Lindsay Corporation (LNN) Q4 2012 Earnings Report, Transcript and Summary

Good morning. My name is Sharae, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lindsay Corporation Third (sic) [Fourth] Quarter 2012 Earnings Conference 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, our Chief Financial Officer; and Lori Zarkowski, our Chief Accounting Officer. In the fourth quarter of fiscal 2012, we continued to experience growth in irrigation equipment demand, which drove revenues in the quarter of $127.8 million, 10% higher than last year. Net earnings were $8.8 million or $0.68 per diluted share compared with $5.9 million or $0.46 per diluted share in the prior year's fourth quarter. Operating margins increased to 9.9% compared to 8.4% in the same quarter of last year. Irrigation equipment demand remained comparatively high through the quarter supported by the high crop prices. We ended the quarter with backlog that was higher than at the end of the previous quarter and at the end of the fiscal 2011. Total revenues for fiscal 2012 were a record $551.3 million, increasing 15% from the same period last year. Net earnings for fiscal 2012 were $43.3 million or $3.38 per diluted share compared to $36.8 million or $2.90 per diluted share for fiscal 2011. 2012 results included a $7.2 million accrual for environmental remediation at our Lindsay Nebraska facility. Excluding the environmental accrual, net earnings for fiscal 2012 were $3.75 per diluted share, and operating margins improved to 13.2% compared to 12.1% in the same period last year. For the global irrigation segment, sales totaled $107.9 million in the quarter, 18% higher than last year. Irrigation operating margins improved to 15% compared to 13.4% last year. In the U.S. market, irrigation equipment revenues were $56.3 million for the fourth quarter, increasing 18% over the same period last year with most of the increase in demand occurring in the drought-affected Midwest corn belt. During the quarter, commodity prices continued to climb, ending the quarter with corn prices up 28%, soybean prices up 33% over the same time last year. The USDA increased its projected 2012 net farm income to be $122.2 billion, which would be the highest on record and 65% higher than the 10-year average, reflecting the higher crop prices, as well as the significant increase in crop insurance income through the drought. For the fourth quarter of fiscal 2012, international irrigation revenues increased 19% to $51.7 million. Revenues increased most notably in China, Mexico, Latin America, Africa and Canada. We continue to see significant activity in our international irrigation market and believe these markets will be a primary source of long-term growth. For the full fiscal year of 2012, irrigation segment revenues increased 28% to $475.3 million. In the U.S. market, irrigation revenues were $305.4 million for the full year, rising 34% over the previous year aided by rising crop prices. In the international market, irrigation revenues were $169.9 million, increasing 19% over the previous year with significant increases in China, Africa and the Middle East. Infrastructure segment revenues were $19.9 million in the fourth quarter, decreasing 20% from the fourth quarter of last year, primarily due to lower sales and leases of QMB systems. Throughout the year, infrastructure demand remained challenging due to funding issues and transportation project delays. While the project nature of QMB systems sales creates earnings volatility for the infrastructure segment, we've made good progress in reducing the cost structure of the segment in 2012 and expect additional sales growth and profit improvement in 2013. The recent passage of a Highway Bill providing funding through 2014 should result in an improved environment for infrastructure spending. For fiscal 2012, infrastructure revenues were $76 million, decreasing 30% from fiscal 2011 due primarily to the lower QMB systems sales for large infrastructure projects. Gross profit was $32.7 million or 25.6% of sales for the fourth quarter versus $30.1 million or 25.9% in the same quarter last year. Irrigation gross margins increased by approximately 1 percentage point, primarily due to fixed cost leverage and efficiency gain over the fourth quarter of last year. Infrastructure margins decreased approximately 6 percentage points due to lower QMB sales, partially offset by improved margins in road safety and diversified products. Operating expenses in the fourth quarter decreased slightly to $20.1 million. Fourth quarter expenses included incremental expenses for an acquired company purchased in fiscal 2011 and higher marketing and selling expenses. The prior year fourth quarter also included expenses associated with the ERP implementation and an adverse administrative tax ruling in a foreign business unit. Operating expenses as a percentage of sales dropped to 15.7% for the quarter compared to 17.5% for the same quarter last year. Our order backlog was $57.1 million on August 31, 2012, as compared to $46 million, August 31, 2011, and $44.5 million on May 31, 2012. Irrigation backlog is higher than at the end of last fiscal year and sequentially higher than the previous quarter, while infrastructure backlog is lower than the same time last year and sequentially lower. Cash and cash equivalents of $143.4 million were $35.3 million higher than at the same time last year, while debt decreased $4.3 million over the same period. Accounts receivable were $3.6 million higher year-over-year due to the higher sales, and inventories increased $3.3 million with improved inventory turns. Our primary uses of cash remain investing in organic growth opportunities while continuing to seek accretive acquisitions that add new businesses and/or product lines. We expect capital expenditures in 2013 of approximately $15 million to $20 million, largely focused on manufacturing capacity and productivity improvements. In summary, 2012 resulted in record revenue and earnings for Lindsay Corporation. Irrigation sales and profits rose driven by positive farmer sentiment, record farm incomes, rising crop prices. Drought across the U.S. had a significant negative impact on yields, and we anticipate a significant reduction in U.S. ending stocks of corn continuing to support high crop prices. Adding efficient automated irrigation equipment remains the most impactful way to enhance yields for many farms around the world especially through dry periods and for efficient utilization of limited water resources. In the infrastructure segment, reduced government spending on highway and other infrastructure projects has continued to be an impediment to significant growth and profitability, resulting in the lowest QMB revenue in fiscal 2012 since the acquisition of the product line in 2006. However, we believe that with the recent passage of the Highway Bill providing funding through 2014, market conditions will improve. The improvement in transportation infrastructure and overall road safety remains a priority for state and for the federal government, as well as many countries around the world. As we proceed into fiscal 2013, we're confident that the key drivers for our markets remain favorable and that, over the long term, increasing agricultural yields to boost food supply, improving water use efficiency, biofuel production, improving transportation infrastructure will remain global priorities. I'd now like to open it for your questions.

