Lindsay Corporation announced results for its second quarter ended February 29, 2016. Revenues were $120.6 million versus $141.1 million of revenues in the same prior year period.
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Including a $13 million increase in environmental expenses, the company incurred a net loss of $4.1 million or $0.37 per diluted share compared with net income of $9 million or $0.75 per diluted share in the prior year.
The environmental charge, on an after tax basis, reduced net income by $8.7 million or $0.79 per diluted share.
Total irrigation equipment revenues decreased 5 percent to $103.1 million from $108.3 million in the prior fiscal year's second quarter. U.S. irrigation revenues of $72.3 million increased 6 percent primarily due to revenues from acquired companies, including Elecsys Corporation, which was acquired in January 2015.
International irrigation revenues of $30.8 million decreased 24 percent. Excluding the effect of currency translation, international irrigation sales declined 15 percent, most significantly in Brazil and several export markets.
Infrastructure revenues decreased 47 percent to $17.5 million due primarily to the completion of the Golden Gate Bridge Road Zipper project in the prior year and decreases in Contract and Tubing markets.
Gross margin was 26.9 percent of sales compared to 28 percent of sales in the prior year's second quarter. Gross margin in irrigation increased by approximately 1 percentage point and infrastructure gross margin decreased by approximately 8 percentage points.
The increase in irrigation gross margins is primarily a result of higher margins from value added product lines such as pump stations, filtration and M2M controls, while the competitive pricing pressures on center pivot sales were largely offset by lower input costs.
The decrease in infrastructure gross margin was primarily due to sales mix from the decrease in Road Zipper sales.
Operating expenses increased $12.1 million to $37.1 million compared to the second quarter of the prior fiscal year. The increase includes $13 million for future environmental expense which was accrued after the company completed additional environmental testing near a building at its Lindsay, Nebraska facility.
The company's accrual relates to contamination identified in 1982. The previous accrual did not include certain areas of potential contamination because the company had been unable to determine the extent of contamination until further testing was conducted and was uncertain as to the remediation that might be required.
While the updated estimate includes a number of uncertainties including the need for any remediation plan to be approved by the EPA, it represents the company's best estimate of remediation and operating and maintenance costs to meet the long-term regulatory requirements of the 1992 EPA consent decree at the Lindsay, Nebraska facility.
Excluding the environmental expense, operating expenses decreased $0.9 million. The addition of Elecsys Corporation and SPF added $1.7 million in operating expenses, offset by $1.2 million in lower personnel related expenses and $0.9 million of reduced acquisition and integration expenses.
Operating expenses were 30.8 percent of sales in the second quarter of fiscal 2016 compared with 17.7 percent of sales in the prior year period. Operating margins were (3.9) percent in the second quarter, versus 10.3 percent in the prior year period.
Cash and cash equivalents of $89.5 million were $77.7 million lower compared to the prior year second quarter.
The company repurchased 332,949 shares for $23 million during the second quarter and a total of 469,212 shares for $32.2 million during the first six months of fiscal 2016. $79.8 million remains available under the company's share repurchase program.
Backlog of unshipped orders at February 29, 2016 was $52.6 million compared with $74.3 million at February 28, 2015 and $61.9 million at November 30, 2015. ■