative solutions that
help growers maximize productivity and profitability.”
- RANDY WOOD, PRESIDENT IRRIGATION
IRRIGATION SEGMENT REVIEW
IRRIGATION SEGMENT
PERFORMANCE
Total irrigation equipment revenue
increased to $439.9 million in fiscal
2018 compared to $418.0 million in
fiscal 2017. The irrigation segment
provided 80 percent of total
Company revenue in fiscal 2018.
Irrigation equipment sales in North
America generated 67 percent of
segment revenue with international
sales representing 33 percent.
Irrigation segment operating
income increased to $46.9 million
for the fiscal year from $42.8 million
in the prior year.
North America irrigation revenues
generated 16 percent growth,
reflecting an increase in irrigation
system unit volume and higher
average selling prices. Farmer
sentiment improved as the trough
cycle appeared to moderate and
show signs of stabilization.
International irrigation sales
retreated from the strong level
recorded in fiscal 2017. Projects
in many developing markets
were slower to develop than we
had projected. Sales in Brazil, an
important market, were disrupted
by political turmoil and labor
issues, including a truckers’ strike
that virtually shut down the entire
country for 10 days.
Operating margins for the irrigation
segment were 10.7 percent in fiscal
2018 compared to 10.2 percent the
prior year, reflecting the increase in
North America volume. Our North
America manufacturing costs were
impacted by an increase in the
price of steel that was largely the
result of new tariffs. Lindsay has,
for the most part, been able to
pass the price increases on, adding
a steel surcharge that has been
understood and accepted by our
dealers and growers. In addition,
margins were affected by higher
freight costs in the U.S. and a lower
margin mix from international
project orders.
LEVERAGING TECHNOLOGY
TO GAIN MARKET SHARE
Technology has proven to provide
a valuable competitive advantage
for Lindsay Corporation. Lindsay
offers complete, integrated
irrigation solutions, including a
comprehensive range of services
and tools that help growers with
field layout and system design;
7
Lindsay Corporation is one of
the world’s leading providers of
irrigation and water management
systems and technologies used to
irrigate approximately 12 million
acres (4.8 million hectares) in more
than 90 countries. Our product
lines include center pivot and
lateral move irrigation systems,
hose reel travelers, irrigation
controls, irrigation consulting,
design, advanced machine-
to-machine communication,
remote control and monitoring
technology, and wireless
networking solutions. Lindsay’s
irrigation products are sold
through more than 200 dealers
in the U.S. and more than 140
dealers in international markets.
LINDSAY’S IRRIGATION
SEGMENT GENERATES
REVENUE FROM THREE
PRIMARY SOURCES:
Conversion of dry land
to irrigation
Conversion from less efficient
irrigation methods to
mechanized systems
Sales of replacement systems
and parts
IRRIGATION SEGMENT REVIEW
weather and field monitoring
anywhere, with a smart device.
services; design and installation of
In fiscal 2018, FieldNET Advisor
in-field broadband communication
was upgraded with powerful new
infrastructure; and smart systems
features and capabilities. When it
that enable wireless, remote
was launched in 2017, FieldNET
operation and management of
Advisor covered corn and soybean
the entire irrigation operation, all
crops in the U.S. and Canada only.
working together to maximize a
The 2018 technology enhancements
grower’s yields and profitability.
can now help growers around the
The FieldNET ® platform is
the cornerstone of Lindsay’s
technological advantage. FieldNET
world. FieldNET Advisor now
covers 21 crops and is available in
18 more countries.
remote monitoring and control
FieldNET Advisor is a highly
products can be incorporated
differentiated offering in the
into a new irrigation system or
marketplace. It is the only
added to a pivot system – even
fully integrated irrigation
a competitor’s machine – that is
scheduling solution that provides
already in the field. It has proven
recommendations on when, where,
to be an effective way for Lindsay
and how much to irrigate. It even
technology to gain a foothold with
updates recommendations daily
based on changes in weather
conditions and soil moisture. By
2022, FieldNET Advisor technology
is expected to help growers around
the world save 700 billion gallons
of water and more than 1 billion
kilowatt hours of energy.
We continue to invest and
collaborate with others to expand
the capabilities of FieldNET
Advisor. In fiscal 2018, Lindsay
partnered with the John Deere
Operations Center, which maintains
one of the world’s largest databases
of comprehensive agricultural
information, to allow access by
FieldNET Advisor users. This means
a new customer base.
FieldNET Advisor is the most
advanced level of interactive tool,
helping farmers make irrigation
decisions and then program and
operate their systems from virtually
21 CROPS
18 COUNTRIES
Backed by 40 years
of proven crop
science, FieldNET
Advisor delivers the
information growers
need to decide
precisely when,
where and how
much to irrigate.
8
By 2020, FieldNET Advisor
is expected to help growers around
the world save 700 billion gallons
of water and more than 1 billion
kilowatt hours of energy.
effectiveness and simplicity than
ever before.
Lindsay also aligned with digital
solutions provider Farmers Edge
to allow our FieldNET customers
access to their comprehensive
suite of agronomic tools including
exclusive daily satellite imagery as
well as data from on-farm weather
stations, telematics devices and
soil sampling that can bring new
levels of data-driven detail to timely
irrigation planning.
These unmatched capabilities
continue to expand the reach of
FieldNET Advisor in the market.
IRRIGATION SEGMENT
OUTLOOK
that with a handheld device a
The U.S. Department of Agriculture
grower can leverage big data to
reports that marketing year 2017/18
plan, manage, monitor and control
projections suggest the end of the
irrigation with greater precision,
commodity price declines and the
beginning of modest increases
updated its projections, forecasting
that are expected to continue
that 2017 would set a new record
through 2026. However, the USDA
for annual fuel ethanol production,
also forecasts net farm income to
with slight increases projected for
decrease $9.8 billion (13.0 percent)
2018 and 2019. The government
from 2017 to $65.7 billion in 2018,
of China is continuing its plans
after increasing $13.9 billion (22.5
to require the use of ethanol in
percent) in 2017.
Biofuel production will remain a
major consumer of irrigated corn,
sugar cane and soybeans, using
30 to 40 percent of total crop
all gasoline by 2020 as part of
its efforts to reduce the country’s
notorious air pollution, but there
has so far been little effect on the
amount of U.S. fuel stock imports.
production to produce ethanol
There is still industry-wide
and biodiesel. For 2018, the
uncertainty regarding trade
Environmental Protection Agency
negotiations and possible tariffs
kept its ethanol production target
and retaliatory practices. Progress,
levels the same as those of 2017.
success and growth of our
The current administration has been
international projects also depend
supportive of ethanol. The U.S.
on a number of factors that are
Energy Information Administration’s
difficult to predict.
Short-Term Energy Outlook
Despite uncertainty in the industry,
biofuel production remains a major
consumer of irrigated corn, sugar
cane and soybeans.
9
“We determined
that without a Road Zipper
to do the Michigan US-131
project, you would have to do it
over a two-year span, which would
be two different summers. We
knew we had to do something to
expedite the project.”
TANYA PAWLUKIEWICZ,
MICHIGAN DEPARTMENT
OF TRANSPORTATION ASSISTANT
CONSTRUCTION ENGINEER
Lindsay’s infrastructure segment is an international group of companies producing a wide range of products
that aid in roadway maintenance and transportation safety. We manufacture moveable road barriers and barrier
transfer machines, energy-absorbing crash cushions, specialty barriers for work areas or construction zones, road
marking materials, railroad signaling structures, and other safety-related products. Lindsay’s roadway infrastructure
products are sold through 35 dealers in the U.S. and 35 international dealers, while railroad products are sold
directly to the major railroad companies in the U.S.
10
"The Road Zipper System is able to save lives, reduce traffic
and our carbon footprint by people not sitting in traffic."
- SCOTT MARION, PRESIDENT INFRASTRUCTURE
INFRASTRUCTURE SEGMENT REVIEW
INFRASTRUCTURE
SEGMENT PERFORMANCE
The infrastructure segment
provided 20 percent of Lindsay’s
revenue in fiscal 2018 compared to
19 percent in fiscal 2017.
Infrastructure segment revenue
increased to $107.9 million from
$99.9 million in fiscal 2017.
Operating income rose as well, to
a record $24.7 million in fiscal 2018
compared to $20.1 million in the
prior year. Infrastructure operating
margin increased for the fourth
consecutive year, to 22.9 percent
compared to 20.1 percent in fiscal
2017. Greater revenue from Road
Zipper System projects resulted
in an improved margin mix and
operating cost leverage.
Lindsay’s Road Zipper System is a
one-of-a-kind solution to reduce
road congestion and improve
road safety. During fiscal 2018, the
infrastructure segment was awarded
two high-profile Road Zipper
System contracts.
with North Delta in Greater
Vancouver, British Columbia,
Canada. The moveable barrier
technology will replace an
existing static concrete barrier to
accommodate increased traffic
flow during peak periods. With
an average of 119,000 vehicles
moving across the bridge every
day, British Columbian officials are
adding a seventh lane along with
the new counter-flow moveable
barrier system to improve capacity
and help reduce traffic congestion
during peak periods. When the
Road Zipper project is completed,
officials say motorists can expect to
save six minutes on their morning
commute and 12 to 16 minutes
during the afternoon rush hour.
Lindsay's revenue from this project
is approximately $14 million.
The Richmond-San Rafael Bridge
in San Francisco, California, will
be adding Road Zipper moveable
barrier technology to create a
bicycle/pedestrian lane. The
moveable barrier system on the
The Alex Fraser Bridge connects
Richmond and New Westminster
Richmond-San Rafael Bridge will be
unique in that the city wanted taller
11
INFRASTRUCTURE SEGMENT REVIEW
barriers to separate the bicycle/
pedestrian lane from the vehicle
lanes. Lindsay designed custom
barriers with a topper guard that
increases the overall height of the
barrier from 32 inches to 42 inches,
while still allowing the barrier to be
moved. Lindsay's revenue from this
project is approximately $9 million.
INFRASTRUCTURE
SEGMENT OUTLOOK
There is growing interest in Lindsay’s
Road Zipper Solution, which is a
high value, high margin product.
High-profile Road Zipper contracts
awarded in 2018 include the Alex Fraser
Bridge in Vancouver, British Columbia,
Canada and The Richmond-San Rafael
Bridge in San Francisco, California.
The Road Zipper System
is a one-of-a-kind solution
that reduces road
congestion and
improves road safety.
We are seeking to expand our
commercial reach with two primary
strategies Road Zipper growth.
Currently, Road Zipper purchases
are nearly always to relieve
congestion on roadways that have
exceeded their capacity. We see a
strong opportunity to get involved
earlier in the process, during the
planning, design, specification and
development of roadways, before
there’s a problem with congestion.
We want road planners to think of
Road Zipper as a resource to help
manage traffic flow.
We are also seeking to develop
a broader lease model for Road
Zipper. Currently, most leases
are for short-term construction
projects. Longer-term leases would
moderate the lumpiness in the
Road Zipper business.
With our road safety products,
the five-year, $305 billion U.S.
highway bill enacted in December
2015 is continuing to provide
stability in government spending.
However, the current order flow for
road safety products is negatively
impacted by the ongoing transition
to federal Manual for Assessing
Safety Hardware (MASH) standards
for road safety hardware. There is
a December 2019 deadline for
states to comply with the MASH
standards to be eligible for
reimbursement under the
Federal Highway program.
12
CAPITAL ALLOCATION PLAN
The Company has a balanced, comprehensive capital allocation plan that enables decisive short-term actions, assures
long-term growth and returns cash to shareholders.
Targeted cash balance of $60-75 million, including international accounts
To support cyclical and seasonal fluctuations in working capital and projected capital expenditures
Prioritization for cash use:
Organic growth initiatives
Capital expenditures in fiscal 2019 of $15-$20 million
Annual increases in dividends
Synergistic acquisitions that leverage core capabilities
Excess cash invested in opportunistic share repurchases
No repurchases in 2018
$63.7 million remained available under the share repurchase authorization
LONG-TERM FINANCIAL GOALS
Lindsay’s goals of providing solid financial performance through market cycles.
REVENUE
OPERATING MARGIN
RETURN ON INVESTED CAPITAL
GOALS
5-10%
11-16%
10 -15%
13
14
LONG-TERM OUTLOOK
The Foundation for Growth
initiatives were developed to
reshape the business for immediate
improvements that would also have
lasting benefits.
In addition, there are other business
drivers that will contribute to the
Company’s long-term growth.
Lindsay is at the forefront of
research and development of
innovative solutions to meet the
food, fuel, fiber and transportation
needs of the world's rapidly
growing population. The United
Nations forecasts that the world’s
population will grow from current
7.6 billion to approximately
9.6 billion by 2050.
IMPACT ON IRRIGATION
The U.N. Food and Agriculture
Organization projects that food
production will have to increase
by 70 percent to feed the growing
population. Achieving such an
increase will require much higher
crop yields, necessitating more
efficient use of land and water.
Protection of the environment and
the adoption of biofuels will also
continue to be global priorities.
According to the United Nations
Educational, Scientific and Cultural
Organization, only 20 percent
of the world’s cultivated land
is irrigated, yet irrigated land
produces 40 percent of the world’s
food supply. More land will have to
be irrigated, and irrigation will have
to be done much more efficiently.
The world’s most common irrigation
method is flood or gravity irrigation
that consumes twice as much water
as an efficient mechanical system.
By greatly increasing crop yields,
while conserving precious water
and reducing energy requirements,
Lindsay irrigation solutions can play
a vital role in meeting the most
basic human needs. By continuing
to expand our global presence, we
will remain at the forefront of this
essential industry.
IMPACT ON
INFRASTRUCTURE SEGMENT
Essential transportation needs
will continue to drive expansion
in demand for our infrastructure
products. On a global basis, more
than half of total infrastructure
spending is being made in
emerging nations where there
is a rapidly growing number of
vehicles, an under-developed
roadway infrastructure and an
urgent emphasis on reducing traffic
mortality rates through investment
in highway safety products.
In more developed nations,
infrastructure expansion and
renovation are continual issues,
and traffic congestion is a costly
nuisance. According to the 2015
Urban Mobility Report published
by the Texas Transportation
Institute, travel delays due to
traffic congestion caused drivers
to waste 3.1 billion gallons of fuel
and kept travelers stuck in their
cars for 6.9 billion extra hours,
equating to 42 hours per rush-hour
commuter. Nationwide, these direct
and indirect costs add up to $160
billion, or $960 per commuter.
The report predicts urban roadway
congestion will continue to get
worse without more assertive
approaches on the project,
program and policy fronts. By 2020,
with a continued good economy:
• Annual delay per commuter will
grow from 42 hours to 47 hours.
• Total delay nationwide will
grow from 6.9 billion hours to
8.3 billion hours.
• The total cost of congestion
will jump from $160 billion to
$192 billion.
Traffic and congestion also
have a strong negative impact on
the environment.
In many situations, Lindsay’s Road
Zipper System will be the most
cost-effective traffic mitigation
solution available, on either a
temporary or permanent basis.
As the world’s population grows,
mobility increases, and traffic and
congestion become more pressing,
Lindsay’s infrastructure solutions will
provide increasing value in terms
of financial savings, environmental
benefits and improved quality of life.
Lindsay leads the way in research and
development of innovative solutions to
meet the food, fuel and fiber needs of
a growing global population.
15
BUILDING FOR
A STRONGER
FUTURE
A review of our 2018 fiscal year shows that Lindsay is well-positioned for 2019
and beyond.
Our Foundation for Growth is dedicated to improved performance even if
market conditions remain sub-optimal. The changes and improvements we are
implementing will lead to even greater results when market conditions improve.
The people of Lindsay Corporation have proven themselves to be uniquely
capable of developing vital, effective, responsible solutions that provide lasting,
tangible benefits to people throughout the world, from those struggling in
developing nations to the sophisticated shareholders who continue to place
their trust in us.
16
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
(cid:3) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended August 31, 2018
or
(cid:4)(cid:4) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
Commission File Number 1-13419
Lindsay Corporation
y
p
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
2222 North 111th Street, Omaha, Nebraska
(Address of principal executive offices)
47-0554096
(I.R.S. Employer
Identification No.)
68164
(Zip Code)
402-829-6800
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on which registered
g
New York Stock Exchange, Inc. (Symbol LNN)
g
Title of each class
Common Stock, $1.00 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, (as defined in Rule 405 of the Securities
Act). Yes (cid:3) No (cid:5)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange
Act. Yes (cid:5) No (cid:3)
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 (cid:3) No (cid:5)
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 (cid:3) No (cid:5)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K (cid:3)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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
(cid:3)
(cid:5)
Non-accelerated filer
(cid:5)
Smaller reporting company
(cid:5)
Emerging growth company (cid:5)
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. (cid:5)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:5) No (cid:3)
The aggregate market value of Common Stock of the registrant, all of which is voting, held by non-affiliates based on the closing
sales price on the New York Stock Exchange, Inc. on February 28, 2018 was $936,720,708.
As of October 15, 2018, 10,757,318 shares of the registrant’s Common Stock were outstanding.
ff
Portions of the Proxy Statement pertaining to the Registrant’s 2018 annual stockholders' meeting to be filed hereafter are
incorporated by reference into Part III of this Annual Report on Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
Page(s)
Part I
Part II
Part III
Part IV
Item 1.
Business ........................................................................................................................
Item 1A.
Risk Factors ..................................................................................................................
Item 1B. Unresolved Staff Comments..........................................................................................
Item 2.
Properties .....................................................................................................................
Item 3.
Legal Proceedings ........................................................................................................
Item 4.
Mine Safety Disclosures ...............................................................................................
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities............................................................................
Item 6.
Selected Financial Data ...............................................................................................
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations...........................................................................................................
Item 7A. Quantitative and Qualitative Disclosures about Market Risk......................................
Item 8.
Financial Statements and Supplementary Data ...........................................................
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure ...........................................................................................................
Item 9A.
Controls and Procedures..............................................................................................
Item 9B. Other Information.........................................................................................................
Item 10.
Directors, Executive Officers and Corporate Governance ..........................................
Item 11.
Executive Compensation...............................................................................................
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters ............................................................................................
Item 13.
Certain Relationships and Related Transactions, and Director Independence ...........
Item 14.
Principal Accounting Fees and Services ......................................................................
Item 15.
Exhibits, Financial Statement Schedules......................................................................
Item 16.
Form 10-K Summary ....................................................................................................
SIGNATURES
3
12
16
16
17
17
18
20
21
30
30
60
60
63
64
64
64
65
65
66
69
70
2
ITEM 1 — Business
PART I
INTRODUCTION
Lindsay Corporation, along with its subsidiaries (collectively called “Lindsay” or the “Company”), is a global leader
in providing a variety of proprietary water management and road infrastructure products and services. The
Company has been involved in the manufacture and distribution of agricultural irrigation equipment since 1955 and
has grown from a regional company to an international water efficiency solutions and highway infrastructure firm
with worldwide sales and distribution. Lindsay, a Delaware corporation, maintains its corporate offices in Omaha,
Nebraska. The Company has operations which are categorized into two major reporting segments, Irrigation and
Infrastructure.
–
Irrigation Segment – The Company’s irrigation segment includes the manufacture and marketing of center pivot,
lateral move, and hose reel irrigation systems which are used principally in the agricultural industry to increase or
stabilize crop production while conserving water, energy and labor. The irrigation segment also manufactures and
markets repair and replacement parts for its irrigation systems and controls. The Company continues to strengthen
irrigation product offerings through innovative technology such as Global Positioning System (“GPS”) positioning
and guidance, variable rate irrigation, wireless irrigation management, irrigation scheduling, machine-to-machine
(“M2M”) communication technology solutions and smartphone applications. The Company’s primary domestic
irrigation manufacturing facilities are located in Lindsay, Nebraska and Olathe, Kansas. Internationally, the
Company has production operations in Brazil, France, China, Turkey, and South Africa, as well as distribution and
sales operations in the Netherlands, Australia, and New Zealand. The Company also exports equipment from the
U.S. to other international markets.
–
Infrastructure Segment – The Company’s infrastructure segment includes the manufacture and marketing of
moveable barriers, specialty barriers, crash cushions and end terminals, road marking and road safety equipment,
large diameter steel tubing, and railroad signals and structures. The infrastructure segment also provides outsourced
manufacturing and production services. The principal infrastructure manufacturing facilities are located in Rio
Vista, California; Milan, Italy; and Lindsay, Nebraska.
PRODUCTS BY SEGMENT
IRRIGATION SEGMENT
Products - The Company manufactures and markets its center pivot, lateral move irrigation systems, and irrigation
controls in the U.S. and internationally under its Zimmatic® brand. The Company also manufactures and markets
hose reel travelers under the Perrot™t
and Greenfield® brands. The Company also produces or markets chemical
injection systems, variable rate irrigation systems, flow meters, weather stations, soil moisture sensors, and remote
monitoring and control systems which it sells under its GrowSmart® brand. In addition to whole systems, the
Company manufactures and markets repair and replacement parts for its irrigation systems and controls.
Furthermore, the Company designs and manufactures innovative M2M communication technology solutions, data
acquisition and management systems, and custom electronic equipment for critical applications under its Elecsys™
brand.
The Company’s irrigation systems are primarily of the standard center pivot type, with a small portion of its
products consisting of the lateral move type. Both are automatic move systems consisting of sprinklers mounted on
a water carrying pipeline which is supported approximately 11 feet off the ground by a truss system suspended
between moving towers.
A standard center pivot in the U.S. is typically seven spans and approximately 1,300 feet long and is designed to
circle within a quarter-section of land, which comprises 160 acres, wherein it irrigates approximately 125 to 130
acres. A center pivot or lateral move system can also be custom designed and can irrigate from 25 to 600+ acres.
A center pivot system represents a significant investment to a farmer. In a dry land conversion to center pivot
irrigation, approximately one-half of the investment is for the pivot itself, and the remainder is attributable to
installation of additional equipment such as wells, pumps, underground water pipes, electrical supply, and a concrete
pad upon which the pivot is anchored. The Company’s center pivot and lateral move irrigation systems can be
enhanced with a family of integrated proprietary products such as GPS monitoring and other automated controls.
3
The Company also manufactures and distributes hose reel travelers. Hose reel travelers are typically deployed in
smaller or irregular fields and usually are easy to operate, easy to move from field to field, and a smaller investment
than a typical standard center pivot.
The Company also markets proprietary remote monitoring and automation technology that works on any brand of
electronic pivot and drip irrigation systems and is sold on a subscription basis under the FieldNET®TT product name.
FieldNET®TT technology enables growers to remotely monitor and operate irrigation equipment, saving time, and
reducing water and energy consumption. The technology uses cellular or radio frequency communication systems
to remotely acquire data relating to various conditions in an irrigated field, including operational status of the
irrigation system, position of the irrigation system, water usage, weather and soil conditions, and similar data. The
system can remotely control the irrigation system, altering the speed to vary water application amounts, and
controlling pump station and diesel generator operation. Data management and control is achieved using
applications running on various personal computer or mobile devices connected to the internet.
The Company also markets patented technology under the FieldNET Advisor™ product name which delivers
information that helps farmers decide precisely when, where and how much to irrigate. This technology combines
more than 40 years of crop and irrigation science with FieldNET’s cloud computing capabilities, remote sensing
functionality and machine
irrigation
recommendations.
to provide farmers with field-specific and crop-specific
learning
Other Types of Irrigation – Center pivot and lateral move irrigation systems compete with three other types of
irrigation: flood, drip, and other mechanical devices such as hose reel travelers and solid set sprinklers. The bulk of
worldwide irrigation is accomplished by traditional flood irrigation. Flood irrigation is accomplished by either
flooding an entire field, or by providing a water source (ditches or a pipe) along the side of a field, which is planed
and slopes slightly away from the water source. The water is released to the crop rows through gates in the ditch or
pipe, or through siphon tubes arching over the ditch wall into some of the crop rows. It runs down through the crop
row until it reaches the far end of the row, at which time the water source is moved and another set of rows are
flooded. Disadvantages or limitations of flood irrigation include that it cannot be used to irrigate uneven, hilly, or
rolling terrain, it can be wasteful or inefficient and coverage can become inconsistently applied. In “drip” or “low
flow” irrigation, perforated plastic pipe or tape is installed on the ground or buried underground at the root level.
Several other types of mechanical devices, such as hose reel travelers, irrigate the remaining irrigated acres.
Center pivot, lateral move, and hose reel traveler irrigation offer significant advantages when compared with other
types of irrigation. It requires less labor and monitoring; can be used on sandy ground, which, due to poor water
retention ability, must have water applied frequently; can be used on uneven ground, thereby allowing previously
unsuitable land to be brought into production; can be used for the application of fertilizers, insecticides, herbicides,
or other chemicals (termed “fertigation” or “chemigation”); and conserves water and chemicals through precise
control of the amount and timing of the application.
