Lindsay Corporation (LNN) Q4 2011 Earnings Report, Transcript and Summary

Good morning. My name is Rachel, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lindsay Corporation Fourth Quarter 2011 Earnings Conference Call. [Operator Instructions] During this call, management may make forward-looking statements that are subject to risks and uncertainties, and which reflect management’s current beliefs and 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 of 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 forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. I would now like to turn the call over to Rick Parod, President and Chief Executive Officer.

Good morning, and thank you for joining us today. Joining me on today's call are Jim Raabe, our Chief Financial Officer; and Moraine Kuritsky, our Chief Accounting Officer. In the fourth quarter of fiscal 2011, we continued to experience growth in irrigation equipment demand over the same period last year. We also made important steps to advance our business processes for the long term through the final and most significant implementation of our global ERP system at our Nebraska-based operations. While this implementation represents building capabilities for the long term and represents the final stage of a multiyear project, the ERP implementation resulted in inefficiencies at our Lindsay Nebraska facility greater than we anticipated, which impacted our earnings for the quarter. Also during the quarter, we record expenses related to an administrative tax ruling in a foreign business unit. Both of these expenses, which are approximately $0.13 of earnings per share should be largely isolated to the quarter. Revenues for the fourth quarter of fiscal 2011 were $116.1 million, increasing 33% over the same quarter last year. Net earnings were $5.9 million or $0.46 per diluted share compared to $6 million or $0.48 per diluted share in the prior year's fourth quarter. Operating margins declined to 8.4% from 11.1% last year. This decrease was primarily due to lower sales of higher margin QMB products, which were very strong in the fourth quarter of last year. And the incremental expenses in inefficiencies related to the ERP implementation estimated to be approximately $1.6 million pretax in the quarter, and the adverse administrative tax ruling of approximately $1 million. Total revenues for fiscal 2011 were a record $478.9 million, an increase of 34% from fiscal 2010. For the fiscal 2011 year, operating margins improved to 11.8% from 10.6% in fiscal 2010. Net earnings for fiscal 2011 were $36.8 million or $2.90 per diluted share compared to $24.9 million or $1.98 per diluted share for fiscal 2010. In the U.S. irrigation market, revenues were $47.9 million for the fourth quarter, increasing 41% over the same period last year. Relatively high commodity prices for corn increasing 27%, soybeans up 11% from the same period last year, continued to support improved irrigation equipment demand. In August, the USDA, increased its projected 2011 net farm income to be the highest on record and 31% higher than 2010, creating positive economic conditions for U.S. farmers. In addition, Section 179 deduction in accelerated depreciation available to farmers on the purchase of new equipment is likely to support solid U.S. demand for the remaining 2 months of calendar 2011. For the full fiscal 2011 year, U.S. irrigation revenues were $227.6 million, increasing 49% from fiscal 2010. In the international irrigation market, the growth realized in the third quarter continued in the fourth quarter with revenues increasing 87% from the same period last year. Revenues increased in nearly all international markets most notably in China, Brazil, Australia and New Zealand and the Middle East. For fiscal 2011, international irrigation revenues were $142.3 million, rising 34% from fiscal 2010. Long term market drivers of improving diets in a growing worldwide population combined with the water use efficiencies available from mechanized irrigation systems continue to be positive drivers for global irrigation equipment demand. Infrastructure segment revenues were $24.7 million, decreasing 18% from the fourth quarter last year. On a quarter-to-quarter comparative basis, QMB revenues were lower than the fourth quarter fiscal 2011, as last year's fourth quarter had significant QMB project revenues. Global link [ph] within QMB is with safe traffic litigation solution remains robust in sales for our other road safety products during the quarter. But predicting the timing of significant projects is difficult given the uncertainty on a multiyear U.S. Highway Bill and government budget constraints globally. For the full fiscal 2011 year, infrastructure revenues were $109 million, increasing 9% from fiscal 2010. Gross profit was $30.1 million for the fourth quarter versus $25.7 million in the same quarter last year. Gross margins were 25.9% compared to 29.5% in the fourth quarter last year primarily due to lower revenues of higher margin QMB products. Irrigation margins were lower in the quarter due to changes in the geographical sales mix, growth in international project revenue and inefficiencies resulting from the ERP implementation. Operating expenses for the fourth quarter increased $4.3 million to $20.3 million for the fourth quarter of fiscal 2011. The increase in operating expenses included higher incentive compensation, inclusion of operating expenses for business acquired in fiscal 2010, ERP implementation expenses and the adverse administrative tax ruling in a foreign business unit. As stated earlier, the adverse foreign tax ruling of approximately $1 million is isolated to the fourth quarter and the consulting expenses for ERP implementation, which are approximately $600,000 in the quarter will decline over the next few quarters. Even with the abnormal incremental expenses, operating expenses, as a percent of sales, improved to 17.5% for the quarter compared to 18.3% for the same period last year. Our order backlog was $46 million on August 31, 2011, as compared to $43.3 million on May 31, 2011, and $38.4 million, August 31, 2010. The irrigation backlog typically represents less than a month -- one month revenue. It is therefore not a good indicator of the future revenues. Cash and cash equivalents of $108.2 million or $24.7 million higher compared with last year, while debt decreased $4.3 million over the same period and $6.2 million of acquisitions were completed. Accounts receivable were $15.4 million higher year-over-year on higher sales, while days sales outstanding were nearly level. Inventory increased $4.2 million on improved inventory turn. Our primary use of cash remains investing in organic growth opportunities while continuing to seek accretive acquisitions to add new business and/or product lines. In summary, a strong global irrigation performance and solid results from the infrastructure segment even with lower QMB revenues were realized in the quarter. We also executed key initiatives in the quarter which were essential for our continued long term growth in revenue and earnings. As stated earlier, we completed this final significant stage of our ERP implementation which will improve our capabilities. During the quarter, we completed the acquisition of a small business involved in irrigation engineering, field monitoring and broadband Internet services for rural areas. Though not large in size, this acquisition adds to other acquisitions over the last several years that have enhanced our capability to provide comprehensive, turnkey solutions to growers worldwide to improve their efficiency in yield. We enter fiscal 2012 with the backdrop of continued global economic uncertainty. Yet, we're confident that the key drivers to our business are favorable and that the overall -- and over the long term, increasing agriculture yields to boost food supply, improving water use efficiency, expanding biofuel production and improving transportation infrastructure will remain global priorities. I'd now like to open it up for your questions.