[Operator Instructions] Your first question comes from Brett Wong of Piper Jaffray.

Just a couple of questions on the backlog. Wondering if there are any geographic concentrations with your backlog. I mean, has the U.S. drought driven any international increases in sales?

Well, I think the -- I don't have the specific breakout of the irrigation backlog between domestic and international. I think it would be fair to say that the drought has had wide impact across the world with a sense of as we've seen emphasis on trying to provide enough corn, we've seen an emphasis now in growing corn in other areas as well. And also, we've seen increased production in soybeans in South America, for example, to offset the acres that were reduced and have gone to corn in the United States. So it has had broad implications. I don't have the specifics with -- on backlog, but I would say that most of what we saw in the U.S. in terms of backlog would probably be representative of what we saw in the last quarter's revenues where we were seeing very significant increases in the drought-affected Midwest corn belt. And I think that would be the primary area in the U.S. where we would have seen increases in our backlog.

Okay. And are you seeing crop insurance play any part in equipment orders?

I can't say that we've seen crop insurance playing a part in equipment orders to date. I would say that the majority of the farmers, from what we have seen and believe, are covered with some form of crop insurance, and farmers are in pretty good shape from an overall farm income standpoint and from a balance sheet standpoint, which leaves them in good position for continued purchases of equipment, especially irrigation this year because I think there's a very broad realization of the impact of this drought and the benefits of irrigation versus non-irrigated fields in a period like this. I also think that the Section 179 tax benefit is out there that farmers are also looking at this year and saying -- seeing that irrigation may be the right answer for using that.

Okay. And just one last question, any update on the Golden Gate Bridge project? Or timing for equipments?

There's not. The -- as we talked about in the last quarter, the Golden Gate Bridge authority had announced that they were doing this project. That it's still out there. We still expect that, that will be probably in the fall of 2013.