Markets - Water is an essential and critical requirement for crop production, and the extent, regularity, and
frequency of water application can be a critical factor in crop quality and yield. The fundamental factors which
govern the demand for center pivot and lateral move systems are essentially the same in both the U.S. and
international markets. Demand for center pivot and lateral move systems is determined by whether the value of the
increased crop production and cost savings attributable to center pivot or lateral move irrigation exceeds any
increased costs associated with purchasing, installing, and operating the equipment. Thus, the decision to purchase a
center pivot or lateral move system, in part, reflects the profitability of agricultural production, which is determined
primarily by the prices of agricultural commodities and the costs of other farming inputs.
The current demand for center pivot systems has three sources: conversion to center pivot systems from less water-
efficient, more labor-intensive types of irrigation; replacement of older center pivot systems, which are beyond their
useful lives or are technologically obsolete; and conversion of dry land farming to irrigated farming. Demand for
center pivots and lateral move irrigation equipment also depends upon the need for the particular operational
characteristics and advantages of such systems in relation to alternative types of irrigation, primarily flood. More
efficient use of the basic natural resources of land, water, and energy helps drive demand for center pivot and lateral
move irrigation equipment. An increasing global population not only increases demand for agricultural output, but
also places additional and competing demands on land, water, and energy. The Company expects demand for center
pivots and lateral move systems to continue to increase relative to other irrigation methods because center pivot and
lateral move systems are preferred where the soil is sandy; the terrain is not flat; the land area to be irrigated is
sizeable; there is a shortage of reliable labor; water supply is restricted and conservation is preferred or critical;
and/or fertigation or chemigation will be utilized.
4
United States Market – In the United States, the Company sells its branded irrigation systems, including Zimmatic®,
to over 200 independent dealers, who resell to their customer, the farmer. Dealers assess their customers’
requirements, design the most efficient solution, assemble and erect the system in the field, and provide additional
system components, primarily relating to water supply (wells, pumps, pipes) and electrical supply (on-site
generation or hook-up to power lines). Lindsay dealers generally are established local agribusinesses, many of
which also deal in related products, such as well drilling and water pump equipment, farm implements, grain
handling and storage systems, and farm structures.
International Market – The Company sells center pivot and lateral move irrigation systems throughout the world.
International sales accounted for approximately 33 percent and 39 percent of the Company’s total irrigation segment
revenues in fiscal 2018 and 2017, respectively. The Company sells direct to consumers, as well as through an
international dealer network, and has production and sales operations in Brazil, France, China, Turkey, and South
Africa, as well as distribution and sales operations in the Netherlands, Australia, and New Zealand serving the key
South American, European, Chinese, African, Russian, Ukrainian, Middle East, Australian, and New Zealand
markets. The Company also exports irrigation equipment from the U.S. to international markets.
The Company’s international markets differ with respect to the need for irrigation, the ability to pay, demand,
customer type, government support of agriculture, marketing and sales methods, equipment requirements, and the
difficulty of on-site erection. The Company’s industry position is such that it believes that it will likely be
considered as a potential supplier for most major international agricultural development projects utilizing center
pivot or lateral move irrigation systems.
Competition – Four manufacturers control a substantial majority of the U.S. center pivot irrigation system industry.
The international irrigation market includes participation and competition by the leading U.S. manufacturers, as well
as various regional manufacturers. The Company competes in certain product lines with several manufacturers,
some of whom may have greater financial resources than the Company. The Company competes by continuously
improving its products through ongoing research and development activities. The Company continues to strengthen
irrigation product offerings through innovative technology such as GPS positioning and guidance, variable rate
irrigation, wireless irrigation management, and smartphone applications, as well as through the acquisition of
products and services that allow the Company to provide a more comprehensive solution to growers’ needs. The
Company’s engineering and research expenses related to irrigation totaled approximately $10.8 million, $11.1
million, and $11.6 million for fiscal 2018, 2017, and 2016, respectively. Competition also occurs in areas of price
and seasonal programs, product quality, durability, controls, product characteristics, retention and reputation of local
dealers, customer service, and, at certain times of the year, the availability of systems and their delivery time. On
balance, the Company believes it competes favorably with respect to these factors.
INFRASTRUCTURE SEGMENT
Products – The Company’s Quickchange® Moveable Barrier™ system, commonly known as the Road Zipper
System®, is composed of three parts: 1) T-shaped concrete and steel barriers that are connected to form a continuous
wall; 2) a Barrier Transfer Machine™ (“BTM™MM ”) capable of moving the barrier laterally across the pavement; and 3)
the variable length barriers necessary for accommodating curves. A barrier element is approximately 32 inches
high, 12-24 inches wide, 3 feet long, and weighs 1,500 pounds. The barrier elements are interconnected by heavy
duty steel hinges to form a continuous barrier. The BTM™M employs an inverted S-shaped conveyor mechanism that
lifts the barrier, moving it laterally before setting it back on the roadway surface.
In permanent applications, the Road Zipper System® increases capacity and reduces congestion by varying the
number of directional traffic lanes to match the traffic demand, and promotes safety by maintaining the physical
separation of opposing lanes of traffic. Roadways with fixed medians have a set number of lanes in each direction
and cannot be adjusted to traffic demands that may change over the course of a day, or to capacity reductions caused
by traffic incidents or road repair and maintenance. Applications include high-volume highways where expansion
may not be feasible due to lack of additional right-of-way, environmental concerns, or insufficient funding. The
Road Zipper System® is particularly useful in busy commuter corridors and at choke points such as bridges and
tunnels. Road Zipper Systems® can also be deployed at roadway or roadside construction sites to accelerate
construction, improve traffic flow, and safeguard work crews and motorists by positively separating the work area
and traffic. Examples of types of work completed with the help of a Road Zipper System® include highway
reconstruction, paving and resurfacing, road widening, median and shoulder construction, and repairs to tunnels and
bridges.
The Company offers a variety of equipment lease options for Road Zipper Systems® and BTM™M equipment used in
construction applications. The leases extend for periods of one month or more for equipment already existing in the
Company’s lease fleet. Longer lease periods may be required for specialty equipment that must be built for specific
5
projects. Sales for a highway safety or road improvement project range from $2.0 to $20.0 million, making them
significant capital investments.
Crash Cushions and End Terminals – The Company offers a complete line of redirective and non-redirective crash
cushions which are used to enhance highway safety at locations such as toll booths, freeway off-ramps, medians and
roadside barrier ends, bridge supports, utility poles, and other fixed roadway hazards. The Company’s primary
crash cushion products cover a full range of lengths, widths, speed capacities, and application accessories and
include the following brand names: TAU®UU ; Universal TAU-II®II ; TAU-II-R™; TAU-B_NR™; ABSORB 350®; and
Walt™. In addition to these products the Company also offers guardrail end terminal products such as the X-
Tension® and X-Lite® systems. The crash cushions and end terminal products compete with other vendors in the
world market. These systems are generally sold through a distribution channel that is domiciled in particular
geographic areas.
Specialty Barriers – The Company also offers specialty barrier products such as the SAB™, ArmorGuard™,
PaveGuard™, and DR46™ portable barrier and/or barrier gate systems. These products offer portability and
flexibility in setting up and modifying barriers in work areas and provide quick-opening, high-containment gates for
use in median or roadside barriers. The gates are generally used to create openings in barrier walls of various types
for both construction and incident management purposes. The DR46™ is an energy-absorbing barrier that can help
protect motorcyclists from impacting guardrail posts which is an area of focus by departments of transportation and
government regulators for reducing the amount and severity of injuries.
t
Road Marking and Road Safety Equipment – The Company also offers preformed tape and a line of road safety
accessory products. The preformed tape is used primarily in temporary applications such as markings for work
zones, street crossings, and road center lines or boundaries. The road safety equipment consists of mostly plastic
and rubber products used for delineation, slowing traffic, and signaling. The Company also manages an ISO 17025
certified testing laboratory that performs full-scale impact testing of highway safety products in accordance with the
National Cooperative Highway Research Program (“NCHRP”) Report 350, the Manual for Assessing Safety
Hardware (“MASH”), and the European Norms (“EN1317 Norms”) for these types of products. The NCHRP
Report 350 and MASH guidelines are procedures required by the U.S. Department of Transportation Federal
Highway Administration (“FHWA”) for the safety performance evaluation of highway features. The EN1317
Norms are being used to qualify roadway safety products for the European markets.
Other Products – The Company’s Diversified Manufacturing, Rail and Tubing business manufactures and markets
railroad signals and structures, and large diameter steel tubing, and provides outsourced manufacturing and
production services for other companies. The Company’s customer base includes large industrial companies and
railroads. Customers benefit from the Company’s design and engineering capabilities as well as the Company’s
ability to provide a wide spectrum of manufacturing services, including welding, machining, painting, forming,
galvanizing, and assembling hydraulic, electrical, and mechanical components.
Markets – The Company’s primary infrastructure market includes moveable concrete barriers, delineation systems,
crash cushions, and similar protective equipment. The U.S. roadway infrastructure market includes projects such as
new roadway construction, bridges, tunnels, maintenance and resurfacing, and development of technologies for
relief of roadway congestion. Much of the U.S. highway infrastructure market is driven by government (federal and
state) spending programs. For example, the U.S. government funds highway and road improvements through the
Federal Highway Trust Fund Program. This program provides funding to improve the nation’s roadway system.
Matching funding from the various states may be required as a condition of federal funding. In the long term, the
Company believes that the federal program provides a solid platform for growth in the U.S. market, as it is generally
acknowledged that additional funding will be required for infrastructure development and maintenance in the
future.
The global market for the Company’s infrastructure products continues to be driven by population growth and the
need for improved road safety. International sales accounted for approximately 59 percent and 45 percent of the
Company’s total infrastructure segment revenues in fiscal 2018 and 2017, respectively. The international market is
very different from country to country. The standardization in performance requirements and acceptance criteria for
highway safety devices adopted by the European Committee for Standardization is expected to lead to greater
uniformity and a larger installation program. Prevention programs put in place in various countries to lower
highway traffic fatalities may also lead to greater demand. The Company distributes infrastructure products in
Europe, South America, the Middle East, Australia and Asia. The Company expects to continue expanding in
international markets as populations grow and markets become more established.
6
Competition – The Company competes in certain product lines with several manufacturers, some of whom may have
greater financial resources than the Company. The Company competes by continuously improving its products
through ongoing research and development activities. The Company’s engineering and research expenses related to
infrastructure products totaled approximately $5.3 million, $6.0 million, and $4.3 million for fiscal 2018, 2017, and
2016, respectively. The Company competes with certain products and companies in its crash cushion business, but
has limited competition in its moveable barrier line, as there is not another moveable barrier product today
comparable to the Road Zipper System®. However, the Company’s barrier product does compete with traditional
“safety-shaped” concrete barriers and other safety barriers.
Distribution Methods and Channels – The Company has dedicated production and sales operations in the United
States and Italy. Sales efforts consist of both direct sales and sales programs managed by its network of distributors
and third-party representatives. The sales teams have responsibility for new business development and assisting
distributors and dealers in soliciting large projects and new customers. The distributor and dealer networks have
exclusive territories and are responsible for developing sales and providing service, including product maintenance,
repair, and installation. The typical dealer sells an array of safety supplies, road signs, crash cushions, delineation
equipment, and other highway products. Customers include departments of transportation, municipal transportation
road agencies, roadway contractors, subcontractors, distributors, and dealers. Due to the project nature of the
roadway construction and congestion management markets, the Company’s customer base changes from year to
year. Due to the limited life of projects, it is rare that a single customer will account for a significant amount of
revenues in consecutive years. The customer base also varies depending on the type of product sold. The
Company’s moveable barrier products are typically sold to transportation agencies or the contractors or suppliers
serving those agencies. In contrast, distributors account for a majority of crash cushion sales since those products
have lower price points and tend to have shorter lead times.
GENERAL
Certain information generally applicable to both of the Company’s reportable segments is set forth below.
The following table describes the Company’s total revenues for the past three fiscal years. United States export
revenue is included in International, based on the region of destination.
($ in millions)
United States
International
Total revenues
2018
For the years ended August 31,
2017
2016
Revenues
321.7
$
226.0
547.7
$
% of
total
Revenues
59 $ 297.3
41
220.7
100 $ 518.0
% of
total
Revenues
57 $ 321.6
43
194.9
100 $ 516.4
% of
total
62
38
100
SEASONALITY
Irrigation equipment sales are seasonal by nature. Farmers generally order systems to be delivered and installed
before the growing season. Shipments to customers located in Northern Hemisphere countries usually peak during
the Company’s second and third fiscal quarters for the spring planting period. Sales of infrastructure products are
traditionally higher during prime road construction seasons and lower in the winter. The primary construction
season for Northern Hemisphere countries generally corresponds with the Company’s third and fourth fiscal
quarters.
CUSTOMERS
The Company is not dependent upon a single customer or upon a limited number of customers for a material part of
either segment’s business. The loss of any one customer would not have a material adverse effect on the Company’s
financial condition, results of operations, or cash flow.
ORDER BACKLOG
As of August 31, 2018, the Company had an order backlog of $50.0 million compared with $51.8 million at August
31, 2017. 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,
therefore it is generally not a good indication of the next quarter’s revenues.
RAW MATERIALS AND COMPONENTS
Raw materials used by the Company include coil steel, angle steel, plate steel, zinc, tires, gearboxes, concrete, rebar,
fasteners, and electrical and hydraulic components (motors, switches, cable, valves, hose, and stators). The
7
Company has, on occasion, faced shortages of certain such materials. The Company believes it currently has ready
access from assorted domestic and foreign suppliers to adequate supplies of raw materials and components.
CAPITAL EXPENDITURES
Capital expenditures for fiscal 2018, 2017, and 2016 were $11.1 million, $8.9 million, and $11.5 million,
respectively. Capital expenditures for fiscal 2019 are estimated to be approximately $15.0 million to $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.
PATENTS, TRADEMARKS, AND LICENSES
Lindsay’s Zimmatic®, Greenfield®, GrowSmart®, Perrot™t
, Road Zipper System®, Quickchange® Moveable Barrier™,
ABSORB 350®, FieldNET®TT , FieldNET Advisor™, TAU®UU , Universal TAU-II®II , TAU-II-R™, TAU-B_NR™, X-Tension®,
X-Lite® CableGuard™dd , TESI™I , SAB™, ArmorGuard™dd , PaveGuard™dd , DR46™66 , U-MAD™, and other trademarks are
registered or applied for in the major markets in which the Company sells its products. In addition, the Company
owns multiple patents dealing with cellular communication techniques, cathodic protection measurement methods,
and data compression and transmission. Lindsay follows a policy of applying for patents on all significant
patentable inventions in markets deemed appropriate. Although the Company believes it is important to follow a
patent protection policy, Lindsay’s business is not dependent, to any material extent, on any single patent or group
of patents.
EMPLOYEES
The number of persons employed by the Company and its wholly-owned subsidiaries at the fiscal years ended 2018,
2017, and 2016 was 1,412, 1,410, and 1,366, respectively. None of the Company’s U.S. employees are represented
by a union. Certain of the Company’s non-U.S. employees are unionized due to local governmental regulations.
ENVIRONMENTAL AND HEALTH AND SAFETY MATTERS
The Company is subject to numerous laws and regulations that govern environmental and occupational health and
safety matters. The Company believes that its operations are substantially in compliance with all such applicable
laws and regulations, and that it holds all necessary permits in each jurisdiction in which its facilities are located.
Environmental and health and safety regulations are subject to change and interpretation. In some cases, compliance
with applicable regulations or standards may require the Company to make additional capital and operational
expenditures. The Company, however, is not currently aware of any material expenditures required to comply with
such regulations, other than information related to the environmental remediation activities described in Note 14,
Commitments and Contingencies, to the Company’s consolidated financial statements. The Company accrues for
the anticipated cost of investigation and remediation when the obligation is probable and can be reasonably
estimated. Any revisions to these estimates could be material to the operating results of any fiscal quarter or fiscal
year, however the Company does not expect such additional expenses would have a material adverse effect on its
liquidity or financial condition.
8
FINANCIAL INFORMATION ABOUT FOREIGN AND U.S. OPERATIONS
The Company’s primary production facilities are located in the United States. The Company has smaller production
and sales operations in Brazil, France, Italy, China, Turkey, and South Africa, as well as distribution and sales
operations in the Netherlands, Australia, and New Zealand. Where the Company exports products from the United
States to international markets, the Company generally ships against prepayment, an irrevocable letter of credit
confirmed by a U.S. bank or another secured means of payment, or with credit insurance from a third party. For
sales within both U.S. and foreign jurisdictions, prepayments or other forms of security may be required before
credit is granted, however most local sales are made based on payment terms after a full credit review has been
performed. Most of the Company’s financial transactions are in U.S. dollars, although some export sales and sales
from the Company’s foreign subsidiaries are conducted in other currencies. Approximately 23 percent of total
consolidated Company sales were conducted in currencies other than the U.S. dollar in fiscal 2018 and 2017. To
reduce the uncertainty of foreign currency exchange rate movements on these sales and purchase commitments
conducted in local currencies, the Company monitors its risk of foreign currency fluctuations and, at times, may
enter into forward exchange or option contracts for transactions denominated in a currency other than U.S. dollars.
In addition to the transactional foreign currency exposures mentioned above, the Company also has translation
exposure resulting from translating the financial statements of its international subsidiaries into U.S. dollars. In
order to reduce this translation exposure, the Company, at times, utilizes foreign currency forward contracts to hedge
its net investment exposure in its foreign operations. For information on the Company’s foreign currency risks, see
Item 7A of Part II of this report.
INFORMATION AVAILABLE ON THE LINDSAY WEBSITE
The Company makes available free of charge on its website homepage, under the tab “Investor Relations – SEC
Filings”, its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy
Statements, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended, as soon as reasonably practicable after the Company electronically files such
material with, or furnishes it to, the Securities and Exchange Commission. The Company’s internet address is
http://www.lindsay.com; however, information posted on its website is not part of this Annual Report on Form 10-
K. The following documents are also posted on the Company’s website homepage, under the tabs “Investor
Relations – Governance – Committees” and “Investor Relations – Governance – Ethics”:
Audit Committee Charter
Compensation Committee Charter
Corporate Governance and Nominating Committee Charter
Code of Business Conduct and Ethics
Corporate Governance Principles
Code of Ethical Conduct
Employee Complaint Procedures for Accounting and Auditing Matters
Special Toll-Free Hotline Number and E-mail Address for Making Confidential or Anonymous Complaints
These documents are also available in print to any stockholder upon request, by sending a letter addressed to the
Secretary of the Company.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers and significant employees of the Company, their ages, positions and business experience are
set forth below. All executive officers of the Company are appointed by the Board of Directors annually and have
employment agreements. There are no family relationships between any director or executive officer. There are no
arrangements or understandings between any executive officer and any other person pursuant to which they were
selected as an officer.
9
Timothy L. Hassinger
Eric R. Arneson*
Brian L. Ketcham
J. Scott Marion
Gregory G. Oswald*
Kelly M. Staup*
Eric J. Talmadge*
Randy A. Wood
Lori L. Zarkowski*
Age
56
44
57
50
54
46
55
46
43
Position
President and Chief Executive Officer
Vice President, General Counsel and Secretary
Vice President and Chief Financial Officer
President – Infrastructure
Vice President – Global Operations
Vice President – Human Resources
Chief Information Officer
President – Irrigation
Chief Accounting Officer
*
The employee is not an executive officer of the Registrant.
Mr. Timothy L. Hassinger is the President and Chief Executive Officer of the Company, a position he has held since
October 2017. Mr. Hassinger has also been a director of the Company since October 2017 and he is the only
executive officer of the Company serving on the Board of Directors. Prior to joining the Company, Mr. Hassinger
served as President and Chief Executive Officer of Dow AgroSciences, an Indianapolis-based subsidiary of The
Dow Chemical Company. During his 33-year career at Dow AgroSciences, Mr. Hassinger held a series of senior
leadership positions across a variety of domestic and international business units. Prior to becoming President and
Chief Executive Officer of Dow AgroSciences in May 2014, he served as its Global Commercial Leader from
February 2013 to April 2014 and as Vice President for its Crop Protection Global Business Unit from August 2009
to April 2014. Previously, he served as Vice President for the Dow AgroSciences business in the Europe, Latin
America, and Pacific regions from 2007 to 2009. In 2005, he moved to Shanghai, where he served as Regional
Commercial Unit Leader for Greater China. Mr. Hassinger currently serves on the Board of Directors of AGDATA.
Mr. Eric R. Arneson is Vice President, General Counsel and Secretary of the Company and has held such positions
since April 2008, when he joined the Company. Prior to that time and since January 1999, Mr. Arneson practiced
law with the law firm of Kutak Rock LLP, and was most recently a partner of the firm.
Mr. Brian L. Ketcham is Vice President and Chief Financial Officer of the Company, and has held such positions
since April 2016. Prior to joining Lindsay and since 2001, Mr. Ketcham served in various finance roles at Valmont
Industries, Inc., most recently as Vice President and Group Controller of the Engineered Support Structures
segment. Prior to joining Valmont, Mr. Ketcham held various positions with Consolidated Container Company LLC
and KPMG LLP.
Mr. J. Scott Marion is President – Infrastructure Division, a position he has held with the Company since May 2016.
Between April 2011 and May 2016, Mr. Marion served as Vice President and General Manager – Americas and
APAC (Infrastructure). From January 2005 to April 2011, Mr. Marion served in several management positions at
Pentair. Prior to 2005, Mr. Marion spent 14 years with General Electric in a variety of sales and managerial
capacities.
Mr. Gregory G. Oswald is Vice President – Global Operations, a position he has held with the Company since
January 2018. From June 2008 to January 2018, Mr. Oswald served as Vice President – Manufacturing. Prior to
joining the Company, Mr. Oswald served as the Traction Global Lean Manager at Dana Corporation from 1998
through 2007. Mr. Oswald has obtained a Master Black Belt and is certified in Lean Manufacturing through Dana
University.
Ms. Kelly M. Staup is Vice President – Human Resources, a position she has held with the Company since January
2018. From November 2016 to January 2018, Ms. Staup served as Director – Human Resources. From June 2011 to
November 2016, Ms. Staup served as Organization Development and Recruiting Manager. Prior to joining Lindsay,
Ms. Staup was an Associate Vice President of SkillStorm from August 2008 to June 2011 and previously served in
managerial roles at Ajilon and Digital People.
Mr. Eric J. Talmadge is Vice President and Chief Information Officer of the Company and has served as Chief
Information Officer since December 2012, when he joined the Company. Prior to joining the Company, Mr.
Talmadge served as Chief Information Officer of Crete Carrier Corporation from 2008 to December 2012. Prior to
joining Crete Carrier Corporation, Mr. Talmadge served in a variety of information technology roles with SiTEL,
Lozier Corporation, the University of Missouri, and the United States Air Force.
10
Mr. Randy A. Wood is President – Agricultural Irrigation Division of the Company and has held such position since
May 2016. Between October 2013 and May 2016, Mr. Wood served as President – International Irrigation of the
Company. Between February 2012 and October 2013, Mr. Wood served as Vice President – Americas / ANZ Sales
and Marketing. Previously he was Vice President – North America Irrigation Sales of the Company and held such
position from March 2008, when he joined the Company. Prior to March 2008, Mr. Wood spent 11 years with Case
Corporation / CNH Global including roles as the Senior Director of Marketing, Case IH Tractors, and Senior
Director of Sales and Marketing, Parts and Service.
Ms. Lori L. Zarkowski is Chief Accounting Officer of the Company, and has held such position since August 2011.
Ms. Zarkowski joined Lindsay in June 2007 as Corporate Reporting Manager and was promoted to Corporate
Controller in April 2008. Prior to joining the Company and since 1997, Ms. Zarkowski was most recently an Audit
Senior Manager with Deloitte & Touche LLP.
11
ITEM 1A — Risk Factors
The following are certain of the more significant risks that may affect the Company’s business, financial condition
and results of operations.
The Company’s irrigation revenues are highly dependent on the agricultural industry and weather conditions.
The Company’s irrigation revenues are cyclical and highly dependent upon the need for irrigated agricultural crop
production which, in turn, depends upon many factors, including total worldwide crop production, the profitability
of agricultural crop production, agricultural commodity prices, net farm income, availability of financing for
farmers, governmental policies regarding the agricultural sector, water and energy conservation policies, the
regularity of rainfall, and regional climate conditions. As farm income decreases, farmers may postpone capital
expenditures or seek less expensive irrigation alternatives.