[Operator Instructions] Your first question comes from Michael Cox from Piper Jaffray.

My first question, just to clarify on the ERP implementation cost side, you called out $1.6 million pretax and then you also said $600,000 for consulting expenses. Does that mean that the difference of $1 million is more of an ongoing expense or is that also sort of a onetime type of charge?

No. The difference in that, Mike, was that the $1 million is basically in the factory inefficiencies. The $600,000 was in reference to operating expenses, and basically -- primarily consulting fees associated with ERP implementation. And my comment was that, the $600,000 will be phased out over time as we reduce that consulting as we work through the next few quarters. The $1 million, which is tied to the efficiency, is a result from actually the inefficiency we saw initially in them implementation. And what we've seen to date is already some improvement in efficiencies, in other words, it's coming back up. But it's going to take working through this quarter to see that return.

Okay. Okay, that's helpful. You called out China as a bright spot internationally. Could you speak to what is driving the growth in China? Are there specific government programs that are moving growers towards mechanized irrigation there?

Well, I would describe it as there are government programs and there is a government subsidy in most or many of the regions that apply to purchasing pivots that can be equal to half the cost of the machine. And we're seeing growth in a few specific regions primarily with either large growers or government-sponsored growers in food production. So the growth is pretty significant, but it is limited to a few regions primarily in the North at this time.

Okay. And if I could ask one last question. You talked about the accelerated depreciation continuing here through the balance of the year that starts to phase out next year and then completely goes away as the tax vote is written for 2013. Do you expect -- do you believe that that's pulled-forward demand or maybe could you just speak to how you think that might flow through as the program begins to phase out?

