Lindsay Corporation (LNN) Q1 2012 Earnings Report, Transcript and Summary

Good morning. My name is David, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lindsay Corporation First Quarter 2012 Earnings Call. [Operator Instructions] During this call, management may make forward-looking statements that are subject to risks and uncertainties, 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 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 call over to Mr. 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, Lindsay Corporation's Chief Financial Officer; and Lori Zarkowski, our Chief Accounting Officer. In the first quarter of fiscal 2012, we continued to experience growth in irrigation equipment demand in both domestic and international markets. We leveraged those sales gains into increased cash flows and higher margins from operations. The margin gains were offset by an accrual in the quarter of $7.2 million or $0.37 per diluted share and expenses that we expect will be incurred in future years for environmental remediation at our Lindsay, Nebraska facility. Consolidated revenues for the quarter were a record $119 million, increasing 34% from $89 million in the same quarter last year. Net earnings were $2.9 million or $0.23 per diluted share, compared with $4.3 million or $0.34 per diluted share in the prior year's first quarter. Excluding the environmental accrual, net earnings were $7.7 million or $0.60 per diluted share. I intend on devoting the majority of my comments to the underlying performance of our business, excluding the impact of the environmental accrual. Before doing so, let me spend a few minutes on the situation with our environmental liability. In 1992, the company entered into a consent decree with the EPA specifying monitoring and remediation actions regarding contamination that occurred in the '80s. Since that time, we have worked with Nebraska Department of Environmental Quality and the EPA, including numerous 5-year reviews and adjustments to the monitoring and remediation actions. We have accrued expenses over the years based on the discussions with the EPA and the plans developed from the 5-year reviews. As a result of the most recent review, we've been discussing potential actions that could result in more permanent remediation solutions on the site. Based on preliminary findings of our environmental advisors, we determined in recent days that it was appropriate to accrue $7.2 million of expense that we expect will be incurred over the next 5 to 10 years in remediation activity in accordance with appropriate accounting treatment. The accrual is based on preliminary findings and plans which have not yet been finalized, nor have the specifics of the action plan been agreed to by the EPA or Lindsay. So this estimate is subject to change. I'm confident that the expenses required to address this environmental obligation will not materially impact the company's liquidity or financial resources or long-term trajectory for our growth, nor will this expense impact the extent to which we invest in growth for the advancement of our competitive position. Now I'd like to move on to discuss the underlying performance of our business in the quarter as noted, exclusive of the $7.2 million in environmental expense. Global irrigation sales grew 68% to $101 million in the quarter with segment operating margins exclusive the environmental remediation expenses of 15.6%. U.S. irrigation revenues totaled $60.7 million for the first quarter, increasing 66% over the same period last year. Commodity prices remained relatively high through most of the quarter and continue to support positive farmer sentiment. Projections of record U.S. farm income throughout 2011 along with Section 179 accelerated depreciation and write-off of equipment purchases continue to support positive economic conditions for U.S. farmers. In the international irrigation market, revenues increased 71% to $40.1 million, a record for the first quarter. We have seen solid revenue increases in nearly all international markets with the most significant year-over-year gains in the Middle East, South America and China. Long-term market drivers of improving diets and growing worldwide population, combined with water use efficiencies available for mechanized irrigation systems, continue to be positive drivers for global irrigation equipment demand. Infrastructure segment revenues were $18.4 million, decreasing 37% from the first quarter of last year due to lower QMB system sales. Importantly, we have made significant progress in our other infrastructure product lines, as our non-QMB infrastructure sales grew by 7% over the year-ago quarter despite a difficult environment for funding, highway and other infrastructure projects. Yet we are confident in the opportunity to drive significant profitability with QMB system sales over the long term as a superior solution to worldwide traffic congestion and improvement in driver and highway worker safety. QMB sales are likely to continue at some level of volatility due to the project nature of this business and the current funding environment. For the irrigation and infrastructure segments combined, gross profit increased to $30.2 million for the first quarter versus $24.2 million in the same quarter last year. Gross margins were 25.4% compared to 27.2% in the first quarter last year. The lower gross margin was primarily due to the lower revenues of higher-margin QMB systems accounting for 2.5 percentage points of the year-over-year margin difference in the quarter. Both irrigation and non-QMB infrastructure gross margins improved as compared to the prior-year period due to expense leveraging and productivity gains. Last quarter, we discussed challenges associated with our European implementation. While there remain opportunities to improve our productivity and better utilize this new tool, a significant amount of inefficiencies have been eliminated. We look forward to further improvements in future quarters. Operating expenses for the first quarter increased by $1 million to $17.9 million for the first quarter of fiscal 2012, exclusive of the environmental accrual. The increase in operating expenses is attributable to inclusion of newly acquired businesses. Operating margin, excluding environmental liabilities, increased to 10.3% from 8.2% last year, driven by the higher revenues. Our sales remain strong through the quarter and our order backlog at the end of the quarter was $52.8 million on November 30, 2011, compared to $46 million on August 31, 2011, and $59.7 million, November 30, 2010. Our first quarter is typically a low quarter for the irrigation segment and the backlog at the end of any quarter is not indicative of future demand. From a balance sheet perspective, our position remains strong with cash and cash equivalents of $108.7 million, $28.2 million higher than the same time last year, while debt decreased $4.3 million over the same period. Accounts receivable were $16.7 million higher year-over-year, reflecting our higher sale volumes, and inventories increased $4.5 million while inventory turns improved. Our primary use of cash remains investing in organic growth opportunities, dividends and continuing to seek accretive acquisitions that add new businesses and/or product lines. In summary, strong global irrigation performance and solid results from our infrastructure segment were realized in the quarter. Through the balance of fiscal year 2012, we will continue to execute on a strategic plan containing additional technology investments and organic growth initiatives, and an operating plan featuring more lean manufacturing initiatives and fewer ERP system inefficiencies. We believe these plans position us well against the backdrop of continued global economic uncertainty. Furthermore, we are confident that the key drivers to our business are favorable and that over the long term, increasing agricultural yields to boost food supply, improving water use efficiency, expanding biofuel production and improving transportation infrastructure will remain global priorities. I would now like to open it up for your questions.