Weather conditions, particularly leading up to the planting and early growing season, can significantly affect the
purchasing decisions of consumers of irrigation equipment. Natural calamities such as regional floods, hurricanes or
other storms, and droughts can have significant effects on seasonal irrigation demand. Drought conditions, which
generally affect irrigation equipment demand positively over the long term, can adversely affect demand if water
sources become unavailable or if governments impose water restriction policies to reduce overall water availability.
Changing worldwide demand for food and different types of biofuel could have an effect on the price of
f
agricultural commodities and consequently the demand for irrigation equipment. Changing worldwide demand
for farm outputs to meet the world’s growing food and biofuel demands, driven in part by government policies and
an expanding global population, are likely to result in fluctuating agricultural commodity prices, which affect
demand for irrigation equipment. The primary benefit of many of the Company’s irrigation products is to increase
grain yields and the resulting revenue for farmers. As grain prices decline, the breakeven point of incremental
production is more difficult to achieve, reducing or eliminating the profit and return on investment from the
purchase of the Company’s products. As a result, changes in grain prices can significantly affect the Company’s
sales levels.
A decline in oil prices or changes in government policies regarding biofuels could also negatively affect the biofuels
market and/or reduce government revenues of oil-producing countries that purchase or subsidize the purchase of
irrigation equipment. Biofuels production is a significant source of grain demand in the U.S. and certain
international markets. While ethanol production levels are currently mandated within the U.S., potential mandate
changes or price declines for ethanol could reduce the demand for grains. In addition, a number of ethanol
producers in the U.S. are cooperatives partially owned by farmers. Reduced profit of ethanol production could
reduce income for farmers which could, in turn, reduce the demand for irrigation equipment.
The Company’s international sales are highly dependent on foreign market conditions and subject the Company
to additional risk, restrictions, and compliance obligations. International revenues are primarily generated from
Australia, New Zealand, Canada, Europe, Mexico, the Middle East, Africa, China, Russia, Ukraine, and Central and
South America. In addition to risks relating to general economic and potential instability in these countries, a
number of countries are particularly susceptible to disruption from changing socioeconomic conditions as well as
terrorism, sanctions, war and similar incidents. The collectability of receivables can also be difficult to estimate,
particularly in areas of political instability or with governments with which the Company has limited experience or
where there is a lack of transparency as to the current credit condition.
The Company’s international sales efforts and profit margins are affected by international trade barriers, including
governmental policies on tariffs, taxes, import or export licensing requirements and trade sanctions. For example,
certain of the components required for the manufacture of the Company’s products have been or may be impacted
by new or recently proposed tariffs.
In addition, the Company’s international sales efforts must also comply with anti-corruption laws like the U.S.
Foreign Corrupt Practices Act. These anti-corruption laws generally prohibit companies and their intermediaries
(including, in the Company’s case, dealers and sales representatives) from making improper payments or providing
anything of value to improperly influence government officials or certain private individuals for the purpose of
obtaining or retaining a business advantage. As part of the Company’s irrigation and infrastructure sales efforts, the
Company promotes and sells products to governmental entities and state-owned or state-backed business enterprises,
the employees and representatives of which may be considered government officials for purposes of the U.S.
Foreign Corrupt Practices Act. Further, some of the countries in which the Company does business lack fully
developed legal systems and are perceived to have elevated levels of corruption. Although the Company has
12
compliance and training programs in place designed to reduce the likelihood of potential violations of such laws,
violations of these laws or other compliance requirements could occur and result in criminal or civil sanctions and
have an adverse effect on the Company’s reputation, business, financial condition and results of operations.
The Company’s international sales and profit margins are subject to currency exchange risk. Most of the
Company’s international sales involve some level of export from the U.S., either of components or completed
products. Policies and geopolitical events affecting exchange rates could adversely affect the international flow of
agricultural and other commodities, which can cause a corresponding downturn in the demand for agricultural
equipment in many areas of the world. Further, any strengthening of the U.S. dollar or any other currency of a
country in which the Company manufactures its products (e.g. the Euro, the Brazilian real, the South African rand,
the Turkish lira, and the Chinese renminbi) and/or any weakening of local currencies can increase the cost of the
Company’s products in its foreign markets. Irrespective of any effect on the overall demand for agricultural
equipment, the effect of these changes can make the Company’s products less competitive relative to local
producing competitors and, in extreme cases, can result in the Company’s products not being cost-effective for
customers. As a result, the Company’s international sales and profit margins could decline.
The Company’s profitability may be negatively affected by changes in the availability and price of certain parts,
components, and raw materials. The Company requires access to various parts, components, and raw materials at
competitive prices in order to manufacture its products. Changes in the availability and price of these parts,
components, and raw materials (including steel and zinc), which have changed significantly and rapidly at times and
are affected by factors like demand, tariffs, and freight costs, can significantly increase the costs of production. Due
to price competition in the market for irrigation equipment and certain infrastructure products, the Company may not
be able to recoup increases in these costs through price increases for its products, which would result in reduced
profitability. Whether increased operating costs can be passed through to the customer depends on a number of
factors, including farm income and the price of competing products. Further, the Company relies on a limited
number of suppliers for certain raw materials, parts and components in the manufacturing process. Disruptions or
delays in supply or significant price increases from these suppliers could adversely affect the Company’s operations
and profitability. Such disruptions, terminations or cost increases could result in cost inefficiencies, delayed sales or
reduced sales.
The Company’s infrastructure revenues are highly dependent on government funding of transportation projects and
subject to compliance with government regulations. The demand for the Company’s infrastructure products depends
to a large degree on the amount of government spending authorized to improve road and highway systems. For
example, the U.S. government funds highway and road improvements through the Federal Highway Trust Fund
Program and matching funding from states may be required as a condition of federal funding. If highway funding is
reduced or delayed, it may reduce demand for the Company’s infrastructure products.
In addition, the Company’s infrastructure products are required to meet certain standards as outlined by the various
governments worldwide. The Federal Highway Administration (“FHWA”) continues to implement Manual for
Assessing Safety Hardware (“MASH”) standards which update and supersede National Cooperative Highway
Research Program (“NCHRP”) Report 350 standards for evaluating new road safety hardware devices. In addition,
state departments of transportation have the ability to require compliance with MASH standards prior to FHWA
mandating such practices. While infrastructure products previously accepted under NCHRP Report 350 criteria are
not required to be retested under MASH standards, they will no longer be eligible for federal reimbursement as the
MASH standards are implemented by FHWA and the states. The Company is incurring, and will continue to incur,
research and development and testing expense to comply with MASH standards. Any reevaluation of the
Company’s infrastructure products’ compliance with applicable standards, the implementation of new standards,
and/or any delay in the Company’s development of additional infrastructure products that comply with new
standards could have a significant adverse effect on the Company’s competitive position and on sales and
profitability from its infrastructure product line.
Compliance with applicable environmental and health and safety regulations or standards may require additional
capital and operational expenditures. The Company is subject to numerous laws and regulations which govern
environmental and occupational health and safety matters. The Company believes that its operations are
substantially in compliance with all such applicable laws and regulations and that it holds all necessary permits in
each jurisdiction in which its facilities are located. Environmental and health and safety regulations are subject to
change and interpretation. Compliance with applicable regulations or standards may require the Company to make
additional capital and operational expenditures.
13
The Company’s Lindsay, Nebraska site was added to the list of priority superfund sites of the U.S. Environmental
Protection Agency (the “EPA”) in 1989. The Company and its environmental consultants have developed a
remedial alternative work plan, under which the Company continues to work with the EPA to define and implement
steps to better contain and remediate the remaining contamination. Although the Company has accrued reasonably
estimable costs associated with remediation of the site, the estimate of costs and their timing could change as a result
of a number of factors, including (1) input from the EPA and the Nebraska Department of Environmental Quality on
the proposed remediation plan and any changes which they may subsequently require, (2) refinement of cost
estimates and length of time required to complete remediation and post-remediation operations and maintenance, (3)
effectiveness of the technology chosen in remediation of the site as well as changes in technology that may become
available in the future, and (4) 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 could exceed the amounts accrued for this expense at the end of fiscal 2018. The Company’s ongoing
remediation activities at its Lindsay, Nebraska facility are described in Note 14, Commitments and Contingencies, to
the Company’s consolidated financial statements.
The Company is exposed to risks from legal proceedings. From time to time, the Company may be involved in
various legal proceedings and other various claims that arise in the ordinary course of its business, which may
include commercial, employment, product liability, tort, and other litigation. Current and future litigation,
governmental proceedings and investigations, audits, indemnification claims or other claims that the Company faces
may result in substantial costs and expenses and significantly divert the attention of its management regardless of the
outcome. In addition, these matters could lead to increased costs or interruptions of its normal business operations.
Litigation, governmental proceedings and investigations, audits, indemnification claims or other claims involve
uncertainties and the eventual outcome of any such matter could adversely affect the Company’s business, results of
operations or cash flows. For a summary of the Company’s infrastructure products litigation, see Note 14,
Commitments and Contingencies, to the Company’s consolidated financial statements.
The frequency and magnitude of liability claims and the related expenses could lower profitability and
increase business risk. The nature of the Company’s business subjects the Company to potential liability for claims
alleging property damage and personal injury or death arising from the use of or exposure to its products, especially
infrastructure products that are installed along roadways. While the Company’s liability insurance coverage is
consistent with commercial norms in the industries in which the Company operates, an unusually large liability
claim or a string of claims could potentially exceed the Company’s available insurance coverage. In addition, the
availability of, and the Company’s ability to collect on, insurance coverage can be subject to factors beyond the
Company’s control. For example, any accident, incident, or lawsuit involving the Company, its products
specifically, or the industries in which the Company operates generally, even if the Company is fully insured,
contractually indemnified, or not held to be liable, could significantly affect the cost and availability of insurance to
the Company in the future.
If any of the Company’s third-party insurers fail, cancel, or refuse coverage, or otherwise are unable to provide the
Company with adequate insurance coverage, then the Company’s overall risk exposure and operational expenses
would increase and the management of the Company’s business operations would be disrupted.
Further, as insurance policies expire, increased premiums for renewed or new coverage, if such coverage can be
secured, may increase the Company’s insurance expense and/or require that the Company increase its self-insured
retention or deductibles. The Company maintains primary coverage and excess coverage policies. If the number of
claims or the dollar amounts of any such claims rise in any policy year, the Company could suffer additional costs
associated with accessing its excess coverage policies. Also, an increase in the loss amounts attributable to such
claims could expose the Company to uninsured damages if the Company was unable or elected not to insure against
certain claims because of increased premiums or other reasons.
The Company’s infrastructure products are installed along roadways in inherently dangerous applications.
Accidents involving the Company’s infrastructure products could reduce demand for such products and expose
the Company to significant damages and reputational harm. The Company is currently defending a number of
product liability lawsuits involving the Company’s X-Lite® end terminal. While the Company’s infrastructure
products are designed to meet all applicable standards in effect in the markets in which such products are offered,
the risk of product liability claims and associated adverse publicity is inherent in the development, manufacturing,
marketing, and sale of such products, including end terminals and crash cushions that are ultimately installed along
roadways. In addition to this inherent risk, a sizable judgment against a competitor (which was reversed on appeal)
14
brought significant attention to the infrastructure products industry and may be a factor leading to additional
lawsuits being filed against the Company and others in the industry.
An actual or perceived issue with the Company’s infrastructure products can lead to a decline in demand for such
products, the removal of such products from qualified products lists used by government customers in their
purchasing decisions, product recalls, adverse publicity, claims or litigation, and/or the diversion of management’s
attention, which could materially and adversely affect the Company’s reputation, business, financial condition, and
results of operations. While infrastructure product selection, assembly, installation, operation, repair, and
maintenance are the responsibilities of dealers, distributors, customers, and/or state departments of transportation,
the Company may nevertheless also be subjected to claims or litigation in connection with a third party’s alleged
failure to satisfactorily discharge such responsibilities, including but not limited to claims associated with personal
injuries, property damage, and death. Likewise, improper assembly, installation, operation, repair, or maintenance of
the Company’s infrastructure products may cause such infrastructure products to fail to meet certain performance
standards, which could lead to similar consequences as an actual or perceived issue with the infrastructure products
themselves. Although the Company currently maintains insurance against product-related claims or litigation, the
Company could be exposed to significant losses arising from claims involving infrastructure products if the
Company’s insurance does not cover all associated liabilities or if coverage in the future becomes unobtainable on
commercially reasonable terms.
The Company may not realize targeted performance improvements from the Foundation for Growth initiative.
Foundation for Growth is a focused performance improvement initiative by the Company that includes setting
strategic direction, defining priorities, and improving overall operating performance. As previously announced, a
key financial objective is to achieve operating margin performance of 11 percent to 12 percent in fiscal 2020
exclusive of market changes. While costs associated with the Foundation for Growth initiative are expected to be
recovered through improved operating income in fiscal 2020, it is possible the Company may not realize these
anticipated performance improvements.
The initiative requires a substantial amount of management and operational resources. Elements of this initiative
require the Company to modify the way that it conducts and structures its operations, such as the recent portfolio
review that led to the divestment of the Company’s pump and filtration businesses and a Company-owned water
resource consulting firm. Management must successfully implement the administrative and operational changes
essential to achieve the targeted performance improvements of this initiative and, in limited respects, the Company’s
tactics to achieve these improvements, revenue gains, and cost savings continue to be in development and are
subject to change as future circumstances may dictate. These and related demands on the Company’s resources
could divert the attention of management from other business issues, adversely affect the Company’s existing
business relationships with suppliers, dealers and distributors, and impact employee morale. The Company’s future
success is partly dependent upon successfully executing, and realizing performance improvements, revenue gains,
cost savings and other benefits from, this initiative. Any failure to fully implement the Foundation for Growth
initiative or to realize the projected benefits of initiative-related divestitures could have an adverse effect on the
Company’s reputation, business, financial condition and results of operations.
Changes in interest rates could reduce demand for the Company’s products. In a number of markets, including
the U.S., the Company has seen interest rates rise after years of historically low rates. It is expected that global rates
will continue to increase as the economy continues to improve. Rising interest rates could have a dampening effect
on overall economic activity and/or the financial condition of the Company’s customers, either or both of which
could negatively affect customer demand for the Company’s products and customers’ ability to repay obligations to
the Company. An increase in interest rates could also make it more difficult for customers to cost-effectively fund
the purchase of new equipment, which could adversely affect the Company’s sales.
The Company’s consolidated financial results are reported in U.S. dollars while certain assets and other reported
items are denominated in the currencies of other countries, creating currency translation risk. The reporting
currency for the Company’s consolidated financial statements is the U.S. dollar. Certain of the Company’s assets,
liabilities, expenses and revenues are denominated in other countries’ currencies. Those assets, liabilities, expenses
and revenues are translated into U.S. dollars at the applicable exchange rates to prepare the Company’s consolidated
financial statements. Therefore, increases or decreases in exchange rates between the U.S. dollar and those other
currencies affect the value of those items as reflected in the Company’s consolidated financial statements.
Substantial fluctuations in the value of the U.S. dollar compared to other currencies could have a significant effect
on the Company’s results.
15
Security breaches and other disruptions to the Company’s information technology infrastructure could interfere
with its operations and could compromise the Company’s and its customers’ and suppliers’ information,
exposing the Company to liability that could cause its business and reputation to suffer. In the ordinary course of
business, the Company relies upon information technology networks and systems to process, transmit and store
electronic information, and to manage or support a variety of business functions, including supply chain,
manufacturing, distribution, invoicing and collection of payments. The Company uses information technology
systems to record, process and summarize financial information and results of operations for internal reporting
purposes and to comply with regulatory financial reporting, legal and tax requirements. Additionally, the Company
collects and stores sensitive data, including intellectual property, proprietary business information and the
proprietary business information of customers and suppliers, as well as personally identifiable information of
customers and employees, in data centers and on information technology networks. The secure operation of these
networks and the processing and maintenance of this information is critical to the Company’s business operations
and strategy. Despite security measures and business continuity plans, the Company’s information technology
networks and infrastructure may be vulnerable to damage, disruptions or shutdowns due to, among other reasons,
attacks by hackers or breaches due to employee error or malfeasance or other disruptions during the process of
upgrading or replacing computer software or hardware, power outages, computer viruses, telecommunication or
utility failures or natural disasters or other catastrophic events. The occurrence of any of these events could
compromise the Company’s networks, and the information stored there could be accessed, publicly disclosed, lost or
stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability
or regulatory penalties under laws protecting the privacy of personal information, disrupt operations, and damage the
Company’s reputation, which could adversely affect the Company’s business.
ITEM 1B — Unresolved Staff Comments
None.
ITEM 2 — Properties
The Company’s facilities are well-maintained, in good operating condition, and suitable for present purposes. These
facilities, together with both short-term and long-term planned capital expenditures, are expected to meet the
Company’s manufacturing needs in the foreseeable future. The Company does not anticipate any difficulty in
retaining occupancy of any leased facilities, either by renewing leases prior to expiration or by replacing them with
equivalent leased facilities. The following are the Company’s significant properties.
Geographic
location (s)
Omaha, Nebraska
Lindsay, Nebraska
Own/
lease
Lease
Own
Lease
expiration
2019
N/A
Square
feet
30,000 Corporate headquarters
300,000 Principal U.S. manufacturing plant consists of
Property description
Segment
Corporate
Irrigation
Irrigation
Irrigation
Irrigation
Irrigation
Irrigation
Irrigation
Lease
Corlu, Turkey
Lease
Tianjin, China
Own
La Chapelle, France
Bellville, South Africa Lease
Own
Mogi Mirim, Sao
Paulo, Brazil
Olathe, Kansas
Own
Infrastructure Omaha, Nebraska (1)
Own
Infrastructure Milan, Italy
Own
Infrastructure Rio Vista, California
Own
(1)
Property is held-for-sale at August 31, 2018.
2025
2022
N/A
2024
N/A
N/A
N/A
N/A
N/A
eight separate buildings located on 122 acres
283,000 Manufacturing plant for irrigation products
163,000 Manufacturing plant for irrigation products
72,000 Manufacturing plant for irrigation products
71,000 Manufacturing plant for irrigation products
67,000 Manufacturing plant for irrigation products
60,000 Manufacturing plant for machine-to-machine
products
83,000 Manufacturing plant for infrastructure
products
45,000 Manufacturing plant for infrastructure
products
30,000 Manufacturing plant for infrastructure
products
16
ITEM 3 — Legal Proceedings
In the ordinary course of its business operations, the Company is involved, from time to time, in commercial
litigation, product liability litigation, tort litigation, employment disputes, administrative proceedings, business
disputes, and other legal proceedings. No such current proceedings, individually or in the aggregate, are expected to
have a material effect on the business or financial condition of the Company, other than the specific environmental
remediation matters which are disclosed as part of Note 14, Commitments and Contingencies, to the Company’s
consolidated financial statements. Any revisions to the estimates accrued for environmental remediation could be
material to the operating results of any fiscal quarter or fiscal year, however the Company does not expect such
additional expenses would have a material adverse effect on its liquidity or financial condition.
For a summary of the Company’s infrastructure products litigation, see Note 14, Commitments and Contingencies,
to the Company’s consolidated financial statements.
ITEM 4 — Mine Safety Disclosures
Not applicable.
17
PART II
ITEM 5 — Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Holders
Lindsay Common Stock trades on the New York Stock Exchange, Inc. (“NYSE”) under the ticker symbol LNN. As
of October 15, 2018, there were approximately 165 stockholders of record.
Price Range of Common Stock
The following table sets forth for the periods indicated the range of the high and low stock prices and dividends paid
per share:
Fiscal 2018 Stock Price
Low
High
Dividends
Fiscal 2017 Stock Price
Low
High
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Year
$ 96.22 $ 83.97 $
$ 95.49 $ 85.00 $
$ 103.03 $ 83.57 $
$ 102.77 $ 88.22 $
$ 103.03 $ 83.57 $
0.30 $ 85.68 $ 69.11 $
0.30 $ 89.98 $ 72.85 $
0.30 $ 89.57 $ 79.01 $
0.31 $ 95.04 $ 83.63 $
1.21 $ 95.04 $ 69.11 $
Dividends
0.29
0.29
0.29
0.30
1.17
Purchases of Equity Securities by the Issuer and Affiliated Purchases
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 twelve months
ended August 31, 2018 and 2017. During the twelve months ended August 31, 2016, the Company repurchased
688,790 shares of common stock for an aggregate purchase price of $48.3 million. The remaining amount available
under the repurchase program was $63.7 million as of August 31, 2018.
Dividends
The Company paid a total of $13.0 million and $12.5 million in dividends during fiscal 2018 and 2017, respectively.
The Company currently expects that cash dividends comparable to those paid historically will continue to be paid in
the future, although there can be no assurance as to the payment of future dividends as such payment depends on
results of operations, financial condition, business prospects, capital requirements, contractual restrictions, any
potential indebtedness the Company may incur, restrictions imposed by applicable law, tax considerations, and other
factors that the Board of Directors deems relevant.
18
Company Stock Performance
The following graph compares the cumulative five-year total return attained by stockholders on the Company’s
Common Stock relative to the cumulative total returns of the S&P SmallCap 600 Index and the S&P SmallCap 600
Construction, Farm Machinery and Heavy Truck Index for the five-year period ended August 31, 2018. An
investment of $100 (with the reinvestment of all dividends) is assumed to have been made in the Company’s
Common Stock and in each of the indexes on August 31, 2013 and the graph shows its relative performance through
August 31, 2018.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Lindsay Corporation, the S&P SmallCap 600 Index,
and S&P SmallCap 600 Construction, Farm Machinery and Heavy Truck Index
$250
$200
$150
$100
$50
$0
8/13
8/14
8/15
8/16
8/17
8/18
Lindsay Corporation
S&P SmallCap 600 Index
S&P SmallCap 600 Construction, Farm Machinery and Heavy Truck Index
*$100 invested on 8/31/13 in stock or index, including reinvestment of dividends.
Fiscal year ending August 31.
Copyright© 2018 Standard & Poor's, a division of S&P Global. All rights reserved.
Lindsay Corporation
S&P SmallCap 600 Index
S&P SmallCap 600 Construction, Farm
Machinery and Heavy Truck Index
8/13
100.00
100.00
8/14
103.45
118.70
8/15
102.72
120.84
8/16
98.54
136.86
8/17
120.25
154.80
8/18
134.80
205.05
100.00
158.87
130.61
144.67
181.74
206.99
The stock price performance included in this graph is not necessarily indicative of future stock price performance.
19
ITEM 6 — Selected Financial Data
($ in millions and shares in thousands,
except per share and employee amounts)
For the years ended August 31,
2018 (1)
2017
2016 (2)
2015 (3)
2014
Operating data
Operating revenues
Gross profit
Gross margin
Operating expenses
Operating income
Operating margin
Effective tax rate
Net earnings
Net margin
Per share data
Diluted net earnings per share
Cash dividends per share
Financial position
Working capital
Property, plant, and equipment, net
Total assets
Long-term debt, including current installments
Total shareholders' equity
Invested capital (4)
Cash flow data
Net cash flows from operating activities
Net cash flows from investing activities
Net cash flows from financing activities
Financial measures
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
547.7
151.5
27.7%
112.9
38.6
7.0%
40.1%
20.3
3.7%
1.88
1.21
251.0
57.2
500.3
116.8
276.9
393.6
$
$
$
$
$
$
$
$
$
$
$
$
$
518.0
145.0
28.0%
104.8
40.2
7.8%
35.1%
23.2
4.5%
2.17
1.17
200.9
74.5
506.0
117.0
270.1
387.1
$
$
$
$
$
$
$
$
$
$
$
$
$
516.4
148.6
28.8%
114.2
34.4
6.7%
30.8%
20.3
3.9%
1.85
1.13
204.2
77.6
487.5
117.2
251.6
368.8
$
$
$
$
$
$
$
$
$
$
$
$
$
560.2
156.3
27.9%
105.6
50.7
9.0%
43.7%
26.3
4.7%
2.22
1.09
227.1
78.7
522.6
117.4
288.6
406.0
$
$
$
$
$
$
$
$
$
$
$
$
$
617.9
171.0
27.7%
92.6
78.4
12.7%
34.5%
51.5
8.3%
4.00
0.92
257.7
72.5
515.5
—
382.6
382.6
$
33.9
18.1
$
(11.3) $
$
39.4
(10.0) $
(10.3) $
$
33.1
(9.9) $
(61.4) $
$
48.7
(79.6) $
$
3.9
91.8
(18.5)
(53.6)
Return on invested capital (5)
Return on beginning shareholders' equity (6)
5.9%
7.5%
6.9%
9.2%
6.1%
7.0%
7.2%
6.9%
13.5%
13.5%
Other Data
Diluted weighted average shares
Number of employees
10,772
1,412
10,694
1,410
10,930
1,366
11,855
1,324
12,882
1,202
(1)
(2)
(3)
(4)
(5)
(6)
Fiscal 2018 operating expenses include costs of $9.7 million ($8.8 million after-tax, or $0.82 per diluted share) in connection with the
Foundation for Growth initiative. The amount includes a net loss from business divestitures of $4.1 million with the remainder representing
severance costs, plant closing costs, and professional consulting fees. Net earnings also includes tax expense of $2.5 million ($0.23 per
diluted share) related to the impact of the U.S. Tax Reform.
