The accompanying notes are an integral part of the condensed consolidated financial statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 Condensed Consolidated Financial Statements
The condensed consolidated financial statements are presented in accordance with the rules and regulations of the Securities and Exchange
Commission and do not include all of the disclosures normally required by U.S. generally accepted accounting principles (U.S. GAAP) as contained in Lindsay Corporations (the Company) Annual Report on Form 10-K.
Accordingly, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Companys most recent Annual Report on Form 10-K for the fiscal year ended
August 31, 2015.
In the opinion of management, the condensed consolidated financial statements of the Company reflect all adjustments (consisting of
normal recurring accruals) necessary to present fairly the financial position and the results of operations and cash flows for the periods presented. The results for interim periods are not necessarily indicative of trends or results expected
by the Company for a full year. The condensed consolidated financial statements were prepared using U.S. GAAP. These principles require us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Actual results could differ from these estimates. Certain reclassifications have been made to prior financial statements and notes to conform to the
current year presentation.
Note 2 New Accounting Pronouncements
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 fiscal year 2019. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting
periods within that reporting period. 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. The
Company is currently evaluating the impact the adoption will have on its condensed consolidated financial statements and related disclosures. The Company has not yet selected a transition method, nor has it determined the effect of the standard
on its ongoing financial reporting.
In September 2015, the FASB issued ASU No. 2015-16,
Business Combinations
. The standard requires an entity to
recognize adjustments to provisional amounts resulting from business combinations to be recognized in the period in which they are determined. The standard requires the acquirer to record, in the same periods financial statements, the effect
on earnings of changes in depreciation, amortization, or other income effects, if any, result from the change to provisional amounts, calculated as if the accounting had been completed at the acquisition date. The Company elected to adopt the
standard in September 2015. The adoption of ASU 2015-16 did not have a material impact on its condensed consolidated financial statements.
In November
2015, the FASB issued ASU No. 2015-17,
Income Taxes: Balance Sheet Classification of Deferred Taxes.
The standard requires an entity to classify all deferred tax assets and liabilities as noncurrent. In addition, companies will no
longer allocate valuation allowances between current and noncurrent because all valuation allowances will also be classified as noncurrent. The effective date of ASU No. 2015-17 will be the first quarter of fiscal 2018 with early adoption
permitted. The guidance allows companies to apply the update either on a retrospective or prospective basis. The Company does not expect this standard to have a material impact on its condensed consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842).
The standard replaces the current codification topic 840 with updated
guidance on accounting for leases and requires a lessee to recognize assets and liabilities arising from an operating lease on the balance sheet. Previous U.S. GAAP did not require lease assets and liabilities to be recognized for most
leases. Furthermore, 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. For both finance leases and operating leases, the lease liability
should be initially measured at the present value of the lease payments. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee will not significantly change under this new guidance. The
effective date of ASU No. 2016-02 will be the first quarter of fiscal 2020 with early adoption permitted.
- 7
Note 3 Net Earnings per Share
Basic earnings per share is calculated on the basis of weighted average outstanding common shares. Diluted earnings per share is
calculated on the basis of basic weighted average outstanding common shares adjusted for the dilutive effect of stock options, restricted stock unit awards and other dilutive securities. When a period results in a net loss, the impact of
outstanding stock awards is excluded from the diluted loss per share calculation as the inclusion would have an anti-dilutive effect.
The following table
shows the computation of basic and diluted net earnings per share for the three and six months ended February 29, 2016 and February 28, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
February 29,
|
|
|
February 28,
|
|
|
February 29,
|
|
|
February 28,
|
|
($ and shares in thousands, except per share amounts)
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
(4,129
|
)
|
|
$
|
8,995
|
|
|
$
|
2,815
|
|
|
$
|
16,563
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
11,024
|
|
|
|
11,982
|
|
|
|
11,142
|
|
|
|
12,103
|
|
Diluted effect of stock awards
|
|
|
|
|
|
|
26
|
|
|
|
21
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding assuming
|
|
|
11,024
|
|
|
|
12,008
|
|
|
|
11,163
|
|
|
|
12,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net earnings (loss) per share
|
|
$
|
(0.37
|
)
|
|
$
|
0.75
|
|
|
$
|
0.25
|
|
|
$
|
1.37
|
|
Diluted net earnings (loss) per share
|
|
$
|
(0.37
|
)
|
|
$
|
0.75
|
|
|
$
|
0.25
|
|
|
$
|
1.36
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
February 29,
|
|
|
February 28,
|
|
|
February 29,
|
|
|
February 28,
|
|
Units and options in thousands
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Restricted stock units
|
|
|
3
|
|
|
|
2
|
|
|
|
9
|
|
|
|
6
|
|
Stock options
|
|
|
86
|
|
|
|
50
|
|
|
|
75
|
|
|
|
54
|
|
Note 4 Income Taxes
It is the Companys policy to report income tax expense for interim periods using an estimated annual effective income tax
rate. However, the tax effects of significant or unusual items are not considered in the estimated annual effective income tax rate. The tax effects of such discrete events are recognized in the interim period in which the events
occur. The Company recorded no material discrete items for the three and six months ended February 29, 2016 and February 28, 2015.