Well, we're certainly hearing from our dealers and from growers that the Section 179 has their attention in terms of the opportunities. So I do believe that they will do what they can to take advantage of it this year. I also believe it's been proposed now to extend that for another year, and I wouldn't be too surprised if we saw some extensions take place with that. But either way, I believe that the growers see an opportunity and then they're sitting with cash and they are taking advantage of that opportunity.

Your next question comes from Carter Shoop with KeyBanc.

First question, can you help us understand how much acquisition-related revenue was in the quarter?

Well, I can tell you that we had a small acquisition, excuse me, in the quarter. The number I believe is -- I'm not going get to the specific acquisition but there were 2 pieces to that. One was related to the acquisition, and I think if you look at the cash flows on the slide deck, you'd see it $6.2 million, $6.2 million in terms of acquisitions of businesses. It would also include a payout on earnouts from a previous acquisition. So I think the combination of those 2 would be what makes up this $6.2 million.

And then on the revenue side for the quarter, can you give us a rough idea how much the acquisition in the quarter contributed?

The acquisition that we made, the most recent one, we have no contributions in the quarter. It was right at the end of the year.

Okay. And can you possibly give us a little bit more color on the backlog? Talk about the percentage of infrastructure related.

I think the primary thing I would say on the backlog, it is primarily irrigation. And as I mentioned that the backlog not very indicative of future sales because irrigations backlog typically represent less than a month’s worth of revenue. The time when the backlog becomes a little more meaningful is when there are significant QMB projects in the backlog, which there is not in the present backlog number.

Okay. In regards to QMB, can you talk about the sales cycle there, and then your expectations about how potential wins in the fiscal year '12? Maybe if you could somehow bracket it around opportunities that are -- attribute over $5 million on a product basis? Do you have 3 or 4 of those potential opportunities that are in the sales pipeline? Help us understand some of the opportunities there.

I'll try and characterize this, Carter, as we typically watch a list of potential projects and we have a couple of different lists. But the primary one we look at is the one that we believe is a higher probability list which could be in the $75 million to $120 million range at any point in time. And that project is one that we're typically watching pretty close and expect that some portion of those projects will fall in say the next 12 months. And one of the things that we often see as we -- and I could talk about one specific project that, without naming it, that we expected it would fall into the end of this year. We were then told a few months back it would probably fall into early in 2012. And this is a fairly sizable one that would be in the -- over $10 million range that now may be at the end of fiscal 2012 or even flip into '13. So the difficulty with the projects that are on that list is really knowing when they will get the funding and when they'll take place. But those are ones that we consider to be generally high probability, it’s a matter of which fiscal year they will fall in. So I can't really give you too much color and I don't want to go into any specific project to impact that in anyway. But I would say that we have a very good active list and that really hasn't changed much, but we do see projects shift from time to time. And as I said, I was just referring to the one that was fairly recent.

Okay. And just when we talk about projects over $10 million, is there an opportunity that -- besides this one that you kind of mentioned that we could see $1 million or $2 million, $10 million plus opportunities awarded in fiscal year '12 or I think it's going to be...

I don't recall the specifics on that from the list. But my recollection would be that there's probably maybe 3 on the list that would be in that range, but it could be more.

Okay. That's helpful. Last question if I can. When you talk to the Board and you guys needed to pull together a business plan for fiscal year '13, help us understand what's some of the most important variables that you look at in trying to help you guys form out a business plan for typically '13 in regards to sales and irrigation. How much of it is just your net farm income, crop prices, et cetera? And if we were to sit there and assume that the crop prices going to stay where they are today, is there any way to kind of handicap what kind of a year investors should expect on the irrigation business?