Fiscal 2016 operating expenses include an increase in an environmental remediation reserve of $13.0 million.
Fiscal 2015 includes operating results of Elecsys Corporation acquired in the second quarter of fiscal 2015. Operating expenses include an
increase in bad debt expense of $5.0 million and an increase in an environmental remediation reserve of $1.5 million.
Defined as current and long-term debt plus shareholders’ equity.
Defined as operating income (after tax) divided by the average of beginning and ending invested capital.
Defined as net earnings divided by beginning-of-period shareholders' equity.
n
r
20
ITEM 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations
Concerning Forward—Looking Statements
This Annual Report on Form 10-K, including Management’s Discussion and Analysis of Financial Condition and
Results of Operations, 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 expectations for future
Company performance. 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,” and similar expressions generally identify
forward-looking statements. For these statements throughout the Annual Report on Form 10-K, the Company
claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995. The entire sections entitled “Financial Overview and Outlook” and “Risk Factors” should be
considered forward-looking statements.
Forward-looking statements involve a number of risks and uncertainties, including but not limited to those discussed
in the “Risk Factors” section contained in Item 1A. 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, as well as others
not now anticipated. The risks and uncertainties described herein 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.
Company Overview
The Company manufactures and markets center pivot, lateral move, and hose reel irrigation systems. The Company
also produces and markets irrigation controls, chemical injection systems, remote monitoring and irrigation
scheduling systems. These products are used by farmers to increase or stabilize crop production while conserving
water, energy, and labor. Through its acquisitions and third-party commercial arrangements, the Company has been
able to enhance its capabilities in providing innovative, turn-key solutions to customers through the integration of
designs, controls, and pump stations. The Company sells its irrigation products primarily to a world-wide
independent dealer network, who resell to their customers, the farmers. The Company’s primary production
facilities are located in the United States. The Company has smaller production and sales operations in Brazil,
France, China, Turkey, and South Africa, as well as distribution and sales operations in the Netherlands, Australia,
and New Zealand. The Company also manufactures and markets, through distributors and direct sales to customers,
various infrastructure products, including moveable barriers for traffic lane management, crash cushions, preformed
reflective pavement tapes, and other road safety devices, through its production facilities in the United States and
Italy, and has produced road safety products in irrigation manufacturing facilities in China and Brazil. In addition,
the Company’s infrastructure segment produces large diameter steel tubing, and railroad signals and structures, and
provides outsourced manufacturing and production services for other companies.
For the business overall, the global, long-term drivers of water conservation, population growth, increasing
importance of biofuels, and the need for safer, more efficient transportation solutions remain positive. Key factors
which impact demand for the Company’s irrigation products include total worldwide agricultural crop production,
the profitability of agricultural crop production, agricultural commodity prices, net farm income, availability of
financing for farmers, governmental policies regarding the agricultural sector, water and energy conservation
policies, the regularity of rainfall, regional climate conditions, and foreign currency exchange rates. A key factor
which impacts demand for the Company’s infrastructure products is the amount of spending authorized by
governments to improve road and highway systems. Much of the U.S. highway infrastructure market is driven by
government spending programs. For example, the U.S. government funds highway and road improvements through
the Federal Highway Trust Fund Program. This program provides funding to improve the nation’s roadway system.
In December 2015, the U.S. government enacted a five-year, $305 billion highway-funding bill to fund highway and
bridge projects, the first long-term national transportation spending bill in a decade. Matching funding from the
various states may be required as a condition of federal funding.
21
The Company continues to have an ongoing, structured, acquisition process that it expects to generate additional
growth opportunities throughout the world and add to its irrigation and infrastructure capabilities. The Company is
committed to achieving earnings growth by global market expansion, improvements in margins, and strategic
acquisitions. Since 2001, the Company has utilized acquisitions and greenfield efforts to expand its product lines
and add to its operations in France, Italy, Brazil, South Africa, the Netherlands, Australia, New Zealand, China, and
Turkey. The addition of those operations has allowed the Company to strengthen its market position in those
regions.
New Accounting Standards Issued But Not Yet Adopted
See Note 2, New Accounting Pronouncements, to the Company’s consolidated financial statements for information
regarding recently issued accounting pronouncements.
Critical Accounting Policies and Estimates
In preparing the consolidated financial statements in conformity with U.S. generally accepted accounting principles
(“GAAP”), management must make a variety of decisions which impact the reported amounts and the related
disclosures. Such decisions include the selection of the appropriate accounting principles to be applied and the
assumptions on which to base accounting estimates. In reaching such decisions, management applies judgment
based on its understanding and analysis of the relevant facts and circumstances. Certain of the Company’s
accounting policies are critical, as these policies are most important to the presentation of the Company’s
consolidated results of operations and financial condition. They require the greatest use of judgments and estimates
by management based on the Company’s historical experience and management’s knowledge and understanding of
current facts and circumstances. Management periodically re-evaluates and adjusts the estimates that are used as
circumstances change. Following are the accounting policies management considers critical to the Company’s
consolidated results of operations and financial condition:
Environmental Remediation Liabilities
The Company’s accounting policy on environmental remediation is critical because it requires significant judgments
and estimates by management, involves changing regulations and approaches to remediation plans, and any
revisions could be material to the operating results of any fiscal quarter or fiscal year. The Company is subject to an
array of environmental laws and regulations relating to the protection of the environment. In particular, the
Company committed to remediate environmental contamination of the groundwater at, and land adjacent, to its
Lindsay, Nebraska facility (the “site”) with the EPA. The Company and its environmental consultants have
developed a remedial alternative work plan, under which the Company continues to work with the EPA to define
and implement steps to better contain and remediate the remaining contamination.
Environmental remediation liabilities include costs directly associated with site investigation and clean up, such as
materials, external contractor costs, and incremental internal costs directly related to the remedy. Estimates used to
record environmental remediation liabilities are based on the Company’s best estimate of probable future costs
based on site-specific facts and circumstances. Estimates of the cost for the likely remedy are developed using
internal resources or by third-party environmental engineers or other service providers. The Company records the
undiscounted environmental remediation liabilities that represent the points in the range of estimates that are most
probable, or the minimum amount when no amount within the range is a better estimate than any other amount.
During the second quarter of fiscal 2016, the Company completed its testing for a feasibility study which clarified
the extent of contamination, including the identification of a source of contamination near the manufacturing
building that was not part of the area for which reserves were previously established. The Company, together with
its third-party environmental experts, participated in a preliminary meeting with the EPA and the Nebraska
Department of Environmental Quality (the “NDEQ”) during the third quarter of fiscal 2016 to review remediation
alternatives and proposed plans for the site and submitted its remedial alternatives evaluation report to the EPA in
August 2016. The proposed remediation plan is preliminary and has not been approved by the EPA or the NDEQ.
Based on guidance from third-party environmental experts and the preliminary discussions held with the EPA, the
Company anticipates that a definitive plan will not be agreed upon until fiscal 2019 or later.
The Company accrues the anticipated cost of environmental remediation when the obligation is probable and can be
reasonably estimated. Although the Company has accrued reasonably estimable costs associated with remediation
of the site, additional testing, environmental monitoring, and remediation could be required in the future as part of
the Company’s ongoing discussions with the EPA regarding the development and implementation of the remedial
action plans. 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.
22
Financial Overview and Outlook
Operating revenues in fiscal 2018 were $547.7 million, a six percent increase compared to $518.0 million in the
prior year. Irrigation segment revenues increased five percent to $439.9 million and infrastructure segment revenues
increased eight percent to $107.8 million. Net earnings for fiscal 2018 were $20.3 million or $1.88 per diluted share
compared with $23.2 million or $2.17 per diluted share in the prior year. Net earnings for fiscal 2018 were reduced
by tax expense of $2.5 million, or $0.23 per diluted share, due to the enactment of significant tax reform in the
United States (“U.S. Tax Reform”) and by after-tax costs of $8.8 million, or $0.82 per diluted share, related to the
Company’s Foundation for Growth initiative.
Foundation for Growth is a focused performance improvement initiative that includes setting strategic direction,
defining priorities, and improving overall operating performance. A key financial objective is to achieve operating
margin performance of 11 percent to 12 percent in fiscal 2020 exclusive of market changes.
During fiscal 2018, in connection with a portfolio review of business investments, the Company committed to a plan
of divestiture of its pump and filtration businesses, a Company-owned irrigation dealership and a Company-owned
water resource consulting firm, all of which are reported in the irrigation segment. The combined revenues from
these businesses were approximately $80 million in fiscal 2018. The Company completed the divestiture of its
pump and filtration businesses and the Company-owned water resource consulting firm during the fourth quarter of
fiscal 2018, recognizing a loss on disposal of $4.1 million. The investment in the Company-owned dealership is
classified as held-for-sale in the August 31, 2018 consolidated balance sheet. In addition, during the fourth quarter
of fiscal 2018, the Company closed one of its infrastructure manufacturing facilities in North America and
consolidated it with an existing irrigation manufacturing facility.
Results for fiscal 2018 include pre-tax costs of $9.7 million in connection with the Foundation for Growth initiative,
including the loss from business divestitures along with severance costs, plant closing costs and professional
consulting fees. These costs, and additional future costs anticipated in connection with this initiative, are expected
to be recovered through improved operating income in fiscal 2020.
The Company’s irrigation revenues are highly dependent upon the need for irrigated agricultural crop production,
which, in turn, depends upon many factors, including the following primary drivers:
•
Agricultural commodity prices - As of August 2018, corn prices have increased approximately two percent
and soybean prices have decreased approximately eleven percent from August 2017. Commodity prices,
although somewhat improved over the prior year, continue to be substantially lower than the peak prices in
2013.
• Net farm income - As of August 2018, the U.S. Department of Agriculture (the “USDA”) estimated U.S.
2018 net farm income to be $65.7 billion, down 13 percent from the USDA’s final U.S. 2017 net farm
income of $75.5 billion.
• 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 government laws and regulations can impact the Company’s
business, including:
o The Agricultural Act of 2014 provides a degree of certainty to growers by adopting a five-year
farm bill. This law continued many of the existing programs, 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.
o U.S. Tax Reform 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. These incentives could benefit equipment sales in the future.
23
o 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 July 2018,
the EPA proposed to maintain the 2019 ethanol production target levels at the same levels as the
2018 requirements.
o 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 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.
After a four-year cyclical downturn in our U.S. irrigation business, the market reached a level of stabilization during
the first half of fiscal 2018 which, along with general economic optimism, contributed to improved grower
sentiment towards investment in irrigation equipment. However, this improved sentiment was tempered over the
last several months of fiscal 2018 by uncertainty regarding the outcome of U.S. steel tariffs and trade negotiations
with other countries. International markets remain active with opportunities for further development and expansion,
however regional political and economic factors, currency conditions and other factors can create a challenging
environment. Additionally, international results are heavily dependent upon project sales which tend to fluctuate
and can be difficult to forecast accurately.
The infrastructure business has continued to generate growth and profitability improvement in an environment of
constrained government spending. In December 2015, the U.S. government enacted a five-year, $305 billion
highway-funding bill to fund highway and bridge projects, the first long-term national transportation spending bill in
a decade. In addition, the FHWA has changed highway safety product certification requirements. The change has
required additional research and development spending and could have an impact on the competitive positioning of
the Company’s highway safety products. In spite of government spending uncertainty, opportunities exist for
market expansion in each of the infrastructure product lines. Demand for the Company’s transportation safety
products continues to be driven by population growth and the need for improved road safety.
As of August 31, 2018, the Company had an order backlog of $50.0 million compared with $51.8 million at August
31, 2017. The Company’s backlog can fluctuate from period to period due to the seasonality, cyclicality, timing,
and execution of contracts. Backlog typically represents long-term projects as well as short lead-time orders;
therefore, it is generally not a good indication of the revenues to be realized in succeeding quarters.
Steel prices in the U.S. have increased dramatically over the last several months of fiscal 2018, primarily as a result
of tariffs that have been placed on imported steel. In addition, freight costs in the U.S. have increased due to a
general trucking shortage. The Company has generally been able to pass through raw material and other cost
increases to its customers and intends to continue to do so, however a sustained increase in steel prices or freight
costs could impact customer sentiment for investment or result in additional pressure on operating margins.
The global drivers for the Company’s markets of population growth, expanded food production and efficient water
use and infrastructure expansion support the Company’s long-term growth goals. The most significant opportunities
for growth over the next several years are in international markets, where irrigation use is significantly less
developed, and demand is driven primarily by food security, water scarcity and population growth.
24
Results of Operations
The following “Fiscal 2018 Compared to Fiscal 2017” and the “Fiscal 2017 Compared to Fiscal 2016” sections
present an analysis of the Company’s consolidated operating results displayed in the Consolidated Statements of
Earnings and should be read together with the information in Note 17, Industry Segment Information, to the
consolidated financial statements.
p
Fiscal 2018 Compared to Fiscal 2017
The following table provides highlights for fiscal 2018 compared with fiscal 2017:
($ in thousands)
Consolidated
Operating revenues
Cost of operating revenues
Gross profit
Gross margin
Operating expenses (1)
Operating income
Operating margin
Other (expense) income, net
Income tax expense
Effective income tax rate
Net earnings
Irrigation segment (2)
Operating revenues
Operating income
Operating margin
Infrastructure segment (2)
Operating revenues
Operating income
Operating margin
For the years ended
August 31,
2018
2017
Percent
increase
(decrease)
$
$
$
$
$
$
$
$
$
$
$
$
547,705
396,243
151,462
27.7%
112,899
38,563
7.0%
(4,710)
13,576
40.1%
20,277
439,858
41,933
9.5%
107,847
23,857
22.1%
$
$
$
$
$
$
$
$
$
$
$
$
517,985
372,973
145,012
28.0%
104,811
40,201
7.8%
(4,486)
12,536
35.1%
23,179
418,041
42,774
10.2%
99,944
20,131
20.1%
6%
6%
4%
8%
-4%
5%
8%
-13%
5%
-2%
8%
19%
(1)
(2)
Includes corporate general and administrative expenses of $27.2 million and $22.7 million for fiscal 2018 and fiscal 2017, respectively.
See Note 17 for further details regarding segments.
Revenues
Operating revenues in fiscal 2018 increased by $29.7 million, or six percent, to $547.7 million compared with
$518.0 million in fiscal 2017. Irrigation segment revenues increased $21.8 million, or five percent, and
infrastructure revenues increased $7.9 million, or eight percent, compared to the prior fiscal year for each. The
irrigation segment provided 80 percent of Company revenue in fiscal 2018 as compared to 81 percent in fiscal 2017.
North America irrigation revenues in fiscal 2018 increased by 16 percent to $294.6 million from $254.2 million in
fiscal 2017. The increase resulted primarily from improved market demand increasing irrigation system unit sales
volume as well as from higher average selling prices.
International irrigation revenues in fiscal 2018 decreased by 11 percent to $145.2 million from $163.8 million in
fiscal 2017. The decrease resulted primarily from a lower level of project activity in developing markets compared
to the prior fiscal year, as well as from a market disruption in Brazil. Market activity in Brazil was disrupted in the
third and fourth quarters of fiscal 2018 due to a country-wide trucking strike, changes in government-subsidized
equipment financing rates, and general uncertainty leading up to October federal elections. The impact of foreign
currency translation rates compared to the prior fiscal year was insignificant.
Infrastructure segment revenues in fiscal 2018 of $107.8 million increased $7.9 million or eight percent from $99.9
million in fiscal 2017. The increase resulted primarily from higher Road Zipper System® sales, driven by two large
projects, compared to the prior fiscal year.
25
Gross Profit
Gross profit was $151.5 million for fiscal 2018, an increase of $6.5 million, or four percent, compared to $145.0
million in fiscal 2017. The increase in gross profit resulted from higher revenues while gross margin of 27.7% was
slightly lower than the prior fiscal year. Improved gross margin in the infrastructure segment was offset by slightly
lower gross margin in the irrigation segment. Infrastructure gross margin improved due to a higher proportion of
revenue from Road Zipper System® sales, which resulted in an improved margin mix. In the irrigation segment, a
higher mix of revenue from the North America market, which produces higher gross margin, was offset by the
impact of incremental LIFO inventory valuation expense and lower overhead cost absorption resulting from lower
international sales volume.
Operating Expenses
The Company’s operating expenses of $112.9 million for fiscal 2018 increased $8.1 million, or eight percent,
compared to fiscal 2017 operating expenses of $104.8 million. The increase included costs of $9.7 million in
connection with the Company’s Foundation for Growth initiative, of which $4.1 million represents a net loss from
business divestitures with the remainder representing severance costs, plant closing costs and professional
consulting fees. These costs were partially offset by the net recovery of $2.5 million in previously reserved accounts
receivable. Operating expenses were 20.6 percent of sales for fiscal 2018 compared to 20.2 percent of sales for
fiscal 2017.
Income Taxes
The Company recorded income tax expense of $13.5 million and $12.5 million for fiscal 2018 and fiscal 2017,
respectively. The effective income tax rate increased to 40.1 percent in fiscal 2018 compared to 35.1 percent in
fiscal 2017. Tax expense for fiscal 2018 includes $2.5 million of incremental expense resulting from the enactment
of U.S. Tax Reform, as more fully explained in Note 6 to the consolidated financial statements, and $1.8 million for
tax impacts related to business divestitures. Excluding the impact of these items, the effective tax rate for fiscal
2018 was 27.4 percent, reflecting the lower statutory federal tax rate resulting from U.S. Tax Reform.
Net Earnings
Net earnings for fiscal 2018 were $20.3 million, or $1.88 per diluted share, compared to $23.2 million, or $2.17 per
diluted share, for fiscal 2017.
Fiscal 2017 Compared to Fiscal 2016
p
The following table provides highlights for fiscal 2017 compared with fiscal 2016:
($ in thousands)
Consolidated
Operating revenues
Cost of operating revenues
Gross profit
Gross margin
Operating expenses (1)
Operating income
Operating margin
Other (expense) income, net
Income tax expense
Effective income tax rate
Net earnings
Irrigation segment (2)
Operating revenues
Operating income
Operating margin
Infrastructure segment (2)
Operating revenues
Operating income
Operating margin
For the years ended
August 31,
2017
2016
Percent
increase
(decrease)
$
$
$
$
$
$
$
$
$
$
$
$
517,985
372,973
145,012
28.0%
104,811
40,201
$
$
$
$
$
7.8%
(4,486) $
$
12,536
35.1%
23,179
418,041
42,774
10.2%
99,944
20,131
20.1%
$
$
$
$
$
516,411
367,798
148,613
28.8%
114,238
34,375
6.7%
(5,087)
9,021
30.8%
20,267
421,641
49,232
11.7%
94,770
18,535
19.6%
0%
1%
(2)%
-8%
17%
-12%
39%
14%
(1)%
(13)%
5%
9%
(1)
(2)
Includes corporate general and administrative expenses of $22.7 million and $33.4 million for fiscal 2017 and fiscal 2016, respectively.
See Note 17 for further details regarding segments.
26
Revenues
Operating revenues in fiscal 2017 were $518.0 million, a slight increase compared with $516.4 million in fiscal
2016. The increase is attributable to a $5.1 million increase in infrastructure segment revenues and a $3.6 million
decrease in irrigation segment revenues. The irrigation segment provided 81 percent of Company revenue in fiscal
2017 as compared to 82 percent in fiscal 2016.
North America irrigation revenues in fiscal 2017 of $254.2 million decreased $21.8 million or eight percent from
$276.0 million in fiscal 2016. The decrease resulted from a decline in irrigation system unit sales volume reflecting
lower market demand as well as a decline in revenue from other irrigation product lines, including filtration and
pump systems. The impact of lower irrigation system unit sales volume was partially offset by higher average
selling prices from passing through higher raw material costs.
International irrigation revenues in fiscal 2017 of $163.8 million increased $18.2 million or 13 percent from $145.6
million in fiscal 2016. A notable recovery of market demand in Brazil and increased project activity in Africa and
the Commonwealth of Independent States region were partially offset by lower revenues in other international
markets. Changes in foreign currency translation rates compared to the prior year resulted in an increase in
international irrigation revenues of approximately three percent for fiscal 2017.
Infrastructure segment revenues in fiscal 2017 of $99.9 million increased $5.1 million or five percent from $94.8
million in fiscal 2016. The increase resulted from higher Road Zipper System® sales and lease revenue and higher
sales of road safety products in international markets. Sales of road safety products in the U.S. declined modestly
compared to the prior year.
Gross Profit
Gross profit was $145.0 million for fiscal 2017, a decrease of $3.6 million, or two percent, compared to fiscal 2016.
The decrease in gross profit resulted from lower irrigation sales and a decline in gross margin to 28.0 percent for
fiscal 2017 from 28.8 percent for fiscal 2016. Comparable year-to-year gross margin in the infrastructure segment
was offset by lower gross margin in the irrigation segment. Irrigation gross margin declined primarily due to lower
overhead cost absorption, as a result of lower domestic unit sales volume, and a higher mix of revenue from
international markets which produce lower gross margins.
Operating Expenses
The Company’s operating expenses of $104.8 million for fiscal 2017 decreased $9.4 million compared to fiscal
2016 operating expenses of $114.2 million. The reduction in operating expenses in the current year is due to $13.0
million of environmental remediation expenses in the prior year that did not repeat in fiscal 2017, offset in part by
higher product development and testing costs and professional fees in the current year. Operating expenses were
20.2 percent of sales for fiscal 2017 compared to 22.1 percent of sales for fiscal 2016. The Company’s operating
income increased to $40.2 million in fiscal 2017 compared to $34.4 million during fiscal 2016. Operating margin
was 7.8 percent for fiscal 2017 as compared to 6.7 percent for fiscal 2016.
Income Taxes
The Company recorded income tax expense of $12.5 million and $9.0 million for fiscal 2017 and fiscal 2016,
respectively. The effective income tax rate increased to 35.1 percent in fiscal 2017 compared to 30.8 percent in
fiscal 2016. The increase in the annual effective income tax rate is primarily due to the impact of differences
between book and tax treatment of certain items and proportionately higher earnings from U.S. operations in the
current year with tax rates higher than in foreign jurisdictions.
Net Earnings
Net earnings for fiscal 2017 were $23.2 million, or $2.17 per diluted share, compared to $20.3 million, or $1.85 per
diluted share, for fiscal 2016.
Liquidity and Capital Resources
The Company’s cash and cash equivalents totaled $160.8 million at August 31, 2018 compared with $121.6 million
at August 31, 2017. A portion of this increase resulted from the sale of certain businesses in fiscal 2018. 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 the credit
arrangements that are described below. The Company believes its current cash resources, projected operating cash
flow, and remaining capacity under its continuing bank lines of credit are sufficient to cover all of its expected
27
working capital needs, planned capital expenditures and dividends. The Company’s Capital Allocation Plan
outlined below could require the Company to incur additional debt depending on the size and timing of share
repurchases and potential acquisitions.
The Company’s total cash and cash equivalents held by foreign subsidiaries was approximately $32.6 million and
$23.5 million as of August 31, 2018 and 2017, respectively. The Company considers earnings of 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. These incremental taxes would be in addition to the
one-time deemed repatriation tax of $1.7 million as more fully explained in Note 6 to the consolidated financial
statements. 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 $251.0 million at August 31, 2018 as compared with $200.9 million at August 31, 2017.
Cash flows provided by operations totaled $33.9 million during the year ended August 31, 2018 compared to $39.4
million provided by operations during the same prior year period. Cash provided by operations decreased by $5.5
million compared to the prior year period primarily as a result of a $2.9 million decrease in net earnings and normal
fluctuations in the changes between assets and liabilities.
Cash flows provided by investing activities totaled $18.1 million during the year ended August 31, 2018 compared
to cash flows used in investing activities of $10.0 million during the same prior year period. Capital spending was
$11.1 million in fiscal 2018 compared to prior year capital spending of $8.9 million. The $28.1 million increase in
cash provided by investing activities was primarily due to the sale of certain businesses in fiscal 2018.
Cash flows used in financing activities totaled $11.3 million during the year ended August 31, 2018 compared to
cash flows used in financing activities of $10.3 million during 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. Priorities for the use of cash under the Company’s capital
allocation plan include:
•
Investment in organic growth including capital expenditures and expansion of international markets,
• Dividends to stockholders, along with expectations to increase dividends on an annual basis,
•
Synergistic acquisitions that leverage core capabilities and provide attractive returns to stockholders, and
• Opportunistic share repurchases taking into account cyclical and seasonal fluctuations.