Your next question comes from Schon Williams of BB&T Capital Markets. Christopher Schon Williams - BB&T Capital Markets, Research Division: I wonder if you could just talk about -- I mean, in terms of visibility on the infrastructure side, I mean, we know that QMB can be quite volatile. But what do you have a lot of confidence on as we move into the fiscal 2013? Where do you have confidence on within infrastructure in terms of either new QMB projects, new leasing projects or maybe even base demand within the safety products? I mean, what do you have a concrete idea about what could actually improve as we move into next year?

Schon, I think the one area where I'd have some confidence is we've seen some pretty good stabilization in terms of the road safety products in general. They had a pretty good year in the sales of things like crash cushions and the other road safety products. I anticipate that we will continue to see some stability in there but also opportunities to continue to grow internationally as well as in the U.S. and grow market share in road safety products. In addition to that, I think in terms of QMB, we're pretty confident with the list of projects that we have, that they are potential QMB projects, and we're confident in projects like Golden Gate Bridge at this time. If you were to say is any of it rock solid, it's very difficult to say because, of course, it's subject to a funding and whatever happens going forward. But there's a reason to have a pretty good confidence level on the continued growth of QMB. Timing is always very difficult. Christopher Schon Williams - BB&T Capital Markets, Research Division: Do we have to have QMB activity next year in order to get the margins up versus where we were in fiscal '12? Or are there other factors, either some of the restructuring or maybe some of the base improvement in road safety, is that enough to -- as long as the market is up, we'll still see the continued margin improvement? Or do we have to land something in QMBs to move the needle here?

Well, I think the way to think about it is that in many respects, we need QMB projects to move the needle significantly or in a meaningful way in -- from an operating margin standpoint in infrastructure. And the primary reason is the other product lines are beneficial, are making money and are doing well and better and improving as we go along. However, we are carrying some costs of sales and marketing on QMB projects that are not covered by those other businesses, so we need some QMB revenue as well to significantly move the needle in the infrastructure business. So I'm not concerned about or -- and I've been actually pleased with the changes we've seen in the other pieces of the business, but I am concerned about the timing of QMB projects in general because there is a cost associated with the sales and marketing activity associated with it. On the other hand, I would say when we do get those projects, they're -- it's very profitable, and they're great projects to have. Christopher Schon Williams - BB&T Capital Markets, Research Division: Okay. And then one last follow-up if I may, you guys have actually done quite a good job with cost control in general this year. I want to say, you've kept selling expense essentially flat. Engineering research is actually -- has gone down. As we move into 2013, assuming that it is going to be a year of maybe modest growth, do you think you can -- is there anything you see in accelerating within spending and may say -- that may come to pressure margins a bit? Or can you see a further dialback in any of those line items? Just kind of your thoughts about spending versus growth next year?

At this point, I wouldn't project any dialback or significant increases in spending in those categories, either sales and marketing or engineering expenses. I would say that we're pleased with the progress that we're making in the engineering and product development side in terms of some of the new products. For example, a new version of FieldNET that we've recently launched, which has taken some investment through this year. However, there's additional modifications and enhancements to it that will be made in terms of adding additional features, as we go through this year. So I would expect that engineering expense will remain relatively in the same area. But I don't anticipate at this point any significant rise or scale back. I think we're running at a pretty good rate at this point. Nothing I'm aware of at this time.

Your next question comes from Brian Drab of William Blair. Brian Drab - William Blair & Company L.L.C., Research Division: I think -- I'd like to actually repeat one of the questions that I just heard there and see if we could get a more specific answer, Rick. Do you need QMB sales in this next fiscal year for margins to go up from fiscal 2012?

Well, I think if we're looking at just the infrastructure piece, Brian, I would say we need QMB sales in order for infrastructure margins to improve significantly, not to improve at all because we've made improvements in our infrastructure business pieces to date that we will see some improvement in this next fiscal year. So while we're looking at, obviously, kind of a breakeven level, we can see some improvement now of the changes that have already been implemented. However, to move it in a meaningful way, given the -- what we've established as kind of a fixed level or a baseline fixed cost level for QMB and for attracting those projects and marketing to those projects, we need some QMB revenue as well. And when I say that, I don't mean that it's unlikely we'll get it because I think it's very likely we'll get it, but I'm not going to make a projection in terms of the timing of specific projects or specific amounts. Brian Drab - William Blair & Company L.L.C., Research Division: Okay. Is there anything -- is there any increased optimism in the pipeline for QMB relative to the last time that we spoke in last quarterly call?