Well, I think the factors that we would look at if we're looking out past '12, let's say to '13, because we're obviously looking at what's happening with commodity prices and farm income. But generally, we're looking much broader and more global in that in terms of overall food production and more supply-/demand-type factors. Because what we've seen is that, as we look out over time, that there's -- there definitely are drivers for having to produce more food. If you look at the FAO projection, they're talking about having to produce something like 70% more by 2050. And we know that, that increased production requirement will continue to drive that need. Which means more efficiency and higher yields in all farmland. So we're looking at the markets where that need may be greatest. For example, in Eastern Europe and Russia, and Ukraine, China, South America, we generally will look at those areas and try and project as best we can what type of growth we would expect. And as we look at our business, we typically project higher growth rates in the international piece of our business, say double digits in that 10 to 15. And certainly, we've seen much higher growth this past year, in this past quarter in the international business. And probably more in the 4%, 7% kind of growth in the domestic U.S. market. But generally, we're going look at those long term drivers and estimate what we expect will happen. But we don't believe that, excuse me, just looking at the short term commodity prices and/or U.S. net farm income is the best indicator.

Your next question comes from Schon Williams with BB&T Capital Markets. Christopher Schon Williams - BB&T Capital Markets, Research Division: Could you talk about maybe a little bit about where you see the new ERP system benefiting you the most? Is it in terms of working capital management, reducing lead times? Where should we see the most benefit? And what's the timeline for achieving those efficiencies?

Well, there's a number of factors to this, Schon. The first one is that this particular ERP system that we have just completed the biggest phase of, it's the same system that we put into all of our international businesses as we started them up and into the significant acquisitions like Barrier Systems and Watertronics, as we've acquired them. So we are now converted the last big piece, which is the Lindsay manufacturing operations in some of our Nebraska-based operations to this system. What that gives us is capability to look across the business and standardize a lot of the processes, but also to more clearly, look at things like cost of production on a comparative basis for all businesses throughout the world. And that allows us to look at things in terms of how we can increase velocity and -- which can have some improvements to the balance sheet as we implement lien [ph]. but also improvements from overall cost basis and making decisions in terms of where product is produced in order to supply a certain market. And in terms of the timing of that, there's another probably subtlety to this conversion in this ERP implementation, which is the Lindsay operations had the oldest system of all of them in the group for the most part and highly modified over the years. So we're implementing basically a pretty clean ERP system, which is forcing us to look at all the processes as the system is moving along as well to try and standardize as much as the processes as we can, which I think will eliminate bad practices and improve overall inventory management. So there's a number of big benefits from implementing a more modern state-of-the-art-type system. Christopher Schon Williams - BB&T Capital Markets, Research Division: Okay. But it sounds like most of those, maybe related to the balance sheet then?

Well, I wouldn't say so. I think it's -- I think there'll be as much to the income statement as the balance sheet. What would be difficult for me to say right now today is how much that will change the balance sheet or the income statement or exactly when that will take place. I expect that by the end of this next quarter, we'll start to see more of the benefits surfacing for us in terms of a broader look across the company. But those are not necessarily benefits that will translate in the first or second quarter to income statement or balance sheet. Christopher Schon Williams - BB&T Capital Markets, Research Division: Okay, fair enough. And then I wanted to talk maybe a little bit more about the acquisitions. They look like you had bought at least a part of the acquisition with a consulting service and I'm just interested to see -- I mean, are you looking to expand more into service-oriented revenues or is this -- was that acquisition somehow be incorporated into your existing manufacturing operations? I'm just trying to understand how that fits.

Your question is, how does that fit? And I would say this is a -- this particular operation as you would describe is somewhat irrigation engineering or consulting. And they're very premier-type firm with excellent capabilities that go beyond just what they do in terms of engineering -- irrigation engineering, which include field monitoring and some moisture sensors and things like that for large customers. Now we view that as something that is leverage-able across all of our business all around the world and being able to incorporate the type of capability. They also have a part of their business that is in broadband Internet service and broadband equipment that we see being applicable to a lot of our more rural applications where our FieldNET system, our web-based irrigation management system, has been very successful. And more and more as we're talking with customers particularly large ones all around the world, they're very interested in expanding to FieldNET and expanding those Internet capabilities and expanding the field management capabilities. And this acquisition fits in well with that as well as helping us on the front end in some locations outside the United States in terms of being on the front end in irrigation design or irrigation engineering for large projects. Christopher Schon Williams - BB&T Capital Markets, Research Division: So it sounds like they will help with kind of the engineering side and the product development side internally. You're not looking at kind of getting into a whole new business all around those kind of b-to-b service?