Capital Expenditures and Expansion of International Markets
In fiscal 2019, the Company expects capital expenditures of approximately $15.0 million to $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 fiscal 2018, the Company paid cash dividends of $1.21 per common share or $13.0 million to stockholders as
compared to $1.17 per common share or $12.5 million to stockholders in fiscal 2017.
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 twelve months
ended August 31, 2018 and 2017. During the twelve months ended August 31, 2016, the Company repurchased
688,790 shares of common stock for an aggregate purchase price of $48.3 million. The remaining amount available
under the repurchase program was $63.7 million as of August 31, 2018.
28
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 and 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.
y
g
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 May 31, 2020. The Company intends to use borrowings under the Revolving Credit Facility for
working capital purposes and to fund acquisitions. At August 31, 2018 and August 31, 2017, 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 August 31, 2018, the Company had the ability to borrow up to $44.6 million under the Revolving
Credit Facility, after consideration of outstanding standby letters of credit of $5.4 million. Borrowings under the
Revolving Credit Facility bear interest at a variable rate equal to LIBOR plus 90 basis points (3.01 percent at August
31, 2018), 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 also pays an annual commitment fee of 0.25
percent on the unused portion of the Revolving Credit Facility.
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. 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 August 31, 2018 and August 31, 2017, 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 Corporation, a wholly owned subsidiary of the Company, has outstanding
$1.8 million in principal amount of industrial revenue bonds that were issued in 2006 (the “Series 2006A Bonds”).
Principal and interest on the Series 2006A Bonds are payable monthly through maturity on September 1, 2026. The
interest rate is adjustable every five years based on the yield of the 5-year United States Treasury Notes, plus 0.45
percent (1.92 percent as of August 31, 2018). This rate was adjusted on September 1, 2016 in accordance with the
terms of the bonds, and the adjusted rate will be in force until September 1, 2021. The obligations under the Series
2006A Bonds are secured by a first priority security interest in certain real estate.
Inflation
The Company is subject to the effects of changing prices. During fiscal 2018, the Company realized pricing
volatility for purchases of certain commodities, in particular steel and zinc products used in the production of its
products, as well as increased freight costs. While the cost outlook for commodities used in the production of the
Company’s products is not certain, management believes it can manage these inflationary pressures by introducing
appropriate sales price adjustments and by actively pursuing internal cost reduction efforts, while further refining the
Company’s inventory and raw materials risk management system. However, competitive market pressures may
affect the Company’s ability to pass price adjustments along to its customers.
Contractual Obligations, Commercial Commitments and Off-Balance Sheet Arrangements
In the normal course of business, the Company enters into contracts and commitments which obligate the Company
to make future payments. The Company uses off-balance sheet arrangements, such as leases accounted for as
operating leases, standby letters of credit and performance bonds, where sound business principles warrant their use.
The table below sets forth the Company’s significant future obligations by time period.
29
($ in thousands)
Contractual obligations (1)
Operating lease obligations
Pension benefit obligations
Long-term debt
Interest
Total
Total
Less than
1 year
2-3
years
4-5
years
More than
5 years
$ 39,138 $
6,404
116,775
50,665
$ 212,982 $
7,149 $ 20,059
3,964 $
3,889
518
115,710
205
4,426
28,577
9,112 $ 18,242 $ 17,393 $ 168,234
7,967 $
1,015
422
8,839
983
438
8,823
(1)
Total liabilities for unrecognized tax benefits as of August 31, 2018 were $1.4 million and are excluded from the table above. Unrecognized
tax benefits are classified on the Company's consolidated balance sheets within other noncurrent liabilities.
The Company does not have any additional off-balance sheet arrangements that have or are reasonably likely to
have a material current or future effect on the Company’s financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
ITEM 7A — Quantitative and Qualitative Disclosures about Market Risk
The Company uses certain financial derivatives to mitigate its exposure to volatility in interest rates and foreign
currency exchange rates. The Company uses these derivative instruments to hedge exposures in the ordinary course
of business and does not invest in derivative instruments for speculative purposes. The credit risk under these
interest rate and foreign currency agreements is not considered to be significant. The Company attempts to manage
market and credit risks associated with its derivative instruments by establishing and monitoring limits as to the
types and degree of risk that may be undertaken, and by entering into transactions with counterparties that have
investment grade credit ratings. As of August 31, 2018, the Company’s derivative counterparty had an investment
grade credit rating.
The Company has manufacturing operations in the United States, Brazil, France, Italy, China, Turkey, and South
Africa. The Company has sold products throughout the world and purchases certain of its components from third-
party international suppliers. Export sales made from the United States are principally U.S. dollar denominated. At
times, export sales may be denominated in a currency other than the U.S. dollar. A majority of the Company’s
revenue generated from operations outside the United States is denominated in local currency. Accordingly, these
sales are not typically subject to significant foreign currency transaction risk. The Company’s most significant
transactional foreign currency exposures are the Euro, the Brazilian real, the South African rand, the Turkish lira,
and the Chinese renminbi in relation to the U.S. dollar. Fluctuations in the value of foreign currencies create
exposures, which can adversely affect the Company’s results of operations. Based on the consolidated statement of
operations for the year ended August 31, 2018, the Company estimates the potential decrease in operating income
from a ten percent adverse change in the underlying exchange rates, in U.S. dollar terms, would be approximately
$0.5 million.
In order to reduce exposures related to changes in foreign currency exchange rates, the Company, at times, may
enter into forward exchange or option contracts for transactions denominated in a currency other than the functional
currency for certain of its operations. This activity primarily relates to economically hedging against foreign
currency risk in purchasing inventory, sales of finished goods, intercompany transactions and future settlement of
foreign denominated assets and liabilities. The Company had $5.0 million of U.S. dollar equivalent cash flow
forward exchange contracts and option contracts outstanding as of August 31, 2018.
In order to reduce translation exposure resulting from translating the financial statements of its international
subsidiaries into U.S. dollars, the Company, at times, utilizes Euro foreign currency forward contracts to hedge a
portion of its Euro net investment exposure in its foreign operations. At August 31, 2018, the Company had
outstanding Euro foreign currency forward contracts to sell 32.7 million Euro at fixed prices expected to settle
during the first quarter of fiscal 2019. At August 31, 2018, the Company also had an outstanding foreign currency
forward contract to sell 43.0 million South African rand at fixed prices to settle during the first quarter of fiscal
2018. Based on the net investments contracts outstanding at August 31, 2018, the Company estimates the potential
decrease in fair value from a ten percent adverse change in the underlying exchange rates would be approximately
$3.4 million. This decrease in fair value would be reflected as a reduction to other comprehensive income offsetting
the translation exposure or adjustment of the international subsidiaries.
ITEM 8 — Financial Statements and Supplementary Data
30
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Lindsay Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Lindsay Corporation and subsidiaries (the
Company) as of August 31, 2018 and 2017, the related consolidated statements of earnings, comprehensive income,
shareholders’ equity, and cash flows for each of the years in the three-year period ended August 31, 2018, and the
related notes and financial statement schedule (collectively, the consolidated financial statements). In our opinion,
the consolidated financial statements present fairly, in all material respects, the financial position of the Company as
of August 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the
three-year period ended August 31, 2018, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of August 31, 2018, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission, and our report dated October 23, 2018 expressed an unqualified
opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on these consolidated financial statements based on our audits. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks
of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor since 2001.
/s/ KPMG LLP
Omaha, Nebraska
October 23, 2018
31
Lindsay Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
2018
547,705
396,243
151,462
Years ended August 31,
2017
517,985
372,973
145,012
$
$
40,885
55,962
16,052
112,899
40,705
46,959
17,147
104,811
2016
516,411
367,798
148,613
41,973
56,419
15,846
114,238
38,563
40,201
34,375
(4,687)
1,640
(1,663)
(4,757)
1,178
(907)
(4,751)
645
(981)
33,853
35,715
29,288
13,576
12,536
9,021
20,277
$
23,179
$
20,267
1.89
1.88
$
$
2.17
2.17
$
$
1.86
1.85
10,741
10,772
10,666
10,694
10,906
10,930
1.21
$
1.17
$
1.13
($ and shares in thousands, except per share amounts)
Operating revenues
Cost of operating revenues
Gross profit
Operating expenses:
Selling expense
General and administrative expense
Engineering and research expense
Total operating expenses
Operating income
Other income (expense):
Interest expense
Interest income
Other (expense) income, net
Earnings before income taxes
Income tax expense
NNet earnings
Earnings per share:
Basic
Diluted
Shares used in computing earnings per share:
Basic
Diluted
Cash dividends declared per share
See accompanying notes to consolidated financial statements.
$
$
$
$
$
32
Lindsay Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ in thousands)
NNet earnings
Other comprehensive income (loss):
Defined benefit pension plan adjustment, net of tax
Foreign currency translation adjustment, net of
hedging activities and tax
Total other comprehensive income (loss), net of tax
expense (benefit) of $267, ($582), and $79
Total comprehensive income
See accompanying notes to consolidated financial statements.
2018
Years ended August 31,
2017
2016
$
20,277
$
23,179
$
20,267
251
(6,231)
331
1,733
(5,980)
14,297
$
2,064
25,243
$
$
(258)
1,394
1,136
21,403
33
Lindsay Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
August 31,
2018
August 31,
2017
$
$
$
160,787
69,107
79,233
3,883
10,837
7,204
331,051
57,248
27,376
64,671
6,645
13,265
500,256
30,530
205
2,424
46,935
80,094
5,874
116,570
1,083
19,769
223,390
121,620
73,850
86,155
4,384
—
6,925
292,934
74,498
42,808
77,131
5,311
13,350
506,032
36,717
201
—
55,119
92,037
6,295
116,775
1,191
19,679
235,977
—
—
18,841
68,465
484,886
(277,238)
(18,088)
276,866
500,256
$
18,780
63,006
477,615
(277,238)
(12,108)
270,055
506,032
$
$
$
$
($ and shares in thousands, except par values)
ASSETS
Current assets:
Cash and cash equivalents
Receivables, net of allowance of $3,585 and $7,447, respectively
Inventories, net
Prepaid expenses
Assets held-for-sale
Other current assets
Total current assets
Property, plant, and equipment, net
Intangible assets, net
Goodwill
Deferred income tax assets
Other noncurrent assets
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
Current portion of long-term debt
Liabilities held-for-sale
Other current liabilities
Total current liabilities
Pension benefits liabilities
Long-term debt
Deferred income tax liabilities
Other noncurrent liabilities
Total liabilities
Shareholders' equity:
Preferred stock of $1 par value - authorized 2,000 shares;
no shares issued and outstanding
Common stock at $1 par value - authorized 25,000 shares;
18,841 and 18,780 shares issued at August 31, 2018 and 2017,
respectively
Capital in excess of stated value
Retained earnings
Less treasury stock - at cost, 8,083 shares
Accumulated other comprehensive loss, net
Total shareholders' equity
Total liabilities and shareholders' equity
See accompanying notes to consolidated financial statements.
34
Lindsay Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
($ and shares in thousands, except per share amounts)
Shares of
common
stock
18,684
Shares of
treasury
stock
7,394
Common
stock
18,684
$
Capital in
excess of
stated
value
55,184
$
Retained
earnings
$ 458,903
20,267
Accumulated
other
comprehensive
(loss) income,
net
(15,308) $
Total
shareholders’
equity
288,560
Treasury
stock
$ (228,903) $
689
(12,244)
(48,335)
1,136
29
29
(628)
18,713
8,083
$
18,713
$
(84)
2,866
57,338
$ 466,926
$ (277,238) $
(14,172) $
23,179
(12,490)
2,064
67
67
2,318
18,780
8,083
$
18,780
$
3,350
63,006
$ 477,615
$ (277,238) $
(12,108) $
20,277
(13,006)
(5,980)
61
61
1,894
18,841
8,083
18,841
3,565
68,465
484,886
(277,238)
(18,088)
20,267
1,136
21,403
(12,244)
(48,335)
(599)
(84)
2,866
251,567
23,179
2,064
25,243
(12,490)
2,385
3,350
270,055
20,277
(5,980)
14,297
(13,006)
1,955
3,565
276,866
Balance at August 31, 2015
Comprehensive income:
Other comprehensive
income
Total comprehensive income
Cash dividends ($1.13) per
share
Repurchase of common stock
Issuance of common shares
under share compensation
plans
Excess tax benefits from share-
based compensation
Share-based compensation
expense
Balance at August 31, 2016
Comprehensive income:
Other comprehensive
income
Total comprehensive income
Cash dividends ($1.17) per
share
Issuance of common shares
under share compensation
plans
Share-based compensation
expense
Balance at August 31, 2017
Comprehensive income:
Other comprehensive
income
Total comprehensive income
Cash dividends ($1.21) per
share
Issuance of common shares
under share compensation
plans
Share-based compensation
expense
Balance at August 31, 2018
See accompanying notes to consolidated financial statements.
35
Lindsay Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings
Adjustments to reconcile net earnings to net cash provided by
operating activities:
2018
Years ended August 31,
2017
2016
$
20,277
$
23,179
$
20,267
Depreciation and amortization
Loss on sale of businesses
Provision for uncollectible accounts receivable
Deferred income taxes
Share-based compensation expense
Other, net
Changes in assets and liabilities:
Receivables
Inventories
Prepaid expenses and other current assets
Accounts payable
Other current liabilities
Other noncurrent assets and liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, and equipment
Proceeds from sale of businesses
Proceeds from settlement of net investment hedges
Payments for settlement of net investment hedges
Other investing activities, net
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options
Common stock withheld for payroll tax obligations
Principal payments on long-term debt
Repurchase of common shares
Dividends paid
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid
Interest paid
See accompanying notes to consolidated financial statements.
$
$
$
16,514
4,056
(2,587)
(50)
3,891
2,903
(3,714)
(8,173)
(1,150)
159
3,671
(1,863)
33,934
(11,054)
29,888
2,278
(3,089)
82
18,105
2,788
(833)
(201)
—
(13,006)
(11,252)
(1,620)
39,167
121,620
160,787
11,184
4,626
$
$
$
16,678
—
(574)
(903)
3,598
626
7,959
(10,092)
4,581
4,076
(3,821)
(5,858)
39,449
(8,863)
—
2,117
(3,466)
233
(9,979)
3,020
(635)
(197)
—
(12,490)
(10,302)
1,206
20,374
101,246
121,620
16,214
4,696
$
$
$
16,881
—
(843)
(5,755)
3,060
89
(4,730)
1,330
(1,047)
(7,101)
(1,043)
12,017
33,125
(11,496)
—
3,381
(2,924)
1,141
(9,898)
113
(712)
(193)
(48,335)
(12,244)
(61,371)
297
(37,847)
139,093
101,246
18,395
4,674
36
Lindsay Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Description of Business and Significant Accounting Policies
Lindsay Corporation, along with its subsidiaries (collectively called “Lindsay” or the “Company”), is a global leader
in providing a variety of proprietary water management and road infrastructure products and services. The
Company has been involved in the manufacture and distribution of agricultural irrigation equipment since 1955 and
has grown from a regional company to an international water efficiency solutions and highway infrastructure firm
with worldwide sales and distribution. Lindsay, a Delaware corporation, maintains its corporate offices in Omaha,
Nebraska. The Company has operations which are categorized into two major reporting segments.
Irrigation Segment
The Company’s irrigation segment includes the manufacture and marketing of center pivot, lateral move, and hose
reel irrigation systems which are used principally in the agricultural industry to increase or stabilize crop production
while conserving water, energy and labor. The irrigation segment also manufactures and markets repair and
replacement parts for its irrigation systems and controls. The Company continues to strengthen irrigation product
offerings through innovative technology such as Global Positioning System (“GPS”) positioning and guidance,
variable rate irrigation, wireless irrigation management, machine-to-machine (“M2M”) communication technology
solutions and smartphone applications. The Company’s domestic irrigation manufacturing facilities are located in
Lindsay, Nebraska and Olathe, Kansas. Internationally, the Company has production operations in Brazil, France,
China, Turkey and South Africa as well as distribution and sales operations in the Netherlands, Australia and New
Zealand. The Company also exports equipment from the U.S. to other international markets.
Infrastructure Segment
The Company’s infrastructure segment includes the manufacture and marketing of moveable barriers, specialty
barriers, crash cushions and end terminals, road marking and road safety equipment, large diameter steel tubing, and
railroad signals and structures. The infrastructure segment also provides outsourced manufacturing and production
services. The principal infrastructure manufacturing facilities are located in Rio Vista, California; Milan, Italy; and
Lindsay, Nebraska.
Notes to the consolidated financial statements describe various elements of the financial statements and the
accounting policies, estimates, and assumptions applied by management. While actual results could differ from
those estimated at the time of preparation of the consolidated financial statements, management believes that the
accounting policies, assumptions, and estimates applied promote the representational faithfulness, verifiability,
neutrality, and transparency of the accounting information included in the consolidated financial statements. The
significant accounting policies of the Company are as follows:
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany
balances and transactions are eliminated in consolidation.
Reclassifications
Certain reclassifications have been made to prior financial statements to conform to the current-year presentation.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”)
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
The Company’s basic criteria necessary for revenue recognition are: 1) evidence of a sales arrangement exists, 2)
delivery of goods has occurred, 3) the sales price to the buyer is fixed or determinable, and 4) collectability is
reasonably assured. The Company recognizes revenue when these criteria have been met and when title and risk of
loss transfers to the customer. The Company generally has no post-delivery obligations to its independent dealers
other than standard warranties.
Revenues and gross profits on intercompany sales are eliminated in
consolidation. Revenues from the sale of the Company’s products are recognized based on the delivery terms in the
sales contract. If an arrangement involves multiple deliverables, revenues from the arrangement are allocated to the
separate units of accounting based on their relative selling price.
37
The Company offers a subscription-based service for wireless management and recognizes subscription revenue on
a straight-line basis over the contract term. The Company leases certain infrastructure property held for lease to
customers such as moveable concrete barriers and Road Zipper Systems®. Revenues for the lease of infrastructure
property held for lease are recognized on a straight-line basis over the lease term.
The costs related to revenues are recognized in the same period in which the specific revenues are recorded.
Shipping and handling fees billed to customers are reported in revenue. Shipping and handling costs incurred by the
Company are included in cost of sales. Customer rebates, cash discounts and other sales incentives are recorded as a
reduction of revenues at the time of the original sale. Estimates used in the recognition of operating revenues and
cost of operating revenues include, but are not limited to, estimates for product warranties, product rebates, cash
discounts and fair value of separate units of accounting on multiple deliverables.
Share-Based Compensation
The Company recognizes compensation expense for all share-based payment awards made to employees and
directors based on estimated fair values on the date of grant. The Company uses the straight-line amortization
method over the vesting period of the awards. The Company has historically issued shares upon exercise of stock
options or vesting of restricted stock units or performance stock units from new stock issuances.
The value of the portion of the award that is ultimately expected to vest is recognized as expense in the Company’s
Consolidated Statement of Operations over the periods during which the employee or director is required to perform
a service in exchange for the award.
The Company uses the Black-Scholes option-pricing model (“Black-Scholes model”) as its valuation method for
stock option awards. Under the Black-Scholes model, the fair value of stock option awards on the date of grant is
estimated using an option-pricing model that is affected by the Company’s stock price as well as assumptions
regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the
Company’s expected stock price volatility over the term of the awards and actual and projected employee stock
option exercise behaviors. Restricted stock, restricted stock units, performance shares and performance stock units
issued under the 2015 Long-Term Incentive Plan will have a grant-date fair value equal to the fair market value of
the underlying stock on the grant date less present value of expected dividends.
Warranty Costs
The Company’s provision for product warranty reflects management’s best estimate of probable liability under its
product warranties. At the time a sale is recognized, the company records the estimated future warranty costs. The
Company generally determines its total future warranty liability by applying historical claims rate experience to the
amount of equipment that has been sold and is still within the warranty period. In addition, the Company records
provisions for known warranty claims. This provision is periodically adjusted to reflect actual experience.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments with original maturities of three months or less.
Receivables and Allowances
Trade receivables are reported on the balance sheet net of any doubtful accounts. Losses are recognized when it is
probable that an asset has been impaired and the amount of the loss can be reasonably estimated. In estimating
probable losses, the Company reviews specific accounts that are significant and past due, in bankruptcy or otherwise
identified as at risk for potential credit loss. Collectability of these specific accounts are assessed based on facts and
circumstances of that customer, and an allowance for credit losses is established based on the probability of default.
In assessing the likelihood of collection of receivable, the Company considers (for example) the Company’s history
of collections, the current status of discussions and repayment plans, collateral received, and other evidence and
information regarding collection or default risk that is available in the market place. The allowance for credit losses
attributable to the remaining accounts is established using probabilities of default and an estimate of associated
losses based upon the aging of receivable balances, collection experience, economic condition and credit risk
quality.
38
As the Company’s international business has grown, the exposure to potential losses in international markets has
also increased. These exposures can be difficult to estimate, particularly in areas of political instability or with
governments with which the Company has limited experience or where there is a lack of transparency as to the
current credit condition of governmental units. The Company’s allowance for all doubtful accounts related to
outstanding receivables decreased to $3.6 million at August 31, 2018 from $7.4 million at August 31, 2017. The
Company’s evaluation of the adequacy of the allowance for credit losses is based on facts and circumstances
available to the Company at the date the consolidated financial statements are issued and considers any significant
changes in circumstances occurring through the date that the financial statements are issued.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined by the last-in, first-out (“LIFO”) method,
the first-in, first-out (“FIFO”) method, or the weighted average cost method for inventory depending on the
operations at each specific location. At all locations, the Company reserves for obsolete, slow moving, and excess
inventory by estimating the net realizable value based on the potential future use of such inventory.
Property, Plant, and Equipment
Property, plant, equipment, and capitalized assets held for lease are stated at cost. The Company capitalizes major
expenditures and charges to operating expenses the cost of current maintenance and repairs. Provisions for
depreciation and amortization have been computed principally on the straight-line method for property, plant, and
equipment. Rates used for depreciation are based principally on the following expected lives: buildings -- 15 to 30
years; equipment -- 3 to 7 years; leased barrier transfer machines -- 8 to 10 years; leased barriers -- 12 years; other --
2 to 20 years and leasehold improvements – shorter of the economic life or term of the lease. All of the Company’s
long-lived asset groups are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. If the sum of the expected future cash flows is less than the carrying
amount of the asset group, an impairment loss is recognized based upon the difference between the fair value of the
asset and its carrying value. No impairments were recorded during the fiscal years ended August 31, 2018, 2017,
and 2016. The cost and accumulated depreciation relating to assets retired or otherwise disposed of are eliminated
from the respective accounts at the time of disposition. The resulting gain or loss is included in operating income in
the consolidated statements of earnings.
Valuation of Goodwill and Identifiable Intangible Assets
Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business
combination. Acquired intangible assets are recognized separately from goodwill. Goodwill and intangible assets
with indefinite useful lives are tested for impairment at least annually at August 31 and whenever triggering events
or changes in circumstances indicate its carrying value may not be recoverable. Assessment of the potential
impairment of goodwill and identifiable intangible assets is an integral part of the Company’s normal ongoing
review of operations. Testing for potential impairment of these assets is significantly dependent on numerous
assumptions and reflects management’s best estimates at a particular point in time. The dynamic economic
environments in which the Company’s businesses operate and key economic and business assumptions related to
projected selling prices, market growth, inflation rates and operating expense ratios, can significantly affect the
outcome of impairment tests. Estimates based on these assumptions may differ significantly from actual results.
Changes in factors and assumptions used in assessing potential impairments can have a significant impact on the
existence and magnitude of impairments, as well as the time in which such impairments are recognized.
In fiscal 2018, in conjunction with the Company’s annual review for impairment, the Company performed a
qualitative analysis of goodwill for each of the Company’s reporting units, which are the same as its operating
segments, and did not identify any potential impairment. Also in fiscal 2018, the Company performed a qualitative
analysis of other intangible assets not subject to amortization and concluded there were no indicators of impairment.
Income Taxes
Income taxes are accounted for utilizing the asset and liability method. Deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences between the financial statement
carrying value of existing assets and liabilities and their respective tax bases. These expected future tax
consequences are measured based on currently enacted tax rates. The effect of tax rate changes on deferred tax
assets and liabilities is recognized in income during the period that includes the enactment date. In assessing the
ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or
all of the deferred tax asset will not be realized. The Company’s evaluation of the adequacy of any potential
allowance is based on facts and circumstances available to the Company at the date the consolidated financial
statements are issued and considers any significant changes in circumstances occurring through the date that the
financial statements are issued.
39
Net Earnings per Share
Basic net earnings per share is computed using the weighted average number of common shares outstanding during
the period. Diluted net earnings per share is computed using the weighted average number of common shares
outstanding plus dilutive potential common shares outstanding during the period.