I wouldn't really reflect any increased optimism. I would say that I was optimistic with what I saw happen with the Golden Gate project in terms of what they put out prior to last quarter. I think there is nothing that I have seen or heard that would say that, that's changed. I'm still very optimistic about that project. There's other projects that have been in the works that have had some delays and I'm also optimistic about, but I would say nothing really specific or tangible beyond that. I really have no reason to be pessimistic on QMB at all at this point, and I think that the global opportunities for it are extensive. However, it requires more work. And what we're going to do is add another sales position, in fact, that will be covered with some other organization changes to really focus on expanding the QMB sales because it is definitely worthwhile. Brian Drab - William Blair & Company L.L.C., Research Division: Okay, great. And can you talk just a little bit more about productivity improvements that you made in the non-QMB part of your infrastructure business? And specifically, what have you done to improve productivity? And could you maybe quantify in terms of basis points of margin expansion that you think you've achieved in that non-QMB part of the infrastructure segment?

I don't know that I'm ready to quantify specifics. Jim may have some things he can had in terms of some of that, but I'd say the types of things that have been done and there have been operational efficiencies achieved through some reorganization and scale back in -- from an organization standpoint in a couple of cases. There have been operational efficiencies in -- from a manufacturing standpoint where a primary facility that's producing a lot of our infrastructure products that's based here in Omaha, we've done some restructuring and made some changes. And I'd say that's its operating much more efficiently and leaner than it was, say, even 6 months ago. So I think those types of efficiencies have taken place. I think there's better administrative control in terms of pricing management and product line management than what we've seen 6 months ago or a year ago. So I think they're in a number of different areas, all of which will be beneficial for the longer term.

Our next question comes from Nathan Jones of Stifel, Nicolaus. Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: I apologize if I cover something that you covered in your prepared remarks. I got on late. Just starting in irrigation, your contribution margins have come in a little bit from where they were earlier in the year. Can you talk about that -- the level of contribution margin that you're at, if you're satisfied with that, if you think you can maintain that kind of level going forward?

Well, I would say on the irrigation side, there is always a couple of things that factor into the fourth quarter numbers. Some of that being, in this year, there's a little bit of a mix shift with relatively more international in the irrigation, which, as you know, is a little bit lower margin. There's always a little bit of deleverage in the fixed cost because of the volume pullback in the fourth quarter versus other parts of the year. But as a whole, we've seen improvements over the year-ago levels. We've seen efficiency gains in our irrigation margins here on a year-over-year comparison basis. So yes, I think we feel good about the progress we've made there. Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: And I'll try something again on the infrastructure segment. Can you -- are you able to quantify what level of cost has been taken out of the business during 2012 that might be incremental savings in 2013?

Yes. I mean, I -- and some of this obviously occurred over the course of the year, but we've taken somewhere in the range of $1 million plus a quarter out. Now some of that was earlier in the year, so you won't see a -- you wouldn't see a $4 million gain year-over-year. But that's kind of at least the quantifying or magnitude of what we've done in the infrastructure business. So that's $4 million on a roughly $100 million business, so pretty good opportunity there. Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: Right. And over to the balance sheet, you're at $11 million of net cash on the balance sheet now. If you are unable to find acquisitions that meet your criteria, are we thinking about share repurchases these days? Or how are we going to get the balance sheet to not have so much cash on it?

We're considering all options in terms of what we do with that cash as I stated earlier. But the primary initial use of cash is going to be our organic growth. Plus, we have some things in terms of CapEx, that's certainly planned. We got dividend that has declined at this point. But we will look at all of the options. We also right now have a very active acquisition process, which has continued with many candidates. So I'm not ready to say that we're ready to change that direction yet, but we're -- we will consider any options. Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: Do you have any expectation on when acquisitions might be completed? Or is it just impossible to say when they're going to get over the line?