[Operator Instructions] Your first question comes from the line of Michael Cox with Piper.

My first question is, you had noted that the backlog is not a good indication. But I guess I'd be curious, as you look at the progression, the order activity through the course of the quarter and I guess, by comparison to some of the commentary we've heard from the farm machinery companies talking about a very robust pipeline for 2012, is this kind of just in the backlog just a function of the recent decline we've seen in grain prices? Or is there something more to this that we should consider?

I think if you were to -- if we can analyze this backlog a little bit for you, Mike, it would be the primary decrease in the backlog from the same time last year was more in the infrastructure product line and primarily in the QMB backlog. In the first quarter of last year, we had a significant project that we were taking on, an East Coast bridge project that we talked about, I believe it was about $15 million, of which $8 million of it was in the first quarter and the rest of it was in backlog for the second quarter. So the primary difference in the backlog is really in the infrastructure business.

Okay, that's very helpful. And as I look at selling expenses in the quarter, with the 34% revenue increase and selling expenses were flat essentially year-over-year, can you talk about the ability to maintain that selling expense number? What was done in the course of the quarter that was allowed to -- allowed you to keep that number flat in spite of the big sales increase?

I mean, our selling expense in general is not very variable. It tends to be more fixed. It does, at times, ramp up in more of a step level based on what's happening in terms of advertising activities or other promotional activities, but it tends to be more of a fixed expense. There are some exceptions. It is a little more variable in the infrastructure part of our business than in the irrigation part. But I wouldn't expect it to ramp up in a quarter like this with the increase in volume.

Okay. Okay, that's great. And my last question is on the strength of the balance sheet and the cash you have on hand. We've started to see, I guess, a couple of acquisitions in the farm equipment safety here just recently. Could you speak to the opportunities that might be out there from an acquisition standpoint? Or is that an area that we should look for in fiscal 2012 as a potential use of cash?

Well, it certainly is an emphasis of ours to define strategic acquisitions that fit with our business. I think there's -- we found in recent looks that there's many attractive pieces out there, different areas where we can find some businesses that make sense. At the same time, the M&A market is competitive in some sense, and I think we've seen some high prices on some of the deals that were done. And we're pretty prudent and cautious in many respects, but we'll be careful in terms of what we walk into in that area. But I would expect that, that will continue to be an emphasis: to find strategic acquisitions.