The Company
recorded income tax (benefit) expense of $(2.1) million and $5.1 million for the three months ended February 29, 2016 and February 28, 2015, respectively. The Company recorded income tax expense of $1.4 million and $9.2 million for the six
months ended February 29, 2016 and February 28, 2015, respectively. The estimated annual effective income tax rate was 33.0 percent and 35.8 percent for the fiscal year-to-date periods ended February 29, 2016 and February 28, 2015,
respectively. The decrease in the estimated annual effective income tax rate from February 2015 to February 2016 primarily relates to the earnings mix among jurisdictions.
Note 5 Inventories
Inventories consisted of the following as of February 29, 2016, February 28, 2015 and August 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 29,
|
|
|
February 28,
|
|
|
August 31,
|
|
($ in thousands)
|
|
2016
|
|
|
2015
|
|
|
2015
|
|
Raw materials and supplies
|
|
$
|
24,663
|
|
|
$
|
24,724
|
|
|
$
|
29,427
|
|
Work in process
|
|
|
8,714
|
|
|
|
7,421
|
|
|
|
7,318
|
|
Finished goods and purchased parts
|
|
|
53,217
|
|
|
|
57,472
|
|
|
|
44,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total inventory value before LIFO adjustment
|
|
|
86,594
|
|
|
|
89,617
|
|
|
|
81,014
|
|
Less adjustment to LIFO value
|
|
|
(4,516
|
)
|
|
|
(7,354
|
)
|
|
|
(6,084
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories, net
|
|
$
|
82,078
|
|
|
$
|
82,263
|
|
|
$
|
74,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 8
Note 6 Credit Arrangements
Senior Notes
On February 19,
2015, the Company issued $115.0 million in aggregate principal amount of its Senior Notes, Series A, entirely due and payable on February 19, 2030 (the Senior Notes). Borrowings under the Senior Notes are unsecured and have
equal priority with borrowings under the Companys other senior unsecured indebtedness. Interest is payable semi-annually at an annual rate of 3.82 percent.
Amended Credit Agreement
On February 18, 2015, the
Company entered into a $50 million unsecured Amended and Restated Revolving Credit Agreement (the Amended Credit Agreement) with Wells Fargo Bank, National Association. The Amended Credit Agreement amends and restates the Revolving
Credit Agreement, dated January 24, 2008, and last amended on January 22, 2014. The Company intends to use borrowings under the Amended Credit Agreement for working capital purposes and to fund acquisitions. At February 29, 2016 and
February 28, 2015, the Company had no outstanding borrowings under the Amended Credit Agreement. The amount of borrowings available at any time under the Amended Credit Agreement is reduced by the amount of standby letters of credit then
outstanding. At February 29, 2016, the Company had the ability to borrow up to $43.9 million under this facility, after consideration of outstanding standby letters of credit of $6.1 million. Borrowings under the Amended Credit Agreement bear
interest at a variable rate equal to LIBOR plus 90 basis points (1.34 percent at February 29, 2016), subject to adjustment as set forth in the Amended Credit Agreement. 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 Amended Credit Agreement. Borrowings under the Amended Credit Agreement will be unsecured and have equal priority with borrowings under the Companys other
senior unsecured indebtedness. Unpaid principal and interest is due by February 18, 2018.
Each of the credit arrangements described above includes
certain covenants relating primarily to the Companys 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 February 29, 2016, February 28, 2015 and August 31, 2015, the Company was in compliance with all financial loan
covenants contained in its credit arrangements in place as of each of those dates.