Yes, I always have expectations of them getting completed in practically every quarter, but it's impossible to say when they will take place because there's so many different factors to it. But obviously, I'm anxious in a couple of cases to see that we can get those done because we do see some interesting pieces that would fit well with our business but requires a willing seller and a number of other factors to make that happen. So it is very, very difficult to estimate that. Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And just on domestic irrigation, my last question. Are you getting any indications from your dealers or salespeople what kind of level of irrigation spend they're expecting for the selling season coming up next year?

No, I wouldn't say that we're getting any indication of what they expect for the year. I would say that the dealers tend to be a little shorter in perspective as a general rule, meaning they're dealing with a high level of activity at the end of this past quarter, which has continued a bit. So I think that the dealers are looking at it more from the opportunity has been big as this drought has continued. But they're not really projecting through this next year at this point.

Your next question comes from Jon Braatz of Kansas City Capital.

Back to sort of the domestic irrigation, we've been hearing that it might be a possibility that given more crop insurance payments this year that maybe equipment purchases, whether it be irrigation or tractors and so on, might be a little bit delayed this year from maybe normal seasonal patterns. Do you sense that at all? Do you see -- any feeling in that regard?

I don't see that. I've heard comments about the possibility that some equipment purchases could be delayed. I've heard comments that obviously farmers may spend insurance proceeds different than they would spend crop receipts. So I think all of those are potential factors, but I'd say that what happened this past year with the drought really moved irrigation to front of mind for most of the -- particularly the Midwest, but I would say throughout the U.S. And we've seen more of an acceleration of the process of buying irrigation equipment rather than the latter or any kind of a delay. So I haven't really seen or heard of those factors causing a delay at this stage.

Are you seeing any new geographical markets here in the United States that were typically non-irrigated maybe looking towards irrigation as a solution more than they have in the past?

Well, the interesting factor that I watch is the percentage of the machines that are going out into, say, dry land versus conversion or replacement of existing pivots. And what we've seen in very normal years when commodity prices were lower was usually about 1/3, 1/3, 1/3: in [ph] replacement, conversion and dry land. What we've seen this past year, I'd say that the estimate is about 44% of the machines that went out went into dry land, adding irrigation for the first time which is I think really reflecting the higher commodity prices and the drought situation that took place. And it's indicative of we're really seeing that opportunity that exists by converting to irrigated crop land. So I don't think it's limited to any areas. I will say that -- I think in some areas, let's say, the Southeast or different parts of the U.S., we've seen a little more of a pickup than we've seen in the past, but in general, it's been across-the-board.

Okay. Are you approaching this year any differently in terms of production schedules and maybe building some additional units for inventory, or how are you looking at this season?

Well, we've had dealers that are interested in taking some units earlier in the year to have those on hand, to meet some demand, and we're encouraging some of that. So I would say, yes, we're approaching it a little bit different, probably running at a higher level than we -- we certainly are running at a higher level than we would in a typical year because of that. But that's primarily it. I think we'll see more of the units going out earlier in the year.

Okay. And pricing this year?

Pricing has been really pretty consistent. We haven't seen much change. We see a little increased price competition from time to time in different markets or different regions, but it is more -- it's pretty spotty. We're also seeing that steel prices, which obviously plays a big part in this, have been pretty stable. It has actually moved down a little bit. And that's been somewhat beneficial. But in general, I'd say there's been pretty good -- prices have been holding quite well in most of the markets.

Your next question comes from Chris Shaw of Monness, Crespi. Christopher L. Shaw - Monness, Crespi, Hardt & Co., Inc., Research Division: Can you give a break out of the -- in irrigation for 2012? What was volume and what was pricing?

No, we don't typically do that. No. Christopher L. Shaw - Monness, Crespi, Hardt & Co., Inc., Research Division: Okay, I wasn't sure. Fair enough. And looking at the degree of change in the backlog, obviously, it seemed to grow significantly as of this last quarter. But now that we sit here on October 17, you're 1.5 month into the first quarter, is it fair to say that the sort of trends in the growth of backlog has continued into the first quarter here?