Your next question comes from the line of Ryan Connors with Janney Montgomery.

First off, just a question on the irrigation side. I mean, really remarkable results for this seasonally slow part of the year. If I'm not mistaken, it's the first time that segment's ever done $100 million in revenue in that November quarter. And so you also mentioned in your commentary this issue of a depreciation benefit in terms of that being a driver. I mean, to what extent do you think, just in terms of a short-term basis here, that, that's having an impact on the order flow and the top line?

Well, the reference was to the Section 179 accelerated depreciation and write-off on equipment. It's difficult to determine how much that really drives it, but I'll make a reference, Ryan, to something we talked about in the past, which is the percentage of our equipment that will go out into dry land or replacement, conversion. And as I've said, what we've typically seen is that, that wouldn't be unusual to see about 1/3, 1/3, 1/3 in terms of the split between those 3 categories. And what we usually see in periods with higher commodity prices is that dry land will be the highest percentage. And in this past quarter, we saw that dry land was about 30% -- 39%, rather, of the shipments out. So that was about what we would expect. The other one that was a little higher than maybe I would've expected is the replacement, which may be somewhat driven by the Section 179. That was around 34% to 35%. So I don't think it was a huge driver in this past quarter. Our salespeople and dealers have said that it's more likely to have an impact in the next quarter -- or in the current quarter we're in, rather, the second quarter. And I'm not sure that, that will be a significant impact either, but it's more likely that we'll see more of the Section 179 impact in this quarter.

Okay, that's very helpful. And just my second question, I mean, I respect the fact that you prefer to talk about the base business but obviously, the remediation issues -- I think the magnitude of the charge kind of caught people off guard, certainly us. So just 2 questions there. Is there any way you can characterize exactly what the reserve is for? In other words, is it the wells you're drilling for aeration or whatnot? And then number 2, you said it's subject to change, but would you characterize the reserve as being a conservative one, in other words, that -- in other words, you reserve pretty aggressively against it and we shouldn't see further reserves in the future? Or can it change either direction?

Yes, Jim? Go ahead, Jim.

This is Jim. First of all, I'd say that what we've done is we've made the estimate based on the best estimate that we can make at this point. The nature of the remediation is around things on the site -- on the facility site, and so it is wells and that type of thing. Although that's still some analysis being done and the specifics still being developed. With regard to the estimate and future changes to the estimate, this is based on some preliminary work that we've done. We do still need to work through that with the EPA and get their agreement with the path that we would end up proposing. And then always -- there is always the possibility that you learn as you go on these things, and there could be changes as a result of that. So there certainly could be changes from this point forward.

Okay. And then just one last one on that. So I assume given the ramped-up level activity around that, that you've engaged consultants and so forth. Are expenses related to that flowing through SG&A? Or are those going into this reserve as well?

Expenses related to that would go against the reserve.

Your next question comes from the line of Carter Shoop with KeyBanc.

First question is about gross margin. Can you talk about some of the levers impacting gross margin on a quarter-to-quarter basis, the August and November quarters, specifically? Can you comment on how much is that benefit that you saw from the ERP implementation and consulting fees? And then also, what kind of impact you -- that the pricing environment had in the quarter?

Well, I think, Carter, it's difficult to split out specifically some of the levers that you're referring to. I would say that we did see efficiency improvement in this quarter versus the previous quarter, and that certainly, it had quite a role in 2 areas. One is that it caused some of the inefficiencies or variances to be reduced and that had some amount of savings, and the other is it allowed us to get more volume out in the quarter, where in the previous quarter, we would have more difficulty just because of the conversion to the new system. So that was certainly key to handling the volume activity we had. The other factor that can often play -- that does play a role in the margins would be what's happening with steel pricing. And what we saw happen this past quarter, steel prices had moved up about 20% from where they were the same time last year. And we're seeing a steel environment right now that is getting a little cost. So we're seeing steel pricing move up. We have been able to generally pass that through, and we basically had about a 3% to 3.5% price increase through the quarter, and year-over-year I think about 13% increase in price. And most of that is passing through the steel prices. We haven't really seen much change in the competitive environment from a margin standpoint. So say competitively, everything is pretty stable, but it's a constant battle when you're passing through things like steel increases. And we all, of course, have different impact in terms of our steel purchases at different points in time. Those are probably the primary levers, along with the volume itself, that allowed us to leverage our fixed expenses in our factory.