Employee stock options, non-vested shares and similar equity instruments granted by the Company are treated as
potential common share equivalents outstanding in computing diluted net earnings per share. The Company’s
diluted common shares outstanding reported in each period includes the dilutive effect of restricted stock units, in-
the-money options, and performance stock units for which threshold performance conditions have been satisfied and
is calculated based on the average share price for each fiscal period using the treasury stock method. Under the
treasury stock method, the amount the employee must pay for exercising stock options, and the amount of
compensation cost for future service that the Company has not yet recognized, are assumed to be used to repurchase
shares.
Derivative Instruments and Hedging Activities
The Company uses certain financial derivatives to mitigate its exposure to volatility in interest rates and foreign
currency exchange rates. All derivative instruments are recorded on the balance sheet at their respective fair values.
The Company uses these derivative instruments only to hedge exposures in the ordinary course of business and does
not invest in derivative instruments for speculative purposes. On the date a derivative contract is entered into, the
Company may elect to designate the derivative as a fair value hedge, a cash flow hedge, or the hedge of a net
investment in a foreign operation.
The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative
that is used in the hedging transaction is effective. For those instruments that are designated as a cash flow hedge
and meet certain documentary and analytical requirements to qualify for hedge accounting treatment, changes in the
fair value for the effective portion are reported in other comprehensive income (“OCI”), net of related income tax
effects, and are reclassified to the income statement when the effects of the item being hedged are recognized in the
income statement. Changes in fair value of derivative instruments that qualify as hedges of a net investment in
foreign operations are recorded as a component of accumulated currency translation adjustment in accumulated
other comprehensive income (“AOCI”), net of related income tax effects. Changes in the fair value of undesignated
hedges are recognized currently in earnings. All changes in derivative fair values due to ineffectiveness are
recognized currently in income.
The Company discontinues hedge accounting prospectively when it is determined that the derivative is no longer
effective in offsetting changes in the cash flows of the hedged item, the derivative expires or is sold, terminated, or
exercised, or management determines that designation of the derivative as a hedging instrument is no longer
appropriate. In situations in which the Company does not elect hedge accounting or hedge accounting is
discontinued and the derivative is retained, the Company carries or continues to carry the derivative at its fair value
on the balance sheet and recognizes any subsequent changes in its fair value through earnings. The Company
manages market and credit risks associated with its derivative instruments by establishing and monitoring limits as
to the types and degree of risk that may be undertaken, and by entering into transactions with high-quality
counterparties. As of August 31, 2018, the Company’s derivative counterparty had investment grade credit ratings.
Fair Value Measurements
The Company’s disclosure of the fair value of assets and liabilities is based on a three-level hierarchy for fair value
measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement
date. Inputs refers broadly to the assumptions that market participants would use in pricing the asset or liability,
including assumptions about risk. The categorization within the valuation hierarchy is based upon the lowest level
of input that is significant to the fair value measurement. Financial assets and liabilities carried at fair value will be
classified and disclosed in one of the following three categories:
•
•
•
Level 1 – inputs to valuation techniques are quoted prices in active markets for identical assets or liabilities
Level 2 – inputs to the valuation techniques are other than quoted prices but are observable for the assets or
liabilities, either directly or indirectly
Level 3 – inputs to the valuation techniques are unobservable for the assets or liabilities
40
Treasury Stock
When the Company repurchases its outstanding stock, it records the repurchased shares at cost as a reduction to
shareholders’ equity. The weighted average cost method is utilized for share re-issuances. The difference between
the cost and the re-issuance price is charged or credited to a “capital in excess of stated value – treasury stock”
account to the extent that there is a sufficient balance to absorb the charge. If the treasury stock is sold for an
amount less than its cost and there is not a sufficient balance in the capital in excess of stated value – treasury stock
account, the excess is charged to retained earnings.
Contingencies
The Company’s accounting for contingencies covers a variety of business activities including contingencies for legal
exposures and environmental exposures. The Company accrues these contingencies when its assessments indicate
that it is probable that a liability has been incurred and an amount can be reasonably estimated. The Company’s
estimates are based on currently available facts and its estimates of the ultimate outcome or resolution. Actual
results may differ from the Company’s estimates resulting in an impact, positive or negative, on earnings.
Environmental Remediation Liabilities
Environmental remediation liabilities include costs directly associated with site investigation and clean up, such as
materials, external contractor costs and incremental internal costs directly related to the remedy. The Company
accrues the anticipated cost of environmental remediation when the obligation is probable and can be reasonably
estimated. Estimates used to record environmental remediation liabilities are based on the Company’s best estimate
of probable future costs based on site-specific facts and circumstances. Estimates of the cost for the likely remedy
are developed using internal resources or by third-party environmental engineers or other service providers. The
Company records the undiscounted environmental remediation liabilities that represent the points in the range of
estimates that are most probable or the minimum amount when no amount within the range is a better estimate than
any other amount.
Translation of Foreign Currency
The Company’s portion of the assets and liabilities related to foreign investments are translated into U.S. dollars at
the exchange rates in effect at the balance sheet date. Revenue and expenses are translated at the average rates of
exchange prevailing during the year. Unrealized gains or losses are reflected within common shareholders’ equity
as accumulated other comprehensive income or loss.
Note 2 – New Accounting Pronouncements
Recent Accounting Guidance Not Yet Adopted
In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update
(“ASU”) No. 2014-09, Revenue from Contracts with Customers. In August 2015, the FASB issued ASU No. 2015-
14, Revenue from Contracts with Customers: Deferral of the Effective Date. The standard provides a single model
for revenue arising from contracts with customers and supersedes current revenue recognition guidance. The ASU
requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of goods or
services. The ASU will replace existing revenue recognition guidance in U.S. GAAP and becomes effective in the
first quarter of the Company’s fiscal 2019. The guidance permits companies to either apply the requirements
retrospectively to all prior periods presented, or apply the requirements in the year of adoption, through a cumulative
adjustment.
During fiscal 2018, the Company performed an evaluation of the effect of the ASU on the Company’s operations,
accounting policies, internal control over financial reporting, consolidated financial statements, and disclosures. The
Company has identified the key changes in the ASU that could impact the Company’s revenue recognition relate to
contracts with terms and conditions that allow the Company to bill a customer for full compensation on a canceled
order for the performance completed to date, and that include inventory which is custom engineered to a single
customer’s specifications. In these cases, revenue will be recognized over the production period and not the
historical practice of upon shipment or time of delivery to the customer. Within both the Irrigation and Infrastructure
segments, the Company has certain product lines with customer specifications resulting in limited ability for the
asset to be used for another customer. The Company estimates that an immaterial difference in sales and pre-tax
operating income would have been recognized prior to August 31, 2018 if the Company followed the new
accounting guidance instead of the previously applied revenue recognition guidance.
The Company will adopt the new standard using the modified retrospective approach effective the first day of fiscal
2019. Based on work performed to date, the Company expects to record an immaterial adjustment to retained
earnings related to the adoption of the ASU. From a balance sheet perspective, a contract asset will be recorded for
41
the amount of revenue recognized over the production period in excess of billings to that customer. The contract
asset will be offset by lower reported inventory, resulting in an immaterial effect on the balance sheet. Although
there were no significant changes to the Company's accounting systems or controls upon adoption of the ASU,
certain existing controls were modified to incorporate the revisions made to the Company’s accounting policies and
practices.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The standard requires a lessee to
recognize assets and liabilities arising from an operating lease on the balance sheet. Additionally, companies are
permitted to make an accounting policy election to not recognize lease assets and liabilities for leases with a term of
12 months or less. The effective date of ASU No. 2016-02 will be the first quarter of the Company’s fiscal 2020
with early adoption permitted. The Company is currently in the assessment phase and is evaluating the effect that
adoption of this standard will have on its consolidated financial statements.
In March 2017, the FASB issued ASU 2017-07, Presentation of Net Periodic Benefit Cost Related to Defined
Benefit Plans, which amends the income statement presentation requirements for the components of net periodic
benefit cost for an entity's defined benefit pension and post-retirement plans. ASU 2017-07 is effective in the first
quarter of the Company’s fiscal 2019 with early adoption permitted. The Company does not believe this ASU will
have a material impact on the consolidated financial statements.
In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities,
which modifies the financial reporting of hedging relationships through changes to both the designation and
measurement guidance for qualifying hedging relationships and the presentation of hedge results. ASU 2017-12 is
effective in the first quarter of the Company’s fiscal 2020 with early adoption permitted. The Company does not
believe the adoption of this ASU will have a material impact on the consolidated financial statements.
In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic
220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which provides
entities with the option to eliminate the stranded tax effects associated with the change in tax rates under the U.S.
Tax Cuts and Jobs Act (“U.S. Tax Reform”) through a reclassification of the stranded tax effects from accumulated
other comprehensive income (“AOCI”) to retained earnings. The amount of the reclassification would be calculated
on the basis of the difference between the historical and newly enacted tax rates for deferred tax liabilities and assets
related to items within AOCI. ASU 2018-02 is effective in the first quarter of the Company’s fiscal 2020 with early
adoption permitted. Companies should apply the proposed amendments either in the period of adoption or
retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax
rate from U.S. Tax Reform is recognized. The Company does not believe the adoption of this ASU will have a
material impact on the consolidated financial statements.
Recent Accounting Guidance Adopted
In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), Income Tax Accounting
Implications of the Tax Cuts and Jobs Act, which provides guidance on accounting for the impacts of U.S. Tax
Reform. SAB 118 directs companies to consider the impact of U.S. Tax Reform as provisional when it does not
have the necessary information available, prepared, or analyzed in reasonable detail to complete its accounting under
Accounting Standards Codification (“ASC”) Topic 740, Income Taxes. The Company has not yet completed its
accounting for the tax effects of the U.S. Tax Reform; however it has made a reasonable, but provisional, estimate of
the effects as more fully explained in Note 6 to the condensed consolidated financial statements.
Note 3 – Divestitures and Held-For-Sale
During fiscal 2018, in connection with a portfolio review of business investments, the Company committed to a plan
of divestiture of its pump and filtration businesses, a Company-owned irrigation dealership, and a Company-owned
water resource consulting firm, all of which are reported in the Irrigation segment. The Company determined that
the divestiture of these businesses does not meet the criteria for discontinued operations presentation as the
commitment to divest these businesses does not represent a strategic shift that will have a major effect on its
operations and financial results. The Company completed the divestiture of its pump and filtration businesses and
the Company-owned water resource consulting firm during the fourth quarter of fiscal 2018. The Company has
recorded a loss on sale of businesses of $4.1 million included in general and administrative expense on the
consolidated statement of earnings in the fiscal year ended August 31, 2018.
The Company expects the sale of the Company-owned irrigation dealership to close before the end of the current
calendar year. Because the divestiture does not meet the criteria for discontinued operations presentation, the assets
42
and liabilities of the Company-owned irrigation dealership are separately presented within the captions “Assets held-
for-sale” and “Liabilities held-for-sale” in the consolidated balance sheet as of August 31, 2018.
Additionally, during the fourth quarter of fiscal 2018, the Company closed one of its infrastructure manufacturing
facilities in North America and consolidated its operations with an irrigation manufacturing facility. The building
related to the closure is currently listed for sale and is included within the caption “Assets held-for-sale” in the
consolidated balance sheet as of August 31, 2018.
The carrying amounts of the major classes of assets and liabilities that were classified as held-for-sale at August 31,
2018, are as follows:
($ in thousands)
Receivables, net of allowance of $244
Inventories, net
Property, plant, and equipment, net
Intangibles, net
Total assets
Accounts payable
Other current liabilities
Total liabilities
NNet assets
Note 4 – Net Earnings Per Share
August 31,
2018
3,473
3,676
3,637
51
10,837
1,476
948
2,424
8,413
$
$
The following table shows the computation of basic and diluted net earnings per share for fiscal 2018, 2017, and
2016:
($ and shares in thousands, except per share amounts)
NNumerator:
Net earnings
Denominator:
For the years ended August 31,
2017
2016
2018
$
20,277
$
23,179
$
20,267
Weighted average shares outstanding
Diluted effect of stock equivalents
Weighted average shares outstanding assuming dilution
10,741
31
10,772
10,666
28
10,694
Basic net earnings per share
Diluted net earnings per share
$
$
1.89
1.88
$
$
2.17
2.17
$
$
10,906
24
10,930
1.86
1.85
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 following
table shows the securities excluded from the computation of earnings per share because their effect would have been
anti-dilutive:
(Units and options in thousands)
Restricted stock units
Stock options
For the years ended August 31,
2017
2016
2018
19
65
10
108
5
89
43
Note 5 – Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss is included in the accompanying consolidated balance sheets in the
shareholders’ equity section, and consists of the following components:
($ in thousands)
Accumulated other comprehensive loss:
August 31,
2018
2017
Defined benefit pension plan, net of tax benefit of $1,362 and $1,451
Foreign currency translation, net of hedging activities, net of tax
expense of $2,686 and $2,508
Total accumulated other comprehensive loss
$
$
(2,199) $
(2,450)
(15,889)
(18,088) $
(9,658)
(12,108)
The following is a roll-forward of the balances in accumulated other comprehensive income (loss), net of tax.
($ in thousands)
Balance at August 31, 2016
Current-period change
Balance at August 31, 2017
Current-period change
Balance at August 31, 2018
Note 6 – Income Taxes
Defined
benefit
pension plan
adjustment
Foreign
currency
translation
adjustment
$
$
(2,781) $
331
(2,450)
251
(2,199) $
(11,391) $
1,733
(9,658)
(6,231)
(15,889) $
Accumulated
other
comprehensive
loss
(14,172)
2,064
(12,108)
(5,980)
(18,088)
The United States enacted significant tax reform into law on December 22, 2017. U.S. Tax Reform made complex
and broad changes to the U.S. tax laws that affect our fiscal year 2018 in two primary ways.
First, effective as of January 1, 2018, U.S. Tax Reform reduces the U.S. federal corporate income tax rate from 35
percent to 21 percent. Since the Company’s fiscal year ends in August, Lindsay has a blended U.S. federal statutory
income tax rate for fiscal year 2018 of 25.7% (four months at 35% and eight months at 21%). The U.S. federal
statutory income tax rate is expected to be 21 percent for fiscal year 2019 and future years.
As a result of the enactment of a lower U.S. statutory corporate income tax rate, the Company remeasured U.S.
deferred income tax assets and liabilities based on the rates at which they are expected to reverse in the future. The
Company recorded a $0.8 million expense related to this required remeasurement.
Second, U.S. Tax Reform requires companies to pay a one-time deemed repatriation tax on certain undistributed
earnings of foreign subsidiaries. The Company recorded a $1.7 million provisional expense for the deemed
repatriation tax.
U.S. Tax Reform also established new income tax provisions that will affect the Company’s fiscal year 2019,
including, but not limited to, eliminating the U.S. manufacturing deduction, and establishing a new minimum tax on
global intangible low-taxed income (“GILTI”). The Company is allowed to make an accounting policy election to
either treat the GILTI tax as a period expense or to provide U.S. deferred income taxes on certain foreign differences
between the financial statement and tax basis of foreign assets and liabilities. An analysis of the new GILTI rules
and how they may impact the Company is incomplete. Accordingly, no policy election has been made regarding the
treatment of the GILTI tax. Further, we did not record a deferred tax liability for these differences.
The U.S. Securities and Exchange Commission issued SAB 118, which provides guidance on accounting for the tax
effects of U.S. Tax Reform. SAB 118 provides a measurement period that should not extend beyond one year from
the U.S. Tax Reform enactment date for companies to complete the accounting under ASC 740. In accordance with
SAB 118, a company must reflect the income tax effects of those aspects of U.S. Tax Reform for which the
accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of
U.S. Tax Reform is incomplete but it can determine a reasonable estimate, it must record a provisional estimate in
the financial statements. If a company cannot determine a provisional estimate to be included in the financial
statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect
44
immediately before U.S. Tax Reform. The deemed repatriation tax expense is provisional, and may be adjusted
during the following fiscal year within the measurement period, as a result of continuing analysis of U.S. Tax
Reform, which may include additional implementation guidance from the IRS, state tax authorities, the SEC, the
FASB, or the Joint Committee on Taxation, and updated information from foreign affiliates.
For financial reporting purposes earnings (losses) before income taxes include the following components:
($ in thousands)
United States
Foreign
Significant components of the income tax provision are as follows:
($ in thousands)
Current:
Federal
State
Foreign
Total current
Deferred:
Federal
State
Foreign
Total deferred
Total income tax provision
For the years ended August 31,
2017
2016
2018
25,116
8,737
33,853
$
$
21,969
13,746
35,715
$
$
17,805
11,483
29,288
For the years ended August 31,
2017
2016
2018
9,313
1,047
3,266
13,626
517
(47)
(520)
(50)
13,576
$
$
7,873
781
4,785
13,439
(688)
(43)
(172)
(903)
12,536
$
$
10,570
976
3,230
14,776
(5,456)
(268)
(31)
(5,755)
9,021
$
$
$
$
Total income tax provision resulted in effective tax rates differing from that of the statutory United States federal
income tax rates. The reasons for these differences are:
($ in thousands)
U.S. statutory rate
State and local taxes, net of federal
tax benefit
Foreign tax rate differences
U.S. tax reform
Deferred tax asset valuation allowance
Domestic production activities deduction
Other
Effective rate
2018
For the years ended August 31,
2017
2016
Amount
$ 8,700
%
Amount
25.7 $ 12,500
%
35.0
Amount
$ 10,251
743
809
2,496
758
(727)
797
$ 13,576
480
2.2
(486)
2.4
—
7.4
(21)
2.2
(700)
(2.1)
2.3
763
40.1 $ 12,536
1.3
(1.4)
—
—
(2.0)
2.2
35.1
350
(195)
—
(124)
(960)
(301)
$ 9,021
%
35.0
1.2
(0.7)
—
(0.4)
(3.3)
(1.0)
30.8
45
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant
components of the Company’s deferred tax assets and liabilities are as follows:
($ in thousands)
Deferred tax assets:
Allowance for doubtful accounts
Accrued expenses
Warranty
Defined benefit pension plan
Inventory
Share-based compensation
Vacation
Net operating loss and capital loss carry forwards
Deferred revenue
Other
Gross deferred tax assets
Valuation allowance
NNet deferred tax assets
Deferred tax liabilities:
Intangible assets
Property, plant, and equipment
Total deferred tax liabilities
Net deferred tax assets
August 31,
2018
2017
947
8,142
1,648
1,528
1,935
925
797
2,868
536
665
19,991
(3,562)
16,429
$
$
2,084
12,459
2,957
2,666
1,923
1,578
1,422
1,420
793
964
28,266
(2,804)
25,462
(6,648) $
(4,219)
(10,867) $
(15,422)
(5,920)
(21,342)
5,562
$
4,120
$
$
$
$
$
In assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that
some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in which those temporary differences
become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable
income, and tax planning strategies in making this assessment. Because the Company has a recent history of
generating cumulative losses in a certain foreign tax jurisdiction, management did not consider projections of future
taxable income as persuasive evidence for the recoverability of deferred tax assets in that jurisdiction. Therefore,
the Company recorded a valuation allowance of $2.9 million as of August 31, 2015, which has decreased to $2.4
million as of August 31, 2018 for the certain foreign tax jurisdiction. Additionally, in fiscal 2018 the Company sold
its filtration business, generating a $5.1 million capital loss. The Company believes it is more likely than not that
the benefit from the capital loss will not be realized. Therefore, the Company recorded a valuation allowance of
$1.2 million as of August 31, 2018.
The Company does not intend to, and has not historically, repatriated earnings of its foreign subsidiaries. Thus, the
Company has not provided a deferred income tax liability on these undistributed earnings that are indefinitely
reinvested. The Company would recognize a deferred income tax liability if the Company were to determine that
such earnings were no longer indefinitely reinvested. During fiscal year 2018, U.S. Tax Reform was enacted,
requiring companies to pay a one-time deemed repatriation tax on certain unrepatriated earnings of foreign
subsidiaries, and generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries. There are
other taxes that may be incurred if the Company would repatriate earnings of its foreign subsidiaries. It is not
practicable to estimate the amount of income taxes that would be incurred if the Company would repatriate earnings
of its foreign subsidiaries.
The Company recognizes tax benefits only for tax positions that are more likely than not to be sustained upon
examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater
than 50 percent likely to be realized upon settlement. Unrecognized tax benefits are tax benefits claimed in the
Company’s tax returns that do not meet these recognition and measurement standards.
46
A reconciliation of changes in unrecognized tax benefits is as follows:
($ in thousands)
Unrecognized tax benefits at September 1
Increases for positions taken in current year
Increases for positions taken in prior years
Decreases for positions taken in prior years
Reduction resulting from lapse of applicable
statute of limitations
Decreases for settlements with tax authorities
Unrecognized tax benefits at August 31
August 31,
2018
2017
$
$
1,498
117
43
(21)
(38)
(200)
1,399
$
$
1,260
371
129
—
(224)
(38)
1,498
The net amount of unrecognized tax benefits at both August 31, 2018 and 2017 that, if recognized, would impact the
Company’s effective tax rate was $1.1 million. Recognition of these tax benefits would have a favorable impact on
the Company’s effective tax rate. The Company recognizes accrued interest and penalties related to unrecognized
tax benefits in income tax expense. Total accrued liabilities for interest and penalties included in the unrecognized
tax benefits liability were $1.0 million and $0.8 million for the years ended August 31, 2018 and 2017, respectively.
While it is expected that the amount of unrecognized tax benefits will change in the next twelve months as a result
of the expiration of statutes of limitations, the Company does not expect this change to have a significant impact on
its results of operations or financial position.
The Company files income tax returns in the United States and in state, local, and foreign jurisdictions. The U.S.
Internal Revenue Service (“IRS”) began an income tax audit for fiscal year 2016 in the fall of 2017. At August 31,
2018, the Company does not believe the outcome of the IRS examination is likely to be material to our consolidated
financial statements. Other major jurisdictions where we conduct business generally have statutes of limitations
ranging from three to five years.
Note 7 - Inventories
($ in thousands)
Raw materials and supplies
Work in process
Finished goods and purchased parts
Total inventory value before LIFO adjustment
Less adjustment to LIFO value
Inventories, net
August 31,
2018
2017
36,316
9,176
40,197
85,689
(6,456)
79,233
$
$
31,158
7,113
52,382
90,653
(4,498)
86,155
$
$
47
Note 8 – Property, Plant, and Equipment
($ in thousands)
Operating property, plant, and equipment:
Land
Buildings
Machinery and equipment
Furniture and fixtures
Construction in progress
Total operating property, plant, and equipment
Accumulated depreciation
Total operating property, plant, and equipment, net
Property held for lease:
Machines
Barriers
Total property held for lease
Accumulated depreciation
Total property held for lease, net
Property, plant, and equipment, net
August 31,
2018
2017
2,799
37,220
75,635
22,727
6,733
145,114
(98,191)
46,923
8,214
18,122
26,336
(16,011)
10,325
57,248
$
$
$
$
$
4,869
49,977
80,442
24,547
3,004
162,839
(99,912)
62,927
7,833
18,468
26,301
(14,730)
11,571
74,498
$
$
$
$
$
Depreciation expense was $12.5 million, $12.2 million, and $12.2 million for fiscal 2018, 2017, and 2016,
respectively.
Note 9 – Goodwill and Other Intangible Assets
The carrying amount of goodwill by reportable segment for the year ended August 31, 2018 and 2017 is as follows:
($ in thousands)
Balance as of August 31, 2016
Foreign currency translation
Balance as of August 31, 2017
Divestiture of businesses
Foreign currency translation
Balance as of August 31, 2018
Irrigation
60,942
36
60,978
(12,294)
(93)
48,591
$
$
$
$
Infrastructure
15,861
$
292
16,153
—
(73)
16,080
$
Total
76,803
328
77,131
(12,294)
(167)
64,671
$
$
$
The components of the Company’s identifiable intangible assets at August 31, 2018 and 2017 are included in the
table below.
($ in thousands)
Amortizable intangible assets:
Patents and developed technology
Customer relationships
Non-compete agreements
Other
Unamortizable intangible assets:
Tradenames
Total
August 31,
Weighted
average
years
2018
Gross
carrying
amount
Accumulated
amortization
Weighted
average
years
2017
Gross
carrying Accumulated
amortization
amount
3.2 $ 26,831 $ (19,656)
(8,668)
5.2
(1,048)
0.4
(85)
1.1
16,459
1,137
110
5.1 $ 34,038 $ (21,581)
(10,419)
5.8
(1,806)
1.6
(84)
8.8
19,975
2,354
210
12,297
N/A
—
3.7 $ 56,834 $ (29,457)
20,121
N/A
—
5.1 $ 76,698 $ (33,890)
Amortization expense for amortizable intangible assets was $4.0 million, $4.4 million, and $4.7 million for fiscal
2018, 2017, and 2016, respectively.
