Lindsay Corporation (NYSE:LNN) Q2 2019 Earnings Conference Call Transcript

Apr 09, 2019 • 11:00 am ET

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Lindsay Corporation (NYSE:LNN) Q2 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good morning. My name is Chad, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lindsay Corporation Second Quarter 2019 Earnings Call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded.

During this call, management may make forward-looking statements that are subject to risks and uncertainties, which reflect management's current beliefs, estimates of future economic circumstances, industry conditions, company performance and financial results. Forward-looking statements include the information concerning possible or assumed future results of operations of the company and those statements preceded by, followed by or including the words; expectation, outlook, could, may, should or similar expressions. For these statements, we claim the protection of the Safe Harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

I would now like to turn the conference over to Mr. Tim Hassinger, President and Chief Executive Officer. Please go ahead, sir.

Executive
Timothy L. Hassinger

Good morning, and thank you for joining our call. With me on today's call is Brian Ketcham, Chief Financial Officer; and Lori Zarkowski, our Chief Accounting Officer. The objective of this call is to discuss our quarter two results. Before we go to that overview, I'll make a few introductory comments.

The ag market conditions this past quarter were very challenging, given the continued lower commodity prices and decreased farmer sentiment compared to the prior quarter and versus the prior year. A recent farmer confidence chart produced by DTN best reflects our view of the market this past quarter, as it showed a sudden and dramatic downturn in farmer sentiment post harvest. This worsening market environment meant that we saw a reduction in our irrigation sales versus same quarter prior year.

For the infrastructure business, the higher margin Road Zipper System sales were lower than prior year. Last year was a record sales year for Road Zipper that included large projects that have not been duplicated this fiscal year. This overall challenging environment and the fact that our Foundation for Growth Initiatives were not far enough along yet to generate meaningful contributions to our earnings meant our quarter results fell well short of expectations.

Our disappointing quarter two results do not impact our objective to improve operating margin in the trough of the market. Our 2020 objective of 11% to 12% operating margin was based on our view that the fiscal year 2017 represented the trough of the market. While current market conditions have been negatively impacted by tariffs and unresolved trade conflicts. We do not believe this is a sustained market environment.

Of course, the challenge is knowing when the timing of these factors will be resolved. We remain committed to our goal of improving our operating margin performance by 300 to 400 basis points and page nine of the slide deck provides the line of sight where that improvement is expected to be delivered by