And just to clarify, in the fourth quarter, you talked about $1 million in factory inefficiencies. Can you think of that number being cut in half last quarter? Or is that -- is there still ancillary efficiencies of that magnitude?

I would think about it as approximately half. And that is a rough number, because there are number of variables. But I think about it as approximately cut in half.

That is helpful. Can you talk about the QMB section a little bit here, in regards to what the outlook is for that business? Obviously, it's a little bit longer in lead time than your irrigation or other infrastructure business. Can you comment and maybe qualify the backlog there and how that backlog has looked thus far in the February quarter?

I think I would qualify -- or probably quantify it more from the standpoint of: there really hasn't been much change from previous quarters when we talk about the project list that we look at and the potential projects that are out there that we're tracking and working. They really don't convert to backlog until they become an actual order and not much has really changed in that area. I will say we've got a good opportunity identification process where we're identifying new ones to go onto that list all the time in different markets. So I'm optimistic about that. Nothing really has changed in my perspective on that. I think it still looks pretty good. It may be a little tight towards the end of this year, just because we're not sure what's happening with funding yet. And I mean, end of the fiscal year in 2012. We're not sure what's happening with government funding on projects. But at this point, I'm still very optimistic about QMB for the year.

Your next question comes from the line of Brian Drab with William Blair. Brian Drab - William Blair & Company L.L.C., Research Division: First, how much confidence do you have that the $7-million investment in remediation will clear you of this issue?

Well, as I said, we've made best estimates that we have based on the information that we have, and we've tried to vet that, but there are always uncertainties as we go forward. Now this is a multi-year accrual. So I would guess that there will be circumstances that could change over that time, but those could affect the accrual in either direction. But for now, we've made the best estimate we can. Brian Drab - William Blair & Company L.L.C., Research Division: Okay. And I guess said another way, that $7-million investment, the idea is that the work plan driven by that $7 million would take care of the issue and it's not just Phase 1 of several phases. Is that correct?

There could be some additional work that needs to be done after this is completed, but we need to go through this piece of the work to make further determination. Brian Drab - William Blair & Company L.L.C., Research Division: Okay, great. Looking at the infrastructure side of the business. Can you give us any sense for how much of the revenue came from QMB sales in the quarter? And I'm sure you won't quantify it, but can you tell us if it was less than 10% or less than 5%? Somehow give us an idea of what the impact was.

I don't have that number on hand. I could possibly get that in a minute, but I believe it was pretty low in the quarter. Let's see; it was probably somewhere around, based on what I do have, about 1/3 of what it would've been at the same time last year. And I don't have a specific percentage for you on that.

Yes, I'll follow up with you. Brian Drab - William Blair & Company L.L.C., Research Division: So QMB, your guess though, right now, Rick, it's 1/3 of the level of sales that you had in QMB last year in this quarter.

Yes.

That is about right. Brian Drab - William Blair & Company L.L.C., Research Division: Okay. And then, I guess this has already been asked, but it's just very surprising that in the seasonally weak quarter for irrigation, you have that pretty substantial increase sequentially from the previous quarter and -- in the domestic market. And I guess, what would be the #1 thing coming up -- I don't know if it's clear to me yet. What would be the #1 thing that you'd point to that's driving that? Is it farmer sentiment? Or is it combination of that with the bonus depreciation?

I would point to farmer sentiment. And I was talking to dealers both in the U.S. and internationally. I would say that the one primary driver and comment has been farmer sentiment has been pretty positive. Farmers have come off from a good year with excellent farm income. Their balance sheets are in good position, and if you look at some of the press recently, they've been buying land even at some pretty high prices, but a lot of the land purchases are with cash. So farmers are in pretty good shape and optimistic about the future, and I think they're also looking at the longer-term perspective even though they tend be pretty short term in some of the purchase decisions. And looking at the long-term and seeing that the demand for the commodities that they're producing is pretty robust long-term. There's a good outlook there so they're willing to make these investments. So I think it's been a pretty positive environment from a farmer sentiment standpoint.

Your next question comes from line of Schon Williams with BB&T Capital Markets. Christopher Schon Williams - BB&T Capital Markets, Research Division: Wanted to make sure that I'm absolutely clear on the environmental charge. Jim mentioned that this is a multi-year accrual. I just want to make sure, this is the full accrual for the next 5 to 10 years of what you expect to spend. Is that correct?