That's correct. We're not looking at this as a change of business to really significantly expand consulting. We're looking at this as a leverage-able capability for the rest of our business.

Your next question comes from Tim Mereenie [ph] with William Blair.

My question has to do with QMB sales. We're trying to figure out how much it impacts -- impacted your gross margin in the fourth quarter. So we know or first, we believe that QMB sales were $9 million in the fourth quarter of 2010. Can you confirm that number and then tell us how much QMB sales were in the fourth quarter of 2011?

Right. I can't confirm that number specifically, Tim, in terms of what it was for that quarter or this quarter because we don't split it out. But I think the key points, if you’re looking at the fourth quarter of this year versus fourth quarter of last year, would be -- really come down to 4 or 5 points. One would be the lower QMB sales, which is probably -- has an impact in the range of $2 million to $2.5 million in terms of that margin variance between the 2, and that's the way to look at that. The other one would be higher lower margin, international project sales. And that has probably an impact -- and this is really a shift between the domestic and international piece that probably is somewhere around $1 million of impact. And the other one would be the ERP implementation, which we've already talked about and said it's probably about $1 million in impact in terms of margins. And the last piece would be the SG&A part of it and that would really get into the adverse tax ruling and some increase in administrative expense for incentive compensation, and those would be the big pieces on a quarter-to-quarter. And those first 3 that I talked about would really be that margin explanation you're looking at the 2 quarters.

Your next question comes from Ryan Connors with Janney Montgomery.

I wonder if you could talk a little more about this issue of mix, domestic versus international. And I guess we were a little taken by surprise by the extent to which that mix had an impact. So is there any way you can kind of just give us a little more color around what the margin differentials are on kind of domestic versus international pivot sales generally speaking? And then specific to some of these large projects that you call out in your prepared commentary?

Well, I think the color I would add to it, Ryan, is as I've said in the past on the international business unit versus the U.S. shipments is generally a 5 to 7 point margin difference, it could be typical. And that would be because of the level of integration of the factories where in the U.S. factory, we're very vertically integrated, where in the international factories, we're not. And those are a matter of scale and timing where we will scale up and have higher levels of integration at some point in time. That's a piece of it. The other part of it is, in the quarter, and we do see this from time to time, especially in very good times, there will be large projects that will pop up in various regions that will become competitive bid. And the larger the project, the more likely it is, competitive bid and sometimes the more difficult that becomes and we saw few of those in the quarter, this quarter. So that had some impact on international margins.

Okay. Okay, now one thing I didn't hear you mention, Rick, and I may have missed it, so I apologize for that. But I didn't hear you mention input costs or steel or any of that as a margin headwinds. But was that a factor at all here?

I don't think it was. We did see steel increase in the quarter and it's actually come back a little bit in time. But we did see some increase but we've been able to pass it through and I would say that really was not a headwind in the quarter. I haven't viewed really competitive pricing or steel as an impact on the fourth quarter other than as I said, for specific international projects.

Okay. And then finally, just wanted to follow up on this topic you were on with the last caller there on technology. You mentioned the FieldNET and the GrowSmart system. Is there any way to quantify, I guess number one, what percentage of your unit that gets shipped today have one of your advanced technologies included in the sale? And then, what that does that margin on a discreet pivot sale?

Well, I don't have that number specifically, both numbers specifically available and I'd prefer not to break those out for competitive purposes. But it would say that the more important point rather than the margin aspect of it because it really isn't very impactful to the margins on the sale is the differentiation that it offers us, and the ability to differentiate against the competition. So we believe our system is unique in its capabilities and unique in the various plug-and-play opportunities that it provides. And that therefore, then works very well for us particularly with large projects but also with farmers throughout the United States.

Okay. And then just one final piece on that. I know there are other companies focused on sort of "precision ag" was not as focused on irrigation companies like Trimble and so forth. Is your stuff compatible with some of their devices whether your data can be brought into those user interfaces or if someone has a GrowSmart or FieldNET, does that have to operate stand-alone just as an irrigation device?