I don't really want to go into the first quarter and what's happened with that other than to say that when you look at the backlog at the end of the fiscal year, you can see that it's higher than it was from the previous year and sequentially higher from an irrigation standpoint. So backlog is indicating that there was strong demand, and that's due to the drought in a typical slow period. So usually, we'll see at the end of our fiscal year that, that's more getting to harvest time, so we'll see demand drop off pretty quickly. But overall, I would say that the order rates through the end of the quarter was very strong. Christopher L. Shaw - Monness, Crespi, Hardt & Co., Inc., Research Division: Okay, great. And then looking at margins for irrigation, I guess 2013, they were up previously like [ph] sort of 200 basis points in 2012. Is that something you could probably -- could you repeat something of that magnitude in '13? Or are you just looking for something more stable?

No, I wouldn't necessarily expect any significant changes. Our gross margin rates from year to year tend to remain fairly stable. Obviously, steel inputs is a factor, but then the competitive size is as well, and -- so there's always a little bit of benefit when there's strong demand. But I really wouldn't expect any significant swings from year to year.

Your next question comes from David Rose of Wedbush Securities.

On international again and in the quarter, if you provide a little bit of color, how many of these -- of the sales for at least the products that you're working on in China that were delayed in the third quarter sell to [ph] the fourth quarter?

I'm sorry, David, I can't -- I didn't hear your question. Could you speak up a little?

Sure. In the fourth quarter, the increase in irrigation, international irrigation sales, you benefited significantly, I imagine, some from products that were delayed in the third quarter in China to the fourth quarter. How many of the products in China went into the fourth quarter? Or was this actually all x China?

Well, there was -- I think we saw until the end of the third quarter about some projects being delayed in China, and we expected that, that would fall in the fourth quarter, which it did. I'm not going to split out the specific amount, but I would say that what was expected to happen in China in the fourth quarter did. And overall, what we ended up with in China this past year was an increase over previous years. So we've seen some good growth in China this past year, which primarily a good portion of it landed in the fourth quarter.

And the international sales growth, is that attributable to same-store sales at existing dealers? Or do you have expansion of the dealers?

Most of it would be sales through existing dealers. I don't think there was really much that I would attribute to expansion of dealer network. I would say that they've been through our existing dealer network in the markets that were defined.

Okay, great. And then the last question on QMB as a follow-up to a previous question. Can you give us some sort of maybe handicap, how you expect your QMB products to fall first half, second half of 2013? Golden Gate sounds like it's fall of 2013, so '14 for you. Any other projects that would fall in the first half or second half?

Well, we have a number of projects that we're working that we could see some fall in the first half and some in the second, and I'm really not going to get into defining those. I'd also say that I wouldn't conclude that Golden Gate would fall into '14 because while they're planning to complete that project, have it open in the fall of '13, I would expect that we could see some revenue from that sooner. But at this point, I don't really want to project on any specific period for QMB.

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

Rick, can you guys speak to any new technical innovation that's coming about in irrigation or that you and your colleagues are bringing to the market?

I think the in terms of the new technologies and the things that have happened, some of it would've been a representative of what we showed at Husker Harvest Show this past fall, just a month or so ago, where we were showing our new FieldNET web-based solution, web-based control product, and that will be, I think, big in the next few months in terms of what their customers are seeing and saying about it as far as additional features that it adds. And we'll see additional enhancements in terms of incorporating other things into FieldNET, which is more of a field management-type solution. I think we've also had some good progress with technologies, such as our integrated pump systems into FieldNET in managing of the pump system, which is really key for a number of the larger growers and customers who are trying to really manage their energy costs, as well as their water use. So there's a number of technologies along that, that are delivering a more complete solution and a complete farm. I may have mentioned I think in the last quarter that we get a farm in the Southeast that would be called the Dee River Ranch farm where it has our easy wireless, basically broadband communication system. Our -- we used our irrigation design company to do the design of that system. It has water kind of pumps systems on it and our pivot, so it really is a complete solution for farming, and we're going to see more solutions like that in the future.