Yes, that is accrual for what we expect to spend. As I said, we still have discussions with the EPA to finalize and to agree to this specific path, and as I said, there are also things that could come out of the future work that could result in a revision to that. But this is an accrual that would cover 5 to 10 years. Christopher Schon Williams - BB&T Capital Markets, Research Division: Okay. And then just on the infrastructure side of business. It looks like -- if I kind of adjust for the environmental remediation, it looks like in the base business, it's still fairly weak there. I mean, when would you guys anticipate -- given some of the restructuring effort you've done there, I mean, when would you anticipate that base business, kind of ex-QMB, to move into the profitable realm?

Well, what I would point to on this is some of the improvements that's taken place, and I guess the reference point would be what we saw in this quarter for the non-QMB business is the revenue was up over 6%. And we saw gross margin improvements in the range of over 3% in the quarter. And when we look at the operating margin or operating income of this business, as you said, when you back out the EPA portion, it basically was breakeven for the quarter on roughly an $18-million revenue number. And if we were to look at a comparable quarter and I think going back to the last year, Jim, you had mentioned, I think, second or third quarter of last year.

Of 2010.

Of 2010 rather, $18-million comparable revenue quarter, that business would have lost about $1 million. So from that standpoint, there's a significant improvement that has taken place in the business as it is. And also, when you look at the revenue from past -- last year for the total infrastructure business has been $109 million. This quarter, revenue in the $18-million range is pretty low. So to be break-even at this level, I'm not concerned and I see very significant improvements that's taken place from the same time in 2010. Christopher Schon Williams - BB&T Capital Markets, Research Division: And should we be seeing, I guess, a further ramp? Are there additional savings that are kind of ramping up over the next couple of quarters? I mean, even if volumes were to stay at the kind of existing levels, should I see that margin level actually improve?

What you should see is continual emphasis to improve those margins, and those margins -- the emphasis on improving those margins will be in product cost reduction, manufacturing efficiencies, selling price management, and the other part of it, that is a definite emphasis in this, is increasing our revenue in our safety products outside of the QMB -- and not that we're not trying increase revenue in QMB, but to the other product lines, increasing revenue to see more leveraging of costs in other periods. So you should see revenue increases plus margin improvement.

Your next question comes from the line of David Rose with Wedbush Securities.

I was hoping we can follow up a little bit more on the international sales and provide a little bit more color on how lumpy the order book is. And last quarter, you talked about lumpiness in the business. And then secondly, if there's some color on margins. Again, internationally, the guidance was margins were going to be weaker. Are there initiatives to improve margins? And then lastly, on the international irrigation sales -- these are all irrigation sales questions but the last one is, as it relates to the competitive environment, could you provide a little bit more color on perhaps the technology component of the sales or other initiatives that you need to do to be competitive internationally?

Okay. Well, I think from the international market perspective, it's -- we've seen some pretty robust market positions in the last quarter in most all of the markets we're participating in, and I mentioned a few specifically where we saw good opportunities and good growth in Middle East, China and South America. At most, all of the international markets were up year-over-year for the quarter from the previous year. So we did see a good demand out there. And a lot of that demand is being driven by the strong fundamentals of the population growth and the need for food security, and overall agriculture prices certainly played a role in it. But we're pretty pleased with the growth that we're seeing there. Now when you refer to it as an order book, it's a little more difficult because we tend to flow through orders pretty quickly. So we don't have big backlog order books necessarily on irrigation products, but they'll flow through relatively quickly. We have not seen a significant drop-off or change in demand, and I'm optimistic about the future. I also think there's some excellent still developing markets that offer good growth potential, for example Russia and Ukraine. We think that we'll see good future there, but they will take some time yet to develop, and there will be in time some government subsidies that will help those markets develop. We're also seeing some strong fundamentals in market demand in northern Africa, where there are some projects that are taking place that are primarily driven again by food security needs from other countries moving into that region. So from an international standpoint, it will continue to be a pretty good, but we're also going to see that because it is project-oriented, that will have some impact on margins from time to time because they will be competitive. We do see the strong order flow in general but also, as I said, we will see projects. And we had one of those in this past quarter, not very significant size, but a project that took place in the Middle East region. And those are -- as I said, tend to get a little more difficult in terms of the competitive bid situation. Coming back to the competitive environment in general, I would say that we haven't really seen much change in competitive environment, but we are emphasizing our differences the Lindsay advantage in everything we do from a marketing standpoint, and that includes the strength, the durability, ruggedness of our equipment, as well as the technology and what we offer with our FieldNET product line that we think is pretty unique. We're going to continue to add on features to the FieldNET product line, into that offering, to further differentiate our product line and to further differentiate our competitive position. It doesn't play a huge role in terms of price in the sense of people buying more technology or play a huge role in the sense of commanding much larger price because of it, but it is an important differentiator and I think there are still more opportunities there for us as well. And I think that hits the majority of your question. I'm not sure if I missed any one aspect of it.