I think today that that is primarily, these are stand-alone devices. There's a lot of potential capability in terms of bring that together, but that really hasn't happened. So they're generally stand-alone devices today.

Your next question comes from Andrew O'Connor with Harris Investment.

Rick, I wanted to know, and you've already spoken around this, but can you further characterize the pricing environment for both irrigation systems and infrastructure products? How pricing compares now to say, 6 to 12 months ago and how you guys see it trending looking ahead?

Well, I think the one way to look at this would be to talk about it in terms of what's happened with pricing in -- pricing on irrigation. And what we've seen is the irrigation prices in general are probably up about 4% quarter-over-quarter from last year to this. A year-to-date -- sorry, quarter-over-quarter, for the whole year probably in the 5% to 6% range. So not huge price differences and it is all filed driven in terms of what happened in price. In terms of the competitive environment, we've seen it generally -- pretty consistent in terms of a fairly normalized competitive environment without any radical things. The one area where we do see some things get a little radical particularly in irrigation is in the international market when we get into, well, like I said, the large competitive bids. Sometimes it gets a little crazy and we walk away from many of them. And we've had some where we've walked away and somebody, a European competitor or whatever won and wasn't able to fulfill the contract also, and they come back around again. So from a comparative standpoint, we occasionally draw some pretty clear lines in terms of what we'll doing on a pricing basis. In the infrastructure market, I would say that it's also been pretty stable and pretty normalized in terms of looking at the road safety products in general. We've been able to pass through increases as necessary and on QMB, there's basically as many competition. However, we're also very cautious in terms of pricing in that one because we do compete with other kinds of technology in a sense and we have to look at it in terms of what the benefit is versus standard concrete barrier, and those types of things. I would characterize the competitive environment right now as pretty normal, nothing really out of the ordinary.

And you'd maintain that you're looking ahead, say the next 6 to 12 months?

I do. I think that there are large projects that take place and this is the one caution in terms of the sales mix and how it can be affected. As large projects take place in international markets, we will see those from time to time be lower margin that we'd like. But generally speaking, I don't really see a change in that in the next 6 to 9 months or a year.

Your next question comes from David Paddock with Invesco.

With the $2.6 million of kind of one-time items that you called out, are all of those included in the irrigation segment?

Yes. Well, just thinking about that for a second, they were all irrigation, yes.

So if you add that $2.6 million, add it to the $12.2 million...

Just one moment on that, I guess, Jim Raabe was correcting me.

The majority of it is in irrigation but because the Lindsay plant, and that would be some of our manufacturing for the infrastructure, there was a small piece of that did get allocated.

That would appear in those margins.

I'm sorry, I couldn't hear the last part.

There is a small piece of the ERP implementation in Lindsay that would show up in infrastructure margins because Lindsay does do some manufacturing for our infrastructure business.

Okay. And so that would imply that your corporate expenses, I think, would be around $4.9 million for the quarter. And that's significantly higher than any other quarter in the past, and I was wondering what was driving that increase?

Well, I don't have that number offhand, but I do know that the -- I believe, the incentive comp that just was made would probably still reside in corporate not as an allocated. But I'm not...

Yes. I mean, just to clarify the -- in the G&A expenses that are showing up on the P&L, the tax ruling shows up in G&A but it is allocated directly to the irrigation segment and the ERP, there are some G&A costs that are in corporate as well related to that. But the total increase in G&A, year-over-year basis, is about $4 million. And some of that is salaries and benefits, but there's probably about 40% of it related to the item that we spoke to. Rick commented on it that we haven't released.

Okay. And moving to the infrastructure segment, you seem to be -- I don't think you've had a big QMB project included in sales for a couple of quarters. But yet, your sales seems to be hanging in there in the $25 million to $30 million range per quarter. It that a pretty good run rate going forward? And then any QMB project will be added into those levels?

Well, there is some QMB sales that are in most of the quarters and there is some that was in this quarter as well. Some of them would have been QMB leasing rather than big projects. So you're right, there isn't anything specific in terms of project. In terms of overall run rate, I'd say that's probably not too bad to think of it in those terms. I don't have a better number but I'm also -- really don't give guidance and can't really project that number for you.