Elecsys Series 2006A Bonds
Elecsys Corporation, a wholly owned subsidiary of the Company, has outstanding $2.3 million in principal amount of industrial revenue bonds that were issued in
2006 (the Series 2006A Bonds). Principal and interest on the Series 2006A Bonds are payable monthly through maturity on September 1, 2026. The interest rate is adjustable based on the yield of the 5-year United States Treasury Notes,
plus 0.45 percent (1.67 percent as of February 29, 2016). The obligations under the Series 2006A Bonds are secured by a first priority security interest in certain real estate.
Long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 29,
|
|
|
February 28,
|
|
|
August 31,
|
|
($ in thousands)
|
|
2016
|
|
|
2015
|
|
|
2015
|
|
Senior Notes
|
|
$
|
115,000
|
|
|
$
|
115,000
|
|
|
$
|
115,000
|
|
Amended Credit Agreement
|
|
|
|
|
|
|
|
|
|
|
|
|
Elecsys Series 2006A Bonds
|
|
|
2,270
|
|
|
|
2,462
|
|
|
|
2,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
117,270
|
|
|
|
117,462
|
|
|
|
117,366
|
|
Less current portion
|
|
|
(195
|
)
|
|
|
(192
|
)
|
|
|
(193
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
117,075
|
|
|
$
|
117,270
|
|
|
$
|
117,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments due on the debt are as follows:
|
|
|
|
|
Due within:
|
|
$ in thousands
|
|
1 year
|
|
$
|
195
|
|
2 years
|
|
|
199
|
|
3 years
|
|
|
203
|
|
4 years
|
|
|
207
|
|
5 years
|
|
|
211
|
|
Thereafter
|
|
|
116,255
|
|
|
|
|
|
|
|
|
$
|
117,270
|
|
|
|
|
|
|
- 9
Note 7 Financial Derivatives
The Company uses certain financial derivatives to mitigate its exposure to volatility in 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 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 February 29, 2016, the Companys derivative counterparty had
an investment grade credit rating. Financial derivatives consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Values of Derivative Instruments
|
|
|
|
Asset (Liability)
|
|
|
|
|
|
February 29,
|
|
|
February 28,
|
|
|
August 31,
|
|
($ in thousands)
|
|
Balance Sheet Classification
|
|
2016
|
|
|
2015
|
|
|
2015
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts
|
|
Other current assets
|
|
$
|
|
|
|
$
|
3,230
|
|
|
$
|
217
|
|
Foreign currency forward contracts
|
|
Other current liabilities
|
|
|
(639
|
)
|
|
|
(278
|
)
|
|
|
(352
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives designated as hedging instruments
|
|
|
|
$
|
(639
|
)
|
|
$
|
2,952
|
|
|
$
|
(135
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts
|
|
Other current assets
|
|
$
|
14
|
|
|
$
|
181
|
|
|
$
|
495
|
|
Foreign currency forward contracts
|
|
Other current liabilities
|
|
|
(187
|
)
|
|
|
(115
|
)
|
|
|
(61
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives not designated as hedging instruments
|
|
|
|
$
|
(173
|
)
|
|
$
|
66
|
|
|
$
|
434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (AOCI) included realized and unrealized after-tax gains of $6.2 million,
$5.2 million and $5.4 million at February 29, 2016, February 28, 2015 and August 31, 2015, respectively, related to derivative contracts designated as hedging instruments.
Cash Flow Hedging Relationships
In order to reduce
exposure related to changes in foreign currency exchange rates, the Company, at times, may enter into forward exchange contracts for transactions denominated in a currency other than the functional currency for certain operations. This activity
primarily relates to economically hedging against foreign currency risk in purchasing inventory, sales of finished goods, and future settlement of foreign denominated assets and liabilities. Changes in the fair value of the forward exchange
contracts designated as hedging instruments that effectively offset the hedged risks are reported in AOCI, net of related income tax effects. At February 29, 2016, the Company had an outstanding Canadian Dollar foreign currency forward contract
to sell 2.6 million Canadian Dollars at a fixed price to settle during fiscal 2018.
Net Investment Hedging Relationships
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain/(Loss) Recognized
in OCI on Derivatives
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
February 29,
|
|
|
February 28,
|
|
|
February 29,
|
|
|
February 28,
|
|
($ in thousands)
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Foreign currency forward contracts, net of tax (benefit) expense of $(240), $1,315, $409 and $2,048
|
|
$
|
(314
|
)
|
|
$
|
2,068
|
|
|
$
|
898
|
|
|
$
|
3,213
|
|
For the three months ended February 29, 2016 and February 28, 2015, the Company settled foreign currency forward contracts
resulting in an after-tax net gain of $1.4 million and $0.9 million, respectively, which were included in other comprehensive income as part of a currency translation adjustment. For the six months ended February 29, 2016 and February 28, 2015,
the Company settled foreign currency forward contracts resulting in an after-tax net gain of $1.2 million and $1.8 million, respectively, which were included in other comprehensive income as part of a currency translation adjustment. There were
no amounts recorded in the condensed consolidated statement of operations related to ineffectiveness of foreign currency forward contracts related to net investment hedges for the three and six months ended February 29, 2016 and February 28, 2015.