Your next question comes from line of Andrew O'Connor [ph] with Harris Investments [ph].

Rick, Jim, I wanted to know on capital expenditures, what you guys expect to spend for fiscal 2012. And in what areas will the expenditures be made from the business?

Our estimate for the capital expenditures for '12 is about $9 million to $11 million. Some of it in productivity, some of it in price development tooling, those types of things.

Okay. Can we apportion between the 2 segments, irrigation and infrastructure, between the $9 million to $11 million?

We don't specifically apportion that, but I would say that you could expect the majority of it will be irrigation and the majority of it will be more manufacturing related in terms of equipment versus product.

Okay. And then, I'm just kind of wondering out loud. Is it possible or are you guys actively investigating the utilization of your QMB technology perhaps in other directions? Or with some modifications, is this system applicable for other uses? And having asked this, I don't know what that would be, but I'd be curious to get your thoughts.

Well, I'd answer that in saying, yes, it is applicable in other uses and other kinds of environments other than the ones that we've sold it in. I wouldn't want to go too far in terms of describing those for competitive purposes, but I would say it is an emphasis to enter into some new market segments with the QMB-type technology. We believe there are some opportunities in areas where we haven't really been able to penetrate a market because of either weight or size of the equipment, and there's some opportunities just thinking about this a little differently.

So you're at liberty at the moment to maybe characterize what some of these other uses are.

No, I would rather not do that at this point. I think there will be a time in the future when we can talk about that.

Your next question comes from the line of Jeff Beach with Stifel, Nicolaus. Jeffrey L. Beach - Stifel, Nicolaus & Co., Inc., Research Division: Rick and Jim, would you discuss the trends and outlook in your non-QMB infrastructure operations, the road safety, rail structure, contract manufacturing?

Yes, I think, the -- we're particularly pleased with the outlook, I think, from a -- in the road -- sorry, the railroad market segment. We think that there's a lot of opportunity there. And we have developed relationships with many of the larger railroads and we will continue to expand our market position in that area. We think the rail structures area is a good growth opportunity for us in the next few years. The diversified manufacturing or contract manufacturing part has been a key piece of our business in terms of overhead absorption and really absorbing overhead with lower-margin contract manufacturing type business. And I think we'll continue to have that and support the customers that we have, but it is becoming somewhat deemphasized from the standpoint of other proprietary product that is taking some of that utilization of the equipment and space as well. The road safety product is a good market and will be a good market in the long term. I do think it's a tough environment in terms of road safety products today, especially considering that we don't really have a U.S. multi-year highway bill. What we have today is the short-term extensions on the existing bill. I think the current one is extended out until March. So we really need a multi-year highway bill that creates a better opportunity for expansion of infrastructure, and that will definitely benefit our highway -- or road safety product line. Also, outside the United States, I'd say that we see opportunities in developing markets with our road safety products, but it is still difficult in some markets due to government funding situation. So we're pretty optimistic about that for the long term. We think it will be a great business to be in. Jeffrey L. Beach - Stifel, Nicolaus & Co., Inc., Research Division: And as a follow up, regarding some of these operations and probably QMB as well is, are you getting a lot of your benefits of the ERP system in these -- broadly across these infrastructure operations of yours?

I think it's too soon to get much of the benefit across the operations. I will say we've finally gotten to the point where all of our operations are on the same ERP system, which will be beneficial to all of the operations, and we're in the early stages of that now that we've gotten -- we're having everything over -- converted over in this last quarter, the fourth quarter of last year. So I think we will see those benefits come over the next few quarters. We expect to continue to reap the benefits throughout this year.