48
Future estimated amortization of intangible assets for the next five years is as follows:
Fiscal years
2019
2020
2021
2022
2023
Thereafter
$ in thousands
2,919
2,513
1,875
1,699
1,595
4,479
15,080
$
$
The Company updated its impairment evaluation of goodwill and intangible assets with indefinite useful lives at
August 31, 2018. No impairment losses were indicated as a result of the annual impairment testing for fiscal 2018,
2017 and 2016.
Note 10 – Other Current Liabilities
($ in thousands)
Other current liabilities:
Compensation and benefits
Warranties
Deferred revenues
Dealer related liabilities
Customer deposits
Tax related liabilities
Accrued environmental liabilities
Other
Total other current liabilities
Note 11 – Credit Arrangements
August 31,
2018
2017
$
$
17,850
7,109
6,337
3,057
2,591
1,293
1,264
7,434
46,935
$
$
18,926
8,411
6,166
3,500
4,096
2,813
2,095
9,112
55,119
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 and 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.
y
g
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 May 31, 2020. The Company intends to use borrowings under the Revolving Credit Facility for
working capital purposes and to fund acquisitions. At August 31, 2018 and August 31, 2017, 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 August 31, 2018, the Company had the ability to borrow up to $44.6 million under the Revolving
Credit Facility, after consideration of outstanding standby letters of credit of $5.4 million. Borrowings under the
Revolving Credit Facility bear interest at a variable rate equal to LIBOR plus 90 basis points (3.01 percent at August
31, 2018), 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 also pays an annual commitment fee of 0.25
percent on the unused portion of the Revolving Credit Facility.
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. 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 August 31, 2018 and August 31, 2017, the Company was in compliance with all financial loan covenants
contained in its credit arrangements in place as of each of those dates.
49
Series 2006A Bonds. Elecsys International Corporation, a wholly owned subsidiary of the Company, has outstanding
$1.8 million in principal amount of industrial revenue bonds that were issued in 2006 (the “Series 2006A Bonds”).
Principal and interest on the Series 2006A Bonds are payable monthly through maturity on September 1, 2026. The
interest rate is adjustable every five years based on the yield of the 5-year United States Treasury Notes, plus 0.45
percent (1.92 percent as of August 31, 2018). This rate was adjusted on September 1, 2016 in accordance with the
terms of the bonds, and the adjusted rate will be in force until September 1, 2021. The obligations under the Series
2006A Bonds are secured by a first priority security interest in certain real estate.
Long-term debt consists of the following:
($ in thousands)
Senior Notes
Revolving Credit Facility
Series 2006A Bonds
Total debt
Less current portion
Total long-term debt
Principal payments due on the debt are as follows:
Due within
1 year
2 years
3 years
4 years
5 years
Thereafter
August 31,
2018
2017
$
$
115,000
—
1,775
116,775
(205)
116,570
$
$
115,000
—
1,976
116,976
(201)
116,775
$ in thousands
205
209
213
217
221
115,710
116,775
$
$
Note 12 – Financial Derivatives
Fair values of derivative instruments are as follows:
($ in thousands)
Derivatives designated as hedging instruments:
Foreign currency forward contracts
Foreign currency forward contracts
Total derivatives designated as hedging
instruments
Derivatives not designated as hedging
instruments:
Foreign currency forward contracts
Foreign currency forward contracts
Total derivatives not designated as hedging
instruments
Balance sheet location
2018
2017
August 31,
Other current assets
Other current liabilities
Other current assets
Other current liabilities
$
$
$
$
$
775
—
—
(1,633)
775
$
(1,633)
$
123
(12)
111
$
9
(114)
(105)
Accumulated other comprehensive income included realized and unrealized after-tax gains of $5.0 million, $3.9
million, and $5.6 million at August 31, 2018, 2017, and 2016, respectively, related to derivative contracts designated
as hedging instruments.
50
Net Investment Hedging Relationships
The amount of loss recognized in OCI on derivatives is as follows:
($ in thousands)
Foreign currency forward contracts, net of tax
expense (benefit) of $498, ($927), and $52
For the years ended August 31,
2017
2016
2018
$
(1,103) $
1,710
$
(204)
During fiscal 2018, 2017, and 2016, the Company settled Euro foreign currency forward contracts resulting in an
after-tax net loss of $0.5 million and $0.9 million, and an after-tax net gain of $0.3 million, respectively, which were
included in OCI as part of a currency translation adjustment. There were no amounts recorded in the consolidated
statement of operations related to ineffectiveness of Euro foreign currency forward contracts for the years ended
August 31, 2018, 2017, and 2016.
At August 31, 2018 and 2017, the Company had outstanding Euro foreign currency forward contracts to sell 32.7
million Euro and 32.8 million Euro, respectively, at fixed prices to settle during the next fiscal quarter. At August
31, 2018 and 2017, the Company also had an outstanding foreign currency forward contract to sell 43.0 million
South African rand at fixed prices to settle during the next fiscal quarter. The Company’s foreign currency forward
contracts qualify as hedges of a net investment in foreign operations.
Derivatives Not Designated as Hedging Instruments
In order to reduce exposures related to changes in foreign currency exchange rates, the Company, at times, may
enter into forward exchange or option contracts for transactions denominated in a currency other than the functional
currency for certain of the Company’s operations. This activity primarily relates to economically hedging against
foreign currency risk in purchasing inventory, sales of finished goods, and future settlement of foreign denominated
assets and liabilities. The Company may choose whether or not to designate these contracts as hedges. For those
contracts not designated, changes in fair value are recognized currently in the income statement. At August 31,
2018 and 2017, the Company had $5.0 million, respectively, of U.S. dollar equivalent of foreign currency forward
contracts outstanding.
Note 13 – Fair Value Measurements
The following table presents the Company’s financial assets and liabilities measured at fair value, based upon the
level within the fair value hierarchy in which the fair value measurements fall, as of August 31, 2018 and 2017,
respectively:
($ in thousands)
Cash and cash equivalents
Derivative assets
Derivative liabilities
($ in thousands)
Cash and cash equivalents
Derivative assets
Derivative liabilities
$
$
Level 1
160,787
—
—
Level 1
121,620
—
—
$
$
August 31, 2018
Level 2
Level 3
— $
898
(12)
— $
— $
— $
Total
160,787
898
(12)
August 31, 2017
Level 2
Level 3
— $
9
(1,747)
— $
—
—
Total
121,620
9
(1,747)
The carrying value of long-term debt (including current portion) was $116.8 million and $117.0 million at August
31, 2018 and 2017, respectively. The fair value of this debt was estimated to be $107.3 million and $113.3 million
as of August 31, 2018 and 2017, based on current market rates as of the respective year-ends.
51
Note 14 – 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 Litigation
The Company is currently defending a number of product liability lawsuits involving 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 intends to vigorously defend each of these allegations. The Company maintains insurance to mitigate
the impact of adverse judgment exposures in the current product liability cases. 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. Because of the
complexity and early stage of these lawsuits, the Company is unable to estimate a range of possible loss.
Environmental Remediation
In 1992, the Company entered into a consent decree with the U.S. Environmental Protection Agency (the “EPA”) in
which the Company committed to remediate environmental contamination of the groundwater that was discovered
from 1982 through 1990 at and adjacent to its Lindsay, Nebraska facility (the “site”). The site was added to the
EPA’s list of priority superfund sites in 1989. Between 1993 and 1995, remediation plans for the site were approved
by the EPA and fully implemented by the Company. Since 1998, the primary remaining contamination at the site
has been the presence of volatile organic compounds in the soil and groundwater. To date, the remediation process
has consisted primarily of drilling wells into the aquifer and pumping water to the surface to allow these
contaminants to be removed by aeration.
In fiscal 2012, the Company undertook an investigation to assess further potential site remediation and containment
actions. In connection with the receipt of preliminary results of this investigation and other evaluations, the
Company estimated that it would incur $7.2 million in remediation of source area contamination and operating costs
and accrued that undiscounted amount. In addition to this source area, the Company determined that volatile organic
compounds also existed under one of the manufacturing buildings on the site. Due to the location, the Company had
not yet determined the extent of these compounds or the extent to which they were contributing to groundwater
contamination. Based on the uncertainty of the remediation actions that might be required with respect to this
affected area, the Company believed that meaningful estimates of costs or range of costs could not be made and
accordingly were not accrued.
In December 2014, the EPA requested that the Company prepare a feasibility study related to the site, including the
area covered by the building, which resulted in a revision to the Company’s remediation timeline. In the first quarter
of fiscal 2015, the Company accrued $1.5 million of incremental operating costs to reflect its updated timeline.
The Company began soil and groundwater testing in preparation for developing this feasibility study during the first
quarter of fiscal 2016. During the second quarter of fiscal 2016, the Company completed its testing which clarified
the extent of contamination, including the identification of a source of contamination near the manufacturing
building that was not part of the area for which reserves were previously established. The Company, with the
assistance of third-party environmental experts, developed and evaluated remediation alternatives, a proposed
remediation plan, and estimated costs. Based on these estimates of future remediation and operating costs, the
Company accrued an additional $13.0 million in the second quarter of fiscal 2016 and included the related expenses
in general and administrative expenses in the consolidated statement of operations.
The current estimated aggregate accrued cost of $16.6 million is based on consideration of several remediation
options that would use different technologies, each of which the Company believes could be successful in meeting
the long-term regulatory requirements of the site. The Company participated in a preliminary meeting with the EPA
and the Nebraska Department of Environmental Quality (the “NDEQ”) during the third quarter of fiscal 2016 to
52
review remediation alternatives and proposed plans for the site and submitted its remedial alternatives evaluation
report to the EPA in August 2016. The proposed remediation plan is preliminary and has not been approved by the
EPA or the NDEQ. Based on guidance from third-party environmental experts and the preliminary discussions with
the EPA, the Company anticipates that a definitive plan will not be agreed upon until fiscal 2019 or later.
The Company accrues the anticipated cost of investigation and remediation when the obligation is probable and can
be reasonably estimated. While the Company believes the current accrual is a good faith estimate of the long-term
cost of remediation at this site based on preliminary analysis available at this time, the estimate of costs and their
timing could change as a result of a number of factors, including (1) EPA and NDEQ input on the proposed
remediation plan and any changes which they may subsequently require, (2) refinement of cost estimates and length
of time required to complete remediation and post-remediation operations and maintenance, (3) effectiveness of the
technology chosen in remediation of the site as well as changes in technology that may be available in the future,
and (4) 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 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 undiscounted environmental remediation liability classifications included in the
balance sheet as of August 31, 2018 and 2017:
($ in thousands)
Balance sheet location
Other current liabilities
Other noncurrent liabilities
Total environmental remediation liabilities
Leases
August 31,
2018
2017
$
$
1,264
15,319
16,583
$
$
2,095
15,937
18,032
The Company leases land, buildings, machinery, equipment, and computer equipment under various non-cancelable
operating lease agreements. At August 31, 2018, future minimum lease payments under non-cancelable operating
leases were as follows:
Fiscal years
2019
2020
2021
2022
2023
Thereafter
$ in thousands
3,964
3,996
3,971
3,831
3,318
20,059
39,138
$
$
Lease expense was $5.0 million, $5.1 million, and $5.0 million for fiscal 2018, 2017, and 2016, respectively.
Note 15 – Retirement Plans
The Company has defined contribution profit-sharing plans covering substantially all of its full-time U.S.
employees. Participants may voluntarily contribute a percentage of compensation, but not in excess of the
maximum allowed under the Internal Revenue Code. The plans provide for a matching contribution by the
Company. The Company’s total contributions charged to expense under the plans were $1.7 million, $1.7 million,
and $1.5 million for the years ended August 31, 2018, 2017, and 2016, respectively.
A supplementary non-qualified, non-funded retirement plan for five former executives is also maintained. Plan
benefits are based on the executive’s average total compensation during the three highest compensation years of
employment. This unfunded supplemental retirement plan is not subject to the minimum funding requirements of
ERISA. While the plan is unfunded, the Company has purchased life insurance policies on certain former
executives named in this supplemental retirement plan to provide funding for this liability. The cash surrender value
of these insurance policies are recorded as other noncurrent assets.
53
As of August 31, 2018 and 2017, the funded status of the supplemental retirement plan was recorded in the
consolidated balance sheets. The Company utilizes an August 31 measurement date for plan obligations related to
the supplemental retirement plan. As this is an unfunded retirement plan, the funded status is equal to the benefit
obligation.
The funded status of the plan and the net amount recognized in the accompanying balance sheets as of August 31 is
as follows:
($ in thousands)
Change in benefit obligation:
Benefit obligation at beginning of year
Interest cost
Actuarial (gain) loss
Benefits paid
Benefit obligation at end of year
Amounts recognized in the statement of financial position consist of:
($ in thousands)
Other current liabilities
Pension benefit liabilities
NNet amount recognized
August 31,
2018
2017
6,825
243
(134)
(530)
6,404
$
$
7,426
236
(287)
(550)
6,825
August 31,
2018
2017
530
5,874
6,404
$
$
530
6,295
6,825
$
$
$
$
The before-tax amounts recognized in accumulated other comprehensive loss consists of:
($ in thousands)
NNet actuarial loss
August 31,
2018
2017
$
(3,561) $
(3,901)
For the years ended August 31, 2018 and 2017, the Company assumed a discount rate of 4.00 percent and 3.70
percent, respectively, for the determination of the liability. The assumptions used to determine benefit obligations
and costs are selected based on current and expected market conditions. The discount rate is based on a hypothetical
portfolio of long-term corporate bonds with cash flows approximating the timing of expected benefit payments.
For the years ended August 31, 2018, 2017, and 2016, the Company assumed a discount rate of 3.70 percent, 3.30
percent, and 4.10 percent, respectively, for the determination of the net periodic benefit cost. The components of the
net periodic benefit cost for the supplemental retirement plan are as follows:
($ in thousands)
Interest cost
NNet amortization and deferral
Total
For the years ended August 31,
2017
2016
2018
$
$
243
206
449
$
$
236
241
477
$
$
281
209
490
The estimated actuarial loss for the supplemental retirement plan that will be amortized, on a pre-tax basis, from
accumulated other comprehensive loss into net periodic benefit cost during fiscal 2019 will be $0.2 million.
54
The Company’s future annual contributions to the supplemental retirement plan will be equal to expected net benefit
payments since the plan is unfunded. The following net benefit payments are expected to be paid:
Fiscal years
2019
2020
2021
2022
2023
Thereafter
Note 16 - Warranties
$ in thousands
518
511
504
496
487
3,889
6,404
$
$
Product Warranties
The Company generally warrants its products against certain manufacturing and other defects. These product
warranties are provided for specific periods and/or usage of the product. The accrued product warranty costs are for
a combination of specifically identified items and other incurred, but not identified, items based primarily on
historical experience of actual warranty claims. This reserve is classified within other current liabilities.
The following tables provide the changes in the Company’s product warranties:
($ in thousands)
Product warranty accrual balance, beginning of period
Liabilities accrued for warranties during the period
Warranty claims paid during the period
Changes in estimates
Transfers to liabilities held-for-sale and divested businesses
Product warranty accrual balance, end of period
For the years ended August 31,
2018
2017
$
$
8,411
5,228
(5,848)
141
(823)
7,109
$
$
7,443
6,914
(6,312)
366
—
8,411
Warranty costs were $5.4 million, $7.3 million, and $5.4 million for fiscal 2018, 2017, and 2016, respectively.
Note 17 – Industry Segment Information
The Company manages its business activities in two reportable segments: Irrigation and Infrastructure. The
accounting policies of the two reportable segments are the same as those described in Note 1, Description of
Business and Significant Accounting Policies. The Company evaluates the performance of its reportable segments
based on segment sales, 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 does include 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.
Irrigation
This reporting segment includes the manufacture and marketing of center pivot, lateral move, and hose reel
irrigation systems, as well as various innovative technology solutions such as GPS positioning and guidance,
variable rate irrigation, wireless irrigation management, M2M communication technology, and smartphone
applications. 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 manufacturing and selling of large
diameter steel tubing and railroad signals and structures; and providing outsourced manufacturing and production
services. The infrastructure reporting segment consists of one operating segment.
The Company has no single major customer representing ten percent or more of its total revenues during fiscal 2018,
2017, or 2016.
55
Summarized financial information concerning the Company’s reportable segments is shown in the following tables:
($ in thousands)
Operating revenues:
Irrigation
Infrastructure
Total operating revenues
Operating income:
Irrigation
Infrastructure
Corporate
Total operating income
Interest and other income (expense), net
Earnings before income taxes
Total capital expenditures:
Irrigation
Infrastructure
Corporate
Depreciation and amortization:
Irrigation
Infrastructure
Corporate
Total assets:
Irrigation
Infrastructure
Corporate
2018
2017
2016
$
$
$
$
$
$
$
$
$
$
439,858
107,847
547,705
41,933
23,857
(27,227)
38,563
(4,710)
33,853
9,259
938
857
11,054
11,412
4,611
491
16,514
277,712
69,919
152,625
500,256
$
$
$
$
$
$
$
$
$
$
418,041
99,944
517,985
42,774
20,131
(22,704)
40,201
(4,486)
35,715
6,313
1,562
988
8,863
11,840
4,452
386
16,678
337,446
80,187
88,399
506,032
$
$
$
$
$
$
$
$
$
$
421,641
94,770
516,411
49,232
18,535
(33,392)
34,375
(5,087)
29,288
8,375
2,977
144
11,496
11,774
4,648
459
16,881
332,294
81,160
74,061
487,515
Summarized financial information concerning the Company’s geographical areas is shown in the following tables.
($ in thousands)
United States
International
Total revenues
2018
For the years ended August 31,
2017
2016
Revenues
$ 321,698
226,007
$ 547,705
% of total
59
41
100
Revenues
$ 297,261
220,724
$ 517,985
% of total
57
43
100
Revenues
$ 321,554
194,857
$ 516,411
% of total
62
38
100
($ in thousands)
2018
United States
International
Total long-lived assets
Long-lived
tangible
assets
$
$
39,290
17,958
57,248
For the years ended August 31,
2017
Long-lived
tangible
assets
% of total
2016
Long-lived
tangible
assets
% of total
69
31
100
$
$
54,199
20,299
74,498
73
27
100
$
$
58,098
19,529
77,627
% of total
75
25
100
56
Note 18 – Share-Based Compensation
Share-Based Compensation Program
Share-based compensation is designed to reward employees for their long-term contributions to the Company and
provide incentives for them to remain with the Company. The number and frequency of share grants are based on
competitive practices, operating results of the Company, and individual performance. As of August 31, 2018, the
Company’s share-based compensation plan was the 2015 Long-Term Incentive Plan (the “2015 Plan”). The 2015
Plan was approved by the shareholders of the Company, and became effective on January 26, 2015, and replaced the
Company’s 2010 Long Term Incentive Plan. At August 31, 2018, the Company had share-based awards outstanding
under its 2010 and 2015 Long-Term Incentive Plans.
The 2015 Plan provides for awards of stock options, restricted shares, restricted stock units, stock appreciation
rights, performance shares and performance stock units to employees and non-employee directors of the Company.
The maximum number of shares as to which stock awards may be granted under the 2015 Plan is 626,968 shares,
exclusive of any forfeitures from the 2010 Long Term Incentive Plan. At August 31, 2018, 466,505 shares of
common stock (including forfeitures from prior plans) remained available for issuance under the 2015 Plan. All
stock awards will be counted against the 2015 Plan in a 1 to 1 ratio. If options, restricted stock units or performance
stock units awarded under the 2010 Plan terminate without being fully vested or exercised, those shares will be
available again for grant under the 2015 Plan. The 2015 Plan also limits the total awards that may be made to any
individual.
Share-Based Compensation Information
The following table summarizes share-based compensation expense for fiscal 2018, 2017, and 2016:
($ in thousands)
Share-based compensation expense included in cost of
operating revenues
Research and development
Sales and marketing
General and administrative
Share-based compensation expense included in
operating expenses
Total share-based compensation expense
Tax benefit
Share-based compensation expense, net of tax
For the years ended August 31,
2017
2016
2018
$
113
$
231
$
207
150
461
3,169
162
397
2,807
3,780
3,893
(1,090)
2,803
$
3,366
3,597
(1,338)
2,259
$
$
140
455
2,258
2,853
3,060
(1,138)
1,922
As of August 31, 2018, there was $6.6 million pre-tax of total unrecognized compensation cost related to non-vested
share-based compensation arrangements which is expected to be recognized over a weighted average period of 2.1
years.
Stock Options – Stock option awards have an exercise price equal to the closing price on the date of grant, expire
no later than ten years from the date of grant and vest over a four-year period at 25 percent per year. The fair value
of stock option awards is estimated using the Black-Scholes option pricing model. The table below shows the
annual weighted average assumptions used for valuation purposes.
Risk-free interest rate
Dividend yield
Expected life (years)
Volatility
Weighted average grant-date fair value of options granted
Grant year
Fiscal 2018
Fiscal 2017
2.2%
1.3%
7
33.9%
30.72
$
1.5%
1.5%
7
36.5%
26.25
$
The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant; the dividend yield is
calculated as the ratio of dividends paid per share of common stock to the stock price on the date of grant; the
57
expected life is based on historical and expected exercise behavior; and volatility is based on the historical volatility
of the Company’s stock price over the expected life of the option.
The following table summarizes information about stock options outstanding as of and for the years ended August
31, 2018, 2017, and 2016:
Stock options outstanding at August 31, 2016
Granted
Exercised
Forfeited / cancelled
Stock options outstanding at August 31, 2017
Granted
Exercised
Forfeited / cancelled
Stock options outstanding at August 31, 2018
Exercisable at August 31, 2016
Exercisable at August 31, 2017
Exercisable at August 31, 2018
Number of
Average
stock options
exercise price
71.24
127,286
$
78.23
$
47,223
69.33
(43,556) $
73.90
(8,434) $
74.43
122,519
$
91.52
$
46,306
74.02
(37,651) $
78.49
(54,371) $
82.06
$
76,803
57,250
36,348
25,469
$
$
$
68.57
71.37
72.70
Average
remaining
contractual
term (years)
7.4
Aggregate
intrinsic
value
(thousands)
521
$
$
$
$
$
$
$
$
7.5
7.7
6.1
5.8
5.5
681
1,487
538
1,053
362
553
587
There were 27,811, 25,285, and 23,164 outstanding stock options that vested during fiscal 2018, 2017, and 2016,
respectively. Additional information regarding stock option exercises is summarized in the table below.
($ in thousands)
Intrinsic value of stock options exercised
Cash received from stock option exercises
Tax benefit realized from stock option exercises
Aggregate grant-date fair value of stock options vested
For the years ended August 31,
2017
2016
2018
$
$
$
$
538
2,788
151
31.37
$
$
$
$
681
3,020
254
35.79
$
$
$
$
181
113
67
37.70
Restricted stock units - The restricted stock units have a grant-date fair value equal to the fair market value of the
underlying stock on the grant date less present value of expected dividends. The restricted stock units granted to
employees vest over a three-year period at approximately 33 percent per year. The restricted stock units granted to
non-employee directors generally vest over a nine-month period.
The following table summarizes information about restricted stock units as of and for the years ended August 31,
2018, 2017, and 2016:
Restricted stock units outstanding at August 31, 2016
Granted
Vested
Forfeited / Cancelled
Restricted stock units outstanding at August 31, 2017
Granted
Vested
Forfeited / Cancelled
Restricted stock units outstanding at August 31, 2018
Number of
restricted
stock units
Weighted
average grant-
date fair value
67,054
44,647
(34,312)
(8,366)
69,023
79,550
(34,857)
(23,107)
90,609
$
$
$
69.11
74.75
69.89
70.51
72.25
87.80
72.82
76.99
84.38
Restricted stock units are generally settled with the issuance of shares with the exception of certain restricted stock
units awarded to internationally-based employees that are settled in cash. At August 31, 2018, 2017, and 2016,
outstanding restricted stock units included 6,474, 6,709, and 6,155 units, respectively, that will be settled in cash.
58
The fair value of restricted stock units that vested during the period was $3.2 million and $2.4 million for each of the
years ended August 31, 2018 and 2017, respectively.
Performance stock units - The performance stock units have a grant-date fair value equal to the fair market value
of the underlying stock on the grant date less present value of expected dividends. The performance stock units
granted to employees cliff vest after a three-year period and a specified number of shares of common stock will be
awarded under the terms of the performance stock units, if performance measures relating to revenue growth and a
return on net assets are achieved.