- 10
At February 29, 2016, February 28, 2015 and August 31, 2015, the Company had outstanding Euro foreign currency
forward contracts to sell 28.3 million Euro, 29.0 million Euro and 29.1 million Euro, respectively, at fixed prices to settle during the next fiscal quarter. At February 29, 2016, February 28, 2015 and August 31, 2015, the Company had an outstanding
South African Rand foreign currency forward contract to sell 43.0 million South African Rand at fixed prices to settle during the next fiscal quarter. The Companys foreign currency forward contracts qualify as hedges of a net investment in
foreign operations.
Derivatives Not Designated as Hedging Instruments
For derivative contracts in which the Company does not elect hedge accounting treatment, the Company carries the derivative at its fair value in the condensed
consolidated balance sheet and recognizes any subsequent changes in its fair value through earnings in the condensed consolidated statement of operations. The Company generally does not elect hedge accounting treatment for derivative contracts
related to future settlements of foreign denominated intercompany receivables and payables. At February 29, 2016, February 28, 2015 and August 31, 2015, the Company had $10.3 million, $5.8 million and $9.5 million of U.S. dollar equivalent
of foreign currency forward contracts outstanding that are not designated as hedging instruments.
Note 8 Fair Value Measurements
The following table presents the Companys financial assets and liabilities measured at fair value based upon the level within the fair
value hierarchy in which the fair value measurements fall, as of February 29, 2016, February 28, 2015 and August 31, 2015, respectively. There were no transfers between any levels for the periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 29, 2016
|
|
($ in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Cash and cash equivalents
|
|
$
|
89,522
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
89,522
|
|
Derivative assets
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
14
|
|
Derivative liabilities
|
|
|
|
|
|
|
(826
|
)
|
|
|
|
|
|
|
(826
|
)
|
|
|
|
|
February 28, 2015
|
|
($ in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Cash and cash equivalents
|
|
$
|
167,165
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
167,165
|
|
Derivative assets
|
|
|
|
|
|
|
3,411
|
|
|
|
|
|
|
|
3,411
|
|
Derivative liabilities
|
|
|
|
|
|
|
(393
|
)
|
|
|
|
|
|
|
(393
|
)
|
|
|
|
|
August 31, 2015
|
|
($ in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Cash and cash equivalents
|
|
$
|
139,093
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
139,093
|
|
Derivative assets
|
|
|
|
|
|
|
712
|
|
|
|
|
|
|
|
712
|
|
Derivative liabilities
|
|
|
|
|
|
|
(413
|
)
|
|
|
|
|
|
|
(413
|
)
|
There were no required fair value adjustments for assets and liabilities measured at fair value on a non-recurring basis for
the three and six months ended February 29, 2016 or February 28, 2015.
Note 9 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 potential loss in excess of the amounts accrued, other than the environmental remediation matters discussed separately
below, would not have a material effect on the business or its consolidated financial statements.
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 EPAs 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.
- 11
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 Companys 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, is developing and evaluating remediation alternatives, a proposed
remediation plan and estimated costs. Based on preliminary 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 condensed consolidated statement of operations.