So you characterize these as incremental improvements. Are there -- is there anything else that's coming about that might be a game changer more broadly in irrigation?

I can't say that there's anything that I would classify as a game changer other than the technologies that manage the irrigation systems and as I said becoming more of a field management-type system. That is more the area where the emphasis is today.

Okay. And then lastly, you've already spoken around this. Is it possible to quantify your comments in the press release that related to irrigation -- the same positive factors that continued into the early months of fiscal '13? Can you quantify or give us any more granularity about the first quarter?

Yes, I really can't comment on the first quarter other than, as I've said, what we saw at the end of the quarter was good demand driven primarily by the drought and a good order rate that we saw at that time.

Your next question comes from Joe Mondillo of Sidoti & Company. Joseph Mondillo - Sidoti & Company, LLC: Just first question related to international irrigation. I'm just wondering if you could expand on sort of the trends that you're seeing there and sort of just given the slowing sort of global demand and global economies, you got Europe, you got Brazil, you've got China. With those slowing global regions, how are you looking at your international opportunities?

Well, the interesting part about the international opportunities from our perspective is really that we see continued growth, and not slowing. Part of it is certainly driven by what's happened with commodities and what's happening with the production of those commodities worldwide. Where the drought in the U.S. affected corn and soybeans, it also had some positive impact in terms of increasing pricing and increasing productions of some of the areas outside of the U.S.. So we've seen increased production in Brazil, for example, in soybeans and in corn. And we believe that there will be some upside there. We're also seeing additional emphasis on sugar cane for ethanol from Brazil, which we see as a continued growth opportunity. China is a continued growth opportunity in both corn and soybean production, and we've seen a number of markets like the Russia, Ukraine area where there've also been affected by droughts and realized the benefits of adding efficient irrigation today, benefiting primarily wheat production. So we see a lot of growth opportunities because the population continues to rise. Biofuel is becoming more and more important worldwide. And as that is taking place, the efficient utilization of water and increasing yields is a bigger factor worldwide. Joseph Mondillo - Sidoti & Company, LLC: So in the near to medium term, do you feel just as strong as the long term in terms of the opportunities?

I do. I think that the international markets will continue to be growing at a good rate yet lumpy at times in terms of, we'll see big projects that will come in that will affect us at that period of time. So it will not be a linear kind of growth in our equipment from that. But we'll see continued growth in the international markets both near term and long term. So I'm pretty optimistic about those growth opportunities that exist. Joseph Mondillo - Sidoti & Company, LLC: Okay. And then looking at domestic irrigation, over the last, say, 3 to 5 years, we've seen planted acreage shoot up. If we see a leveling off or maybe even a tapering down, how does that -- how do you think that affects sort of the growth that you've been seeing compared to over the last couple of years?

Well, it's hard to determine what that will equate to if there is some decrease or let's say slowdown in the growth of planted acreage in the U.S. I would come back to the fact that as the markets are developing, we're continuing to see significant opportunities in terms of conversion from flood irrigation to pivot, the replacement of pivots that have been out there for a number of years and this base keeps -- the installed base continues to grow and the addition of converting non-irrigated lands to irrigated lands. So while there could be some change in acreage overall, there's still significant growth opportunities in those specific categories. Joseph Mondillo - Sidoti & Company, LLC: Okay. And then 2 last questions. One, I was wondering if you could just talk about your CapEx project, the opportunities and sort of what your CapEx budget you're looking at for '13? And then also the tax rate was a little low on the quarter. I'm just wondering what was going on there as well.

Well, from a CapEx standpoint, our expectations for next year are a little bit higher than what they've been recently. I think there's a number of different opportunities for us to improve productivity in our manufacturing facilities, as well as increase the capacity, in particular in some of the international markets where we've seen growth. China, Brazil is just a couple of examples. So we're looking at making some upgrades there. From an overall tax rate standpoint, for the year, the tax rate, it ended at about 33.5%, and we've been talking more in the 35% range. And I would say that we're probably a little bit conservative in our outlook earlier in the year, and we certainly saw some benefits from the U.S. production credits and some other, I would say, expiring reserves that we had. So I would expect that going forward, you'll probably see a rate more in the range of that 34%. That's probably what you should look at going forward. Joseph Mondillo - Sidoti & Company, LLC: Okay. And could you give the CapEx expectations, or do not?