The table below summarizes the status of the Company’s performance stock units as of and for the year ended
August 31, 2018, 2017, and 2016:
Performance stock units outstanding at August 31, 2016
Granted
Forfeited / cancelled
Performance stock units outstanding at August 31, 2017
Granted
Forfeited / cancelled
Performance stock units outstanding at August 31, 2018
Number of
performance
stock units
Weighted
average grant-
date fair value
$
$
38,148
15,902
(15,361)
38,689
15,524
(34,261)
19,952
72.20
74.80
74.10
72.52
88.02
74.61
80.99
In connection with the performance stock units, the performance goals are based upon revenue growth and a return
on net assets during the performance period. The awards actually earned will range from zero to two hundred
percent of the targeted number of performance stock units and will be paid in shares of common stock. Shares
earned will be distributed upon vesting on the first day of November following the end of the three-year
performance period. The Company is accruing compensation expense based on the estimated number of shares
expected to be issued utilizing the most current information available to the Company at the date of the financial
statements. If defined performance goals are not met, no compensation cost will be recognized and any previously
recognized compensation expense will be reversed. In fiscal 2018 and 2017, no performance stock units vested.
Note 19 – 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 twelve months
ended August 31, 2018 and 2017. During the twelve months ended August 31, 2016, the Company repurchased
688,790 shares of common stock for an aggregate purchase price of $48.3 million. The remaining amount available
under the repurchase program was $63.7 million as of August 31, 2018.
Note 20 – Quarterly Results of Operations (Unaudited)
($ in thousands, except per share amounts)
Year ended August 31, 2018
Operating revenues
Cost of operating revenues
Earnings before income taxes
Net earnings
Diluted net earnings per share
Year ended August 31, 2017
Operating revenues
Cost of operating revenues
Earnings before income taxes
Net earnings
Diluted net earnings per share
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$
$
$
$
$
$
$
$
$
$
124,526
92,129
4,792
3,185
0.30
110,390
82,016
1,335
873
0.08
$
$
$
$
$
$
$
$
$
$
130,339
95,023
5,676
1,735
0.16
124,125
91,184
7,636
5,012
0.47
$
$
$
$
$
$
$
$
$
$
169,571
118,093
17,445
10,379
0.96
151,533
105,627
16,197
10,952
1.02
$
$
$
$
$
$
$
$
$
$
123,269
90,998
5,940
4,978
0.46
131,937
94,146
10,547
6,342
0.59
59
ITEM 9 — Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
ITEM 9A — Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and
with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and
procedures, as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting,
as defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Based upon that evaluation, the Company’s Chief
Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are
effective in enabling the Company to record, process, summarize and report information required to be included in
the Company’s periodic SEC filings within the required time period.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting for
the Company. The Company’s internal control system was designed to provide reasonable assurance to the
Company’s management and board of directors regarding the preparation and fair presentation of published
financial statements.
Management has assessed the effectiveness of the Company’s internal control over financial reporting as of August
31, 2018, based on the criteria for effective internal control described in Internal Control – Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its
assessment, management concluded that the Company’s internal control over financial reporting was effective as of
August 31, 2018.
The Audit Committee has engaged KPMG LLP, the independent registered public accounting firm that audited the
consolidated financial statements included in this Annual Report on Form 10-K, to attest to and report on
management’s evaluation of the Company’s internal control over financial reporting. The report of KPMG LLP is
included herein.
60
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Lindsay Corporation:
Opinion on Internal Control Over Financial Reporting
We have audited Lindsay Corporation’s (the Company) internal control over financial reporting as of August 31,
2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of August 31, 2018, based on criteria established in
Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of August 31, 2018 and 2017, the related
consolidated statements of earnings, comprehensive income, shareholders’ equity, and cash flows for each of the
years in the three-year period ended August 31, 2018, and the related notes and financial statement schedule
(collectively, the consolidated financial statements), and our report dated October 23, 2018 expressed an unqualified
opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit
also included performing such other procedures as we considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the consolidated financial statements.
61
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Omaha, Nebraska
October 23, 2018
/s/ KPMG LLP
62
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal controls over financial reporting that occurred during the year
ended August 31, 2018, that have materially affected, or are reasonably likely to materially affect, the Company’s
internal control over financial reporting.
ITEM 9B — Other Information
None.
63
ITEM 10 — Directors, Executive Officers and Corporate Governance
PART III
The Company will file with the Securities and Exchange Commission a definitive Proxy Statement for its 2019
Annual Meeting of Stockholders (the “Proxy Statement”) not later than 120 days after the close of its fiscal year
ended August 31, 2018. Information about the Board of Directors required by Items 401 and 407 of Regulation S-K
is incorporated by reference to the discussion responsive thereto under the captions “Board of Directors and
Committees” and “Corporate Governance” in the Proxy Statement.
Please see the information concerning our executive officers contained in Item 1 of Part I herein, under the caption
“Executive Officers” as required by Item 401(b) of Regulation S-K.
Section 16(a) Beneficial Ownership Reporting Compliance - Item 405 of Regulation S-K calls for disclosure of any
known late filing or failure by an insider to file a report required by Section 16 of the Securities Exchange Act. The
information required by Item 405 is incorporated by reference to the discussion responsive thereto under the caption
“Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement.
Code of Ethics – Item 406 of Regulation S-K calls for disclosure of whether the Company has adopted a code of
ethics applicable to the principal executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions. The Company has adopted a code of ethics applicable to the
Company’s principal executive officer and senior financial officers known as the Code of Ethical Conduct (Principal
Executive Officer and Senior Financial Officers). The Code of Ethical Conduct (Principal Executive Officer and
Senior Financial Officers) is available on the Company’s website. In the event that the Company amends or waives
any of the provisions of the Code of Ethical Conduct applicable to the principal executive officer and senior
financial officers, the Company intends to disclose the same on the Company’s website at www.lindsay.com. No
waivers were provided for the fiscal year ended August 31, 2018.
ITEM 11 — Executive Compensation
The information required by this Item is incorporated by reference to the discussion responsive thereto under the
captions “Executive Compensation,” “Compensation Discussion and Analysis,” “Pension Benefits,” “Nonqualified
Deferred Compensation,” “Report of the Compensation Committee on Executive Compensation,” “Compensation of
Directors,” and “Compensation Committee Interlocks and Insider Participation” in the Proxy Statement.
ITEM 12 — Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required by this Item relating to security ownership of certain beneficial owners and management is
incorporated by reference to the discussion responsive thereto under the caption “Voting Securities and Beneficial
Ownership Thereof by Principal Stockholders, Directors and Officers” in the Proxy Statement.
Equity Compensation Plan Information - The following equity compensation plan information summarizes plans
and securities approved by security holders as of August 31, 2018 (there were no equity compensation plans not
approved by security holders as of August 31, 2018):
(a)
(b)
Plan categoryg y
Number of securities to
be issued upon exercise
of outstanding options,
warrants, and rights
Weighted-average
exercise price of
outstanding options,
warrants, and rights
(c)
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
Equity compensation plans
approved by security holders (1) (2)
Total
180,890
180,890
$
$
82.06
82.06
466,505
466,505
(1)
(2)
Plans approved by stockholders include the Company’s 2010 and 2015 Long-Term Incentive Plans. While certain share-based awards
remain outstanding under the Company’s 2010 Long-Term Incentive Plan, no future equity compensation awards may be granted under
such plan.
Column (a) includes (i) 19,952 shares that could be issued under performance stock units (“PSU”) outstanding at August 31, 2018, and (ii)
84,135 shares that could be issued under restricted stock units (“RSU”) outstanding at August 31, 2018. The PSUs are earned and Common
64
Stock issued if certain predetermined performance criteria are met. Actual shares issued may be equal to, less than or greater than (but not
more than 200 percent of) the number of outstanding PSUs included in column (a), depending on actual performance. The RSUs vest and
are payable in Common Stock after the expiration of the time periods set forth in the related agreements. Column (b) does not take these
PSU and RSU awards into account because they do not have an exercise price.
r
ITEM 13 — Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is incorporated by reference to the discussion responsive thereto under the
captions “Corporate Governance” and “Corporate Governance – Related Party Transactions” in the Proxy
Statement.
ITEM 14 — Principal Accounting Fees and Services
The information required by this Item is incorporated by reference to the discussion responsive thereto under the
caption “Ratification of Appointment of Independent Registered Public Accounting Firm” in the Proxy Statement.
65
ITEM 15 — Exhibits, Financial Statement Schedules
(a)(1) Financial Statements.
PART IV
The following financial statements of Lindsay Corporation and Subsidiaries are included in Part II Item 8.
Report of Independent Registered Public Accounting Firm ................................................................................
Consolidated Statements of Earnings for the years ended August 31, 2018, 2017, and 2016 ............................
Consolidated Statements of Comprehensive Income for the years ended August 31, 2018, 2017, and 2016 ....
Consolidated Balance Sheets as of August 31, 2018 and 2017 ...........................................................................
Consolidated Statements of Shareholders' Equity for the years ended August 31, 2018, 2017, and 2016..........
Consolidated Statements of Cash Flows for the years ended August 31, 2018, 2017, and 2016 .......................
Page
31
32
33
34
35
36
Notes to Consolidated Financial Statements ........................................................................................................ 37-59
Valuation and Qualifying Accounts – Years ended August 31, 2018, 2017, and 2016.......................................
67
Financial statements and schedules other than those listed are omitted for the reason that they are not required, are
not applicable or that equivalent information has been included in the financial statements or notes thereto.
66
(a)(2) Financial Statement Schedules.
Lindsay Corporation and Subsidiaries
VALUATION AND QUALIFYING ACCOUNTS
Years ended August 31, 2018, 2017, and 2016
(in thousands)
Year ended August 31, 2018:
Deducted in the balance sheet from the
assets to which they apply:
Allowance for doubtful accounts (1)
Deferred tax asset valuation allowance (2)
Year ended August 31, 2017:
Deducted in the balance sheet from the
Valuation
Allowance for doubtful accounts (1)
Deferred tax asset valuation allowance (2)
Year ended August 31, 2016:
Deducted in the balance sheet from the
assets to which they apply:
Allowance for doubtful accounts (1)
Deferred tax asset valuation allowance (2)
Additions
Balance at
beginning
of period
Charges to
costs and
expenses
Charged to
other
accounts
Balance
at end of
period
Deductions
$
$
$
7,447 $
2,804
744 $
758
— $
—
4,606 $
—
3,585
3,562
8,312 $
2,825
483 $
—
— $
—
1,348 $
21
7,447
2,804
9,706 $
2,949
800 $
—
— $
—
2,194 $
124
8,312
2,825
(1)
(2)
Deductions consist of uncollectible items reserved, less recoveries of items previously reserved.
Additions and deductions consist of changes to deferred tax assets not expected to be realized.
(a)(3) Exhibits. The list of the Exhibits in the Exhibit Index is incorporated into this item by reference.
67
EXHIBIT INDEX
Exhibit
Number
2.1
3.1
3.2
4.1
10.1
10.2
10.3
Description
Agreement and Plan of Merger, dated November 4, 2014, by and between Lindsay Corporation, Matterhorn Merger
r
Sub, Inc. and Elecsys Corporation, incorporated by reference to Exhibit 2.1 of the Company’s Current Report on
Form 8-K filed on November 4, 2014.
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.
Amended and Restated By-Laws of the Company, incorporated by reference to Exhibit 3.1 to the Company’s
Current Report on Form 8-K filed on October 19, 2018.
Specimen Form of Common Stock Certificate incorporated by reference to Exhibit 4(a) to the Company’s Quarterly
Report on Form 10-Q for the fiscal quarter ended November 30, 2006.
Lindsay Corporation 2015 Long-Term Incentive Plan and forms of award agreements, incorporated by reference to
Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2015.†
Lindsay Corporation 2010 Long-Term Incentive Plan and forms of award agreements, incorporated by reference to
Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2011.†
Lindsay Corporation Management Incentive Umbrella Plan, incorporated by reference to Exhibit 10.2 to the
Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended February 28, 2014.†
10.4**
Lindsay Corporation Management Incentive Plan (MIP), 2018 Plan Year, incorporated by reference to Exhibit 10.1
to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2017.†
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
Form of Indemnification Agreement between the Company and its Officers and Directors, incorporated by reference
to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 19, 2018.†
Employment Agreement between the Company and Richard W. Parod effective March 8, 2000, incorporated by
reference to Exhibit 10(a) to the Company’s Report on Form 10-Q for the fiscal quarter ended May 31, 2000.†
First Amendment to Employment Agreement, dated May 2, 2003, between the Company and Richard W. Parod,
incorporated by reference to Exhibit 10 (a) of Amendment No. 1 to the Company’s Report on Form 10-Q for the
fiscal quarter ended May 31, 2003.†
Second Amendment to Employment Agreement, dated December 22, 2004, between the Company and Richard W.
Parod, incorporated by reference to Exhibit 10(a) to the Company’s Current Report on Form 8-K filed on December
27, 2004.†
Third Amendment to Employment Agreement, dated March 20, 2007, between the Company and Richard W. Parod,
incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 22, 2007.†
Fourth Amendment to Employment Agreement, dated December 22, 2008, between the Company and Richard W.
Parod, incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on January 30,
2009.†
Fifth Amendment to Employment Agreement, dated January 26, 2009, between the Company and Richard W.
Parod, incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on January 30,
2009.†
Restated Sixth Amendment, effective February 25, 2010, by and between the Company and Richard W. Parod,
incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter
ended February 28, 2010.†
Seventh Amendment to Employment Agreement, dated January 31, 2011, between the Company and Richard W.
Parod, incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on February 3,
2011.†
Eighth Amendment to Employment Agreement, dated November 29, 2012, between the Company and Richard W.
Parod, incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on December
4, 2012. †
Ninth Amendment to Employment Agreement, dated January 26, 2015, between the Company and Richard W.
Parod, incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on January 27,
2015. †
68
Exhibit
Number
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
21*
23*
24*
31.1*
31.2*
32*
Description
Employment Agreement dated February 19, 2009, by and between the Company and David B. Downing,
incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on February 25,
2009.†
Separation Agreement and General Release, dated January 10, 2018, by and between the Company and David B.
Downing, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended February 28, 2018.†
Amended and Restated Revolving Credit Agreement, dated February 18, 2015, by and between the Company and
d
Wells Fargo Bank, National Association, incorporated by reference to Exhibit 10.2 to the Company’s Current
t
Report on Form 8-K filed on February 20, 2015.
First Amendment to Amended and Restated Revolving Credit Agreement, dated February 28, 2017, by and between
the Company and Wells Fargo Bank, National Association, incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on March 1, 2017.
Note Purchase Agreement, dated as of February 19, 2015, by and among the Company and the purchasers named
d
therein, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February
20, 2015.
Lindsay Corporation Policy on Payment of Directors Fees and Expenses, incorporated by reference to Exhibit 10.2
to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2016.
Employment Agreement, dated May 9, 2016, between the Company and Randy A. Wood, incorporated by reference
to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 2016.†
Employment Agreement, dated April 5, 2016, between the Company and Brian L. Ketcham, incorporated by
reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on April 5, 2016.†
Employment Agreement, dated July 17, 2017, between the Company and Timothy Hassinger, incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 21, 2017.†
Employment Agreement, dated May 25, 2018, between the Company and J. Scott Marion, incorporated by reference
to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 2018.†
Subsidiaries of the Company
Consent of KPMG LLP
The Power of Attorney authorizing Timothy Hassinger to sign the Annual Report on Form 10-K for fiscal 2018 on
behalf of non-management directors.
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 18 U.S.C.
Section 1350.
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 18 U.S.C.
Section 1350.
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.
Filed herein.
† Management contract or compensatory plan or arrangement required to be filed as an exhibit hereto pursuant to Item 15(b) of Form 10-K.
*
** Certain confidential portions of this Exhibit were omitted by means of redacting a portion of the text. This Exhibit has been filed separately
with the Secretary of the Commission with the redacted text pursuant to the Company’s application requesting confidential treatment under
Rule 24b-2 of the Securities Exchange Act of 1934.
t
ITEM 16 — Form 10-K Summary
None.
69
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 23rd day of
October, 2018.
d
LINDSAY CORPORATION
/s/ BRIAN L. KETCHAM
By:
Name: Brian L. Ketcham
Title: Vice President and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities indicated on this 23rd day of October, 2018.
d
/s/ TIMOTHY L. HASSINGER
Timothy L. Hassinger
Director, President and Chief Executive Officer
(Principal Executive Officer)
/s/ BRIAN L. KETCHAM
Brian L. Ketcham
/s/ MICHAEL C. NAHL
Michael C. Nahl
Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
(1)
Chairman of the Board of Directors
/s/ ROBERT E. BRUNNER
Robert E. Brunner
(1)
Director
/s/ MICHAEL N CHRISTODOLOU
Michael N. Christodolou
(1)
Director
/s/ W. THOMAS JAGODINSKI
W. Thomas Jagodinski
(1)
Director
/s/ CONSUELO E. MADERE
Consuelo E. Madere
/s/ DAVID B. RAYBURN
David B. Rayburn
/s/ MICHAEL D.WALTER
Michael D. Walter
/s/ WILLIAM F. WELSH II
William F. Welsh II
(1)
Director
(1)
Director
(1)
Director
(1)
Director
(1) By: /s/ TIMOTHY L. HASSINGER
Timothy L. Hassinger, Attorney-In-Fact
70
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[THIS PAGE INTENTIONALLY LEFT BLANK]
L I N D S AY CO R P O R AT I O N
DIRECTORS
Michael C. Nahl
Director since 2003
Chairman of the Board since 2015
Retired Executive Vice President
and Chief Financial Officer,
Albany International Corp.
Director: Trans World Entertainment Corporation
Robert E. Brunner
Director since 2013
Retired Executive Vice President,
Illinois Tool Works, Inc.
Director: Leggett & Platt, Inc. and NN, Inc.
OFFICERS
Timothy L. Hassinger
Director since 2017
President and Chief Executive Officer
Joined Lindsay in 2017
Eric R. Arneson
Vice President, General Counsel and Secretary
Joined Lindsay in 2008
Brian L. Ketcham
Vice President and Chief Financial Officer
Joined Lindsay in 2016
Michael N. Christodolou
Director since 1999
Founder and Manager, Inwood Capital
Management, LLC
W. Thomas Jagodinski
Director since 2008
Retired President, Chief Executive Officer
of Delta and Pine Land Company
Director: Centrus Energy Corp.
David B. Rayburn
Director since 2014
Retired President, Chief Executive Officer,
Modine Manufacturing Company
Director: Twin Disc, Inc.
Michael D. Walter
Director since 2009
President of Mike Walter & Associates
Director: Richardson International
Consuelo E. Madere
Director since 2018
President of Proven Leader Advisory, LLC
Director: Nutrien and S&W Seed Company
William F. Welsh II
Director since 2001
Retired Chairman of Election
Systems & Software
J. Scott Marion
President – Infrastructure
Joined Lindsay in 2011
Gregory G. Oswald
Vice President – Global Operations
Joined Lindsay in 2008
Kelly M. Staup
Vice President – Human Resources
Joined Lindsay in 2011
Eric J. Talmadge
Vice President and Chief Information Officer
Joined Lindsay in 2012
Randy A. Wood
President – Irrigation
Joined Lindsay in 2008
Lori L. Zarkowski
Corporate Controller and Chief Accounting Officer
Joined Lindsay in 2007
Annual Meeting
All shareholders are invited to attend our annual meeting, which will be
held on December 18, 2018, at 8:30 a.m. All shareholders are invited to attend
the annual meeting online and submit your questions during the meeting by
visiting www.virtualshareholdermeeting.com/LNN2018. Any shareholder who
will be unable to attend is encouraged to send questions and comments to
Eric Arneson, Secretary at Lindsay Corporate Office.
Quarterly Calendar
The Company operates on a fiscal year ending August 31. Fiscal 2018
quarter-end dates are November 30, 2017, February 28, 2018, May 31, 2018
and August 31, 2018. Quarterly earnings are announced approximately
four weeks after the end of each quarter and audited results are announced
approximately six weeks after year end. Quarterly earnings releases are
posted to Lindsay’s Web site at www.lindsay.com.
Transfer Agent and Registrar
EQ Shareowner Services
Post Office Box 64874
St. Paul, Minnesota 55164-0874
Phone: (800) 468-9716
FAX: (866) 729-7680
Research Coverage Provided By
Boenning & Scattergood, Inc.
Monness, Crespi, Hardt & Co., Inc.
Kansas City Capital Associates
Sidoti & Company
Stifel Nicolaus
William Blair & Co., LLC
Stock Market Information
Lindsay’s common stock is traded on the New York Stock Exchange, Inc.
(NYSE) under the ticker symbol LNN.
Certifications
The Company has filed certifications under Section 302 and Section 906 of
the Sarbanes-Oxley Act of 2002 as exhibits to its Form 10-K for fiscal year
2018. These exhibits are signed by the Principal Executive Officer and the
Principal Financial Officer, respectively. Additionally, on February 28, 2018,
the Company’s Chief Executive Officer provided his annual certification
regarding the Company’s compliance with the New York Stock Exchange
corporate governance listing standards.
Independent Auditors
KPMG LLP
Omaha, Nebraska
For Further Information
Shareholders and prospective investors are welcome to call or write Lindsay
Corporation with questions or requests for additional information. Please
direct inquiries to:
Brian L. Ketcham
Chief Financial Officer
2222 North 111th Street
Omaha, Nebraska 68164
(402) 827-6579
Web site
www.lindsay.com
Concerning Forward-Looking Statements
This Annual Report and Form 10-K, including the President’s letter, Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains not only historical information, but also
forward-looking statements. Statements that are not historical are forward-looking and reflect expectations for future Company performance. The words “expect,” “anticipate,” “estimate,” “believe,” “intend,”
“will,” “plan,” “predict,” “project,” “outlook,” “could,” “may,” “should,” and similar expressions generally identify forward-looking statements. For these statements throughout the Annual Report and Form
10-K, 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 contained in the Form 10-K. 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, as well as others not now anticipated. The risks and uncertainties described herein 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.
LO C AT I O N S
L I N D SAY U SA
Lindsay Corporation
Corporate Headquarters
2222 North 111th Street
Omaha, Nebraska 68164 U.S.A.
Ph: 1-402-829-6800
Toll-free: 1-866-404-5049
www.lindsay.com
Lindsay Transportation Solutions, Inc.
180 River Road
Rio Vista, California 94571 U.S.A.
Ph: 1-707-374-6800
Toll-free: 1-888-800-3691
www.lindsaytransportationsolutions.com
IRZ Consulting, LLC
500 North First Street
Hermiston, Oregon 97838 U.S.A.
Ph: 1-541-567-0252
www.irzconsulting.com
Elecsys Corporation
846 North Mart-Way Court
Olathe, Kansas 66061 U.S.A.
Ph: 1-913-647-0158
www.elecsyscorp.com
L I N D SAY I N T E R N AT I O N A L
Lindsay Europe SAS
72300 La Chapelle
D’Aligne, France
Ph: 33-2-4348-0202
www.lindsayeurope.com
Lindsay Africa Pty. Ltd.
6 Talana Close
Sacks Circle
Bellville South
South Africa
Ph: +27 (21) 986 8900
www.lindsayafrica.com
Lindsay América Do Sul, Ltda.
Rodovia Adhemar Pereira de Barros
SP 340 – KM 153.5
CEP 13804-830 Mogi-Mirim
Sao Paulo
Brazil
Ph: 55-19-3814-1100
www.lindsaybrazil.com
Lindsay Sulama (Turkey)
Lindsay International B.V.
Karamehmet Mahallesi
Avrupa Serbest Bölgesi AdnanArısoy
Bulvarı NO : 11 / Z13
(cid:40)(cid:53)(cid:42)(cid:40)(cid:49)(cid:40)(cid:3)(cid:18)(cid:3)(cid:55)(cid:40)(cid:46)(cid:248)(cid:53)(cid:39)(cid:36)(cid:246)
Adres No : 3402119204
Turkey
Weena 278
Tower B, 7th Floor
3012 NJ Rotterdam
The Netherlands
Ph: +31 (10) 870-1340
Snoline S.P.A.
Via F. Baracca 19/23
20056 Trezzo sull’Adda
Milan, Italy
Ph: 39 02 909961
www.snoline.com
Lindsay International (ANZ) Pty. Ltd.
19 Spencer Street
Toowoomba
Queensland 4350
Australia
Ph: +61 (7) 4613 5000
Lindsay International (ANZ) Pty. Ltd.
Lindsay (Tianjin) Industry Co., Ltd.
169 Huanhenan Road
Tianjin Airport Economic Area (TAEA)
Tianjin 300308
China
Ph: +86 22 5867 9198
www.lindsaychina.com
581 Taonui Road
RD 5
Feilding, 4775
New Zealand
Ph: +64 6 212 0550
www.lindsaynz.com
©2018 Lindsay Corporation. All rights reserved.