And the last question. Years ago, you did a big internal study on improving in profitability in the infrastructure segment. I was curious if you could share any of the results from that study.

Well, I think there's some significant improvements that are being made in that infrastructure business. So it wasn't so much a study as it was taking actions to make some change. And one of the things that I commented on was that, we wanted to get to the point where we were seeing good operating margins from that business with or without QMB projects. And obviously, we'd want the QMB projects to really be the icing on the cake in a sense. And what we've seen in the past quarter and really saw last year is that -- but in the past quarter, we saw operating margins of 10.2% for our infrastructure business without much in terms of QMB. So I'd say in general, we're seeing some improvement in the infrastructure business. We've also in this fiscal year, had some restructuring costs to take expenses out and some of those are isolated within that business expense today. So I am pretty confident that we're going to some good improvements in the infrastructure business in the -- within fiscal '12 and fiscal '13.

Over the low double digit levels you had in recent...

I expect we will see improvements in it over what we have experienced in the past. We've already seen improvements in most of the pieces of the infrastructure business. We still have one that we're working through that is a little more problematic for us, but we're working through that one now as well. So I'm confident we will see improvements in all of those pieces.

And just to elaborate on that a little bit. If you look at sequentially from Q3 to Q4, total revenues and infrastructure are flat, actually down a little bit and the segment margins improved from about 4% to 10%. So we're definitely seeing some improvements there, and as Rick alluded to, I think -- we think that there's more opportunities going forward.

Right. In your Q1 and Q2, you're at the 14% to 15% margin levels. Are those -- were those unusual because of big QMB projects?

Yes, they had a significant amount of QMB in those.

Your next question comes from James Stillman [ph] with Bearing Asset Management.

It's really to do with uses of cash flow whether you're sort of considering share buybacks, the stock at these levels or what you intend to do with your cash essentially?

Well, we do consider a share buyback. We certainly take into consideration at any point in time. Our primary defined uses for cash would be our organic growth opportunity, and if we see a good synergistic acquisitions to add to the business. But we obviously, do watch -- we have had an outstanding and do have an outstanding share repurchase authorization. So it is a consideration that would be made at any time.

[Operator Instructions] You do have an additional question from Schon Williams with BB&T Capital Markets. Christopher Schon Williams - BB&T Capital Markets, Research Division: Could you just remind me how much of that infrastructure business is related to Europe? And then maybe just some of your thoughts on given where the amount of austerity that we're seeing in Europe in some of the macro headwinds, do you still think you can grow that side of the business within your next year?

Yes, I don't recall the percentage offhand, Schon, on the Europe percent of that. I'm sorry, I can't help you with that. That's probably something we could find and Jim is looking. But I do have concern about the European market in terms of how that will grow. Our primary sales in Europe has been in Italy and Germany and few other markets. But primarily, in those 2. And Germany still remains very strong. Italy, I think is problematic in the short term from a cash flow standpoint.

And just -- that number is about 30% at least in the current quarter and that can change depending on what happens with QMB obviously because we have some projects at that as well. Christopher Schon Williams - BB&T Capital Markets, Research Division: Is that -- is Europe the biggest piece of the international mix for infrastructure?

Yes, it is at this time, but does not change as we add QMB projects in -- international QMB projects. For example, as you may recall back about a year ago, we had a Mexico City project, I think it was a $200 million project. So that will change based on the QMB project that are pending at the time.

At this time, there are no additional questions. I would like to turn the call back over to Mr. Parod for any closing remarks.

Before our business overall, the global one-term drivers of water conservation population growth, increase the importance of biofuels and the need for safer, more efficient transportation solutions remain positive. In addition to the overall, business enhancements that are taking place, we continue to have ongoing structured acquisition process that will generate additional growth opportunities throughout the world in water and infrastructure. Lindsay is committed to achieving earnings growth through global market expansion, improvements in margins and strategic acquisitions. I'd like to thank you for your call -- for your participation and questions on this call. Thank you.

This concludes today's Lindsay's confrontation Fourth Quarter 2011 Earnings Conference Call. You may now disconnect.