The estimated aggregate accrued cost of $19.9 million is based on
consideration of several remediation options that would use different technologies, each which the Company believes could be successful in meeting the long-term regulatory requirements of the site. However, the remediation options are still being
evaluated, cost estimates are preliminary, and no plan has been reviewed with or approved by the EPA or the Nebraska Department of Environmental Quality (the NDEQ). The Company is scheduled to meet with the EPA and the NDEQ during the
third quarter of fiscal 2016, although it anticipates that a definitive plan may not be agreed to until fiscal 2017 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, it is not possible to provide a reasonable estimate of the amount of costs that may exceed amounts accrued 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 February 29, 2016,
February 28, 2015 and August 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
Environmental Remediation Liabilities
|
|
($ in thousands)
Balance Sheet Classification
|
|
February 29,
2016
|
|
|
February 28,
2015
|
|
|
August 31,
2015
|
|
|
|
|
|
Other current liabilities
|
|
$
|
1,296
|
|
|
$
|
1,222
|
|
|
$
|
1,431
|
|
Other noncurrent liabilities
|
|
|
18,650
|
|
|
|
6,475
|
|
|
|
6,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total environmental remediation liabilities
|
|
$
|
19,946
|
|
|
$
|
7,697
|
|
|
$
|
7,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 12
Note 10 Warranties
The following table provides the changes in the Companys product warranties:
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
($ in thousands)
|
|
February 29,
2016
|
|
|
February 28,
2015
|
|
Product warranty accrual balance, beginning of period
|
|
$
|
6,285
|
|
|
$
|
9,174
|
|
Liabilities accrued for warranties during the period
|
|
|
586
|
|
|
|
439
|
|
Warranty claims paid during the period
|
|
|
(725
|
)
|
|
|
(1,068
|
)
|
Changes in estimates
|
|
|
285
|
|
|
|
(78
|
)
|
|
|
|
|
|
|
|
|
|
Product warranty accrual balance, end of period
|
|
$
|
6,431
|
|
|
$
|
8,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
($ in thousands)
|
|
February 29,
2016
|
|
|
February 28,
2015
|
|
Product warranty accrual balance, beginning of period
|
|
$
|
7,271
|
|
|
$
|
9,331
|
|
Liabilities accrued for warranties during the period
|
|
|
1,944
|
|
|
|
1,397
|
|
Warranty claims paid during the period
|
|
|
(2,586
|
)
|
|
|
(2,208
|
)
|
Changes in estimates
|
|
|
(198
|
)
|
|
|
(53
|
)
|
|
|
|
|
|
|
|
|
|
Product warranty accrual balance, end of period
|
|
$
|
6,431
|
|
|
$
|
8,467
|
|
|
|
|
|
|
|
|
|
|
Note 11 Share-Based Compensation
The Companys current share-based compensation plans, approved by the stockholders of the Company, provides for awards of stock
options, restricted shares, restricted stock units (RSUs), stock appreciation rights, performance shares and performance stock units (PSUs) to employees and non-employee directors of the Company. The Company measures and
recognizes compensation expense for all share-based payment awards made to employees and directors based on estimated fair values. Share-based compensation expense was $0.6 million and $1.0 million for the three months ended February 29, 2016 and
February 28, 2015, respectively. Share-based compensation expense was $1.5 million and $2.1 million for the six months ended February 29, 2016 and February 28, 2015, respectively.
During the second quarter of fiscal 2016, the Company awarded its annual grant of RSUs to independent members of the Board of Directors at a grant date fair
value of $63.73 per share, which resulted in a total of 7,588 RSUs being granted. These RSUs are scheduled to become fully vested on November 1, 2016 and were issued from the Companys 2015 Long-Term Incentive Plan.
Note 12 Other Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
February 29,
2016
|
|
|
February 28,
2015
|
|
|
August 31,
2015
|
|
Other current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
$
|
12,940
|
|
|
$
|
13,437
|
|
|
$
|
16,168
|
|
Deferred revenues
|
|
|
6,601
|
|
|
|
5,846
|
|
|
|
6,146
|
|
Warranties
|
|
|
6,431
|
|
|
|
8,467
|
|
|
|
7,271
|
|
Customer deposits
|
|
|
6,282
|
|
|
|
8,520
|
|
|
|
3,161
|
|
Dealer related liabilities
|
|
|
4,298
|
|
|
|
5,056
|
|
|
|
5,328
|
|
Income taxes payable
|
|
|
1,455
|
|
|
|
3,936
|
|
|
|
4,034
|
|
Other
|
|
|
9,964
|
|
|
|
13,576
|
|
|
|
13,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other current liabilities
|
|
$
|
47,971
|
|
|
$
|
58,838
|
|
|
$
|
56,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 13
Note 13 Share Repurchases
On January 3, 2014, the Company announced that its Board of Directors authorized the Company to repurchase up to $150.0 million of common
stock through January 2, 2016. On July 22, 2015, the Company announced that its Board of Directors increased its outstanding share repurchase authorization by $100.0 million with no expiration. 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. During the three and six months
ended February 29, 2016, the Company repurchased 332,949 shares and 469,212 shares, respectively, of common stock for an aggregate purchase price of $23.0 million and $32.2 million, respectively. During the three and six months ended February 28,
2015, the Company repurchased 224,307 shares and 605,926 shares, respectively, of common stock for an aggregate purchase price of $19.4 million and $49.4 million, respectively. The remaining amount available under the repurchase program was $79.8
million as of February 29, 2016.