Yes. The expectation for 2013 will be in that $15 million to $20 million range. Joseph Mondillo - Sidoti & Company, LLC: Okay. And that's largely capacity expansion plans internationally?

Largely capacity and productivity in the manufacturing side.

[Operator Instructions] Your next question comes from Mark Banta [ph] of the Kensington Management Group.

Our understanding is that you typically look for acquisitions to be accretive immediately. Any sense that you might be losing that guideline for the current crop of acquisition targets?

Mark, I can barely hear you, and I heard the question as, we in the past have talked about acquisitions being accretive immediately. Was your question, would we waive that guideline?

Yes, with the current crop of potential acquisition targets, might you potentially waive that guideline?

I wouldn't say that at this point. I think that has been a guideline that we've had, and I don't think it has dissuaded us from making an acquisition. We're still looking for acquisitions that are a good, synergistic fit with our core businesses, and we'll continue to look for those. I think if something comes along that we think is really worth considering that may be different than that guideline, we'd certainly consider it. But it's not something that I would do right off unless there were some specific reason to from a synergistic fit standpoint.

Okay. And in terms of the size of the companies that you're currently evaluating, could you give us a sense of what size you're looking at now?

Well, we stated in the past that we're primarily looking for companies that would be in the $15 million [ph] revenue or more range. That's the size that I think makes the most sense. We continue to look at smaller product line type acquisitions, things that could tuck in. But from an overall business standpoint, I would prefer to be looking at businesses in that $15 million [ph] plus revenue range.

Okay. And in terms of the synergies that you would be looking for, could you give us a sense of what would be some of the acquisition synergies that you're looking for specifically?

Some of the preferences that we've had have certainly been in the water area where we've looked at water use type companies, companies that would fit well with our technology from a technology standpoint. We also have considered some that fit in to the infrastructure part of the business. But seeing that the preference has been, in general, ones that are in that water use, water efficiency category, which could include things like pump systems and filters and technologies, that would be synergistic with what we do on an irrigation side.

Your next question comes from Steve Yang of Alger Management.

Could you talk about the average age of the irrigation equipments for the areas that you service? And what's sort of the typical replacement cycle?

I think your question is, what is the average age of the machines that are installed. And I would say in the United States the -- first of all, the equipment will last somewhere between 20 to 30 years. And I would say that on average, we would probably be in that 20 to 25 year range in terms of useful life. And what we would say is that most of the machines or about half of those are at least in that probably halfway point in terms of useful life, about half or more. So it's a -- we think that the opportunity for replacement is pretty good. I think that's correct.

And could you delineate your backlog between replacement versus new purchases?

The backlog, we don't have a split on the backlog in terms of what would be replacement versus new. As I've said, I primarily look at this on an outgoing revenue basis and would say that what we've seen this -- even in this past quarter, is about 1/3 of what went out would be replacement equipment, 40% would've been to dry land.

Okay. And then lastly, how should I think about falling metal prices impacting your margins?

Well, steel is 1/3 of our cost of goods sold. So it's a pretty significant impact in terms of what happens from a pricing standpoint with steel. And typically when it's rising, we're able to pass through increases. When it's falling, it becomes a little trickier. We tend to hold it as much as we can, however, competitive situations may dictate changing it. So I think if the competition will start to make some changes and give back some of the price increase, we'd also will follow in order to hold our market share.

There are no further questions at this time. I would now like to close the call.

Before that, operator, I just have some closing comments. For our business overall, the global long-term drivers of water conservation, population growth, increasing importance of biofuel 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. I'd like to thank you for your questions and participation in this call today.

This concludes today's conference call. You may now disconnect your lines.