[Operator Instructions] You have a follow-up question from the line of Brian Drab with William Blair. Brian Drab - William Blair & Company L.L.C., Research Division: Just a quick follow-up -- 2 quick follow-ups. On the irrigation side, what's your expense, Rick? And I don't know if you would be able to really answer this completely, but do you think that it's going be difficult to have irrigation revenue up in fiscal 2012 after such a strong year in 2011, arguably with some benefits from the bonus depreciation?

I think you'll probably not be surprised to hear me say it's too soon to tell. As you know, this is really the slow part of the season, and what I'm always interested in is what's really happening with commodity prices and the markets in general and farmer sentiment in that February, March time period when the U.S. market really starts to turn back on. And I think it's just too soon to tell at this point, to make a call for us one way or the other at this stage. I would say that the fundamentals have been very positive and supportive of strong demand for 2012 in terms of commodity prices and farmer sentiments and the longer-term perspective from population growth and food security and all the other aspects. But it all comes down a little bit to what happens in that February, March time period as we approach spring, to see what farmer sentiment will be. Brian Drab - William Blair & Company L.L.C., Research Division: Sure. And then on the bonus appreciation issue, I think that I might not understand this completely, but I have been told that the farmer doesn't get the benefit of the bonus depreciation unless the system -- irrigation system is purchased, installed and commissioned, and he doesn't get the bonus depreciation just when he buys it from the dealer. So I'm wondering, is that true? And if so, is it unlikely that any revenue that you'd record with the purchase of an irrigation system, say, in December would actually be driven by someone who thinks that they're going to get bonus depreciation, because if they're not going to have it commissioned -- installed and commissioned for maybe a month or 2 after that?

Well, I would say I've heard the same thing. I don't know for a fact whether that's the case. I will say that somebody ordering a system and having it delivered and getting it installed in December is still very possible. So I wouldn't rule that out in terms of being able to comply us with the accelerated depreciation Section 179 benefits that are available.

You have a follow-up question from the line of Schon Williams with BB&T Capital Markets. Christopher Schon Williams - BB&T Capital Markets, Research Division: Just a quick follow-up. I wanted to see if you could maybe comment on what your lead times are currently on the irrigation. And it sounds like just with that last response, I guess, you think it's less than 4 weeks, if a dealer can make that in order at the beginning of December and still get it to the customer by the end of the month. Could you talk about where you think lead times are as we move into the new year? And maybe where those -- if you have any sense of where those lead times are versus your competitors?

Well, typically, we schedule our irrigation production based on a forecast and to some extent a national production schedule, but generally from this forecast. And as long as the orders are within the forecasted range, the lead time is relatively short and could be 2 to 3 weeks. So it's really not going to be very long. So in some cases, it can be even going to be less if somebody has a specific need and we're accelerating an order through. Once we get beyond that forecasted level, then it becomes a little more difficult and the lead times may move out to 6 or 8 weeks. But generally, we've been forecasting and being able to hold within that to some extent. So I would say that it's probably still in the 2- to 4-week range. Christopher Schon Williams - BB&T Capital Markets, Research Division: Okay. And then you did comment on some of the opportunities that you see on the railroad structures business. I know that the Obama administration had struck down some of the, I guess -- failed to implement some of the safety regulations around signage that could possibly would've benefited that business. Is there any update on maybe the legislative side on where some of that safety regulation is heading -- is going in the near future?

No, I don't really have any update on this -- that at this point. What we've found is most of our customers who have been working on the positive train control requirements, the PTC requirements that were involved in the legislation, have continued to work towards implementing positive train control and PTC. So I think that, that really hasn't stopped anything yet. I do believe that there could be some delays in it but at this point, we really haven't seen much change.

There are no further questions. Mr. Parod, do you have any closing remarks?

Yes. For our business overall, the global long-term drivers of water conservation, population growth; food security; the increasing importance of biofuels; and the need for safer, more efficient transportation solutions remain positive. In addition to the overall business enhancements that have taken place, we continue to have an 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. We thank you for your questions and participation in this call, and we wish you and your families happy holidays. Thank you.

This concludes today's Lindsay Corporation First Quarter 2012 Conference Call. You may now disconnect.