Note 14 Industry Segment Information
The Company manages its business activities in two reportable segments: irrigation and infrastructure. The Company evaluates the
performance of its reportable segments based on segment sales, gross profit and operating income, with operating income for segment purposes excluding unallocated corporate general and administrative expenses, interest income, interest expense,
other income and expenses and income taxes. Operating income for segment purposes includes general and administrative expenses, selling expenses, engineering and research expenses and other overhead charges directly attributable to the
segment. There are no inter-segment sales. The Company had no single customer who represented 10 percent or more of its total revenues during the three and six months ended February 29, 2016 and February 28, 2015.
Irrigation -
This reporting segment includes the manufacture and marketing of center pivot, lateral move, and hose reel irrigation systems as well as
various water pumping stations, controls, filtration solutions and machine-to-machine (M2M) technology. The irrigation reporting segment consists of five operating segments that have similar economic characteristics and meet the
aggregation criteria, including similar products, production processes, type or class of customer and methods for distribution.
Infrastructure -
This reporting segment includes the manufacture and marketing of moveable barriers, specialty barriers, crash cushions and end terminals, and road marking and road safety equipment; the manufacture and sale of large diameter steel tubing and
railroad signals and structures; and the provision of outsourced manufacturing and production services. The infrastructure reporting segment consists of one operating segment.
- 14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
($ in thousands)
|
|
February 29,
2016
|
|
|
February 28,
2015
|
|
|
February 29,
2016
|
|
|
February 28,
2015
|
|
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Irrigation
|
|
$
|
103,081
|
|
|
$
|
108,331
|
|
|
$
|
204,407
|
|
|
$
|
223,047
|
|
Infrastructure
|
|
|
17,492
|
|
|
|
32,758
|
|
|
|
37,788
|
|
|
|
52,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
$
|
120,573
|
|
|
$
|
141,089
|
|
|
$
|
242,195
|
|
|
$
|
275,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Irrigation
|
|
$
|
11,081
|
|
|
$
|
11,942
|
|
|
$
|
23,773
|
|
|
$
|
27,911
|
|
Infrastructure
|
|
|
1,532
|
|
|
|
7,274
|
|
|
|
4,614
|
|
|
|
9,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income
|
|
|
12,613
|
|
|
|
19,216
|
|
|
|
28,387
|
|
|
|
37,629
|
|
|
|
|
|
|
Unallocated general and administrative expenses
(1)
|
|
|
(17,307
|
)
|
|
|
(4,680
|
)
|
|
|
(21,333
|
)
|
|
|
(11,191
|
)
|
Interest and other expense, net
|
|
|
(1,499
|
)
|
|
|
(398
|
)
|
|
|
(2,851
|
)
|
|
|
(639
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes
|
|
$
|
(6,193
|
)
|
|
$
|
14,138
|
|
|
$
|
4,203
|
|
|
$
|
25,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Irrigation
|
|
$
|
2,054
|
|
|
$
|
2,381
|
|
|
$
|
5,206
|
|
|
$
|
5,465
|
|
Infrastructure
|
|
|
633
|
|
|
|
546
|
|
|
|
2,186
|
|
|
|
1,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,687
|
|
|
$
|
2,927
|
|
|
$
|
7,392
|
|
|
$
|
6,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Irrigation
|
|
$
|
3,064
|
|
|
$
|
3,039
|
|
|
$
|
6,158
|
|
|
$
|
5,525
|
|
Infrastructure
|
|
|
1,177
|
|
|
|
1,230
|
|
|
|
2,378
|
|
|
|
2,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,241
|
|
|
$
|
4,269
|
|
|
$
|
8,536
|
|
|
$
|
8,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes environmental remediation expenses of $13.0 million for the three and six month period ended February 29, 2016 and environmental remediation expenses of $1.5 million for the six months ended
February 28, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
February 29,
2016
|
|
|
February 28,
2015
|
|
|
August 31,
2015
|
|
Total assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Irrigation
|
|
$
|
386,287
|
|
|
$
|
477,642
|
|
|
$
|
429,224
|
|
Infrastructure
|
|
|
109,196
|
|
|
|
121,138
|
|
|
|
107,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
495,483
|
|
|
$
|
598,780
|
|
|
$
|
536,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 15