Lindsay Corp (LNN) 2008 Q4 法說會逐字稿

Good morning. My name is Nicole and I will be your conference operator today. At this time I would like to welcome everyone to the Lindsay Corporation fourth-quarter 2008 conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (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 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. Thank you.

I would now like to turn the call over to Mr. Rick Parod, President and Chief Executive Officer. Sir, you may begin your conference.

Good morning, and thank you for joining us today.

Revenues for the fourth quarter of fiscal 2008 increased 100% to $147.2 million as compared to $73.5 million for the same prior-year quarter. Net earnings were $11.3 million or $0.90 per diluted share compared with $3.8 million or $0.32 per diluted share in the prior year's fourth quarter. For the full fiscal 2008 year, revenues were $475.1 million, up 69% from revenues of $281.9 million reported for fiscal 2007.

Net earnings for fiscal 2008 were $39.4 million or $3.20 per diluted share compared with $15.6 million or $1.31 per diluted share for fiscal 2007.

US Irrigation market revenues were $71.9 million for the fourth quarter, increasing 141% over the same quarter of last year. For the full fiscal 2008 year US Irrigation revenues were $239.1 million, up 63% over the previous year.

Economic conditions for US farmers remained robust through the fourth quarter with comparatively high commodity prices. In recent weeks, key agricultural commodity prices have pulled back. However, the most current USDA projection for net farm income is $95.7 billion, up 10.3% over the '07 crop year. International Irrigation revenues were $43.3 million for the fourth quarter, up 94% over the same period last year. For the full fiscal 2008 year, international Irrigation revenues were $135.8 million, increasing 95% over the previous year.

Similar to the US market, high commodity prices created favorable economic conditions for farmers and a desire to invest in yield-enhancing irrigation systems. Contrary to the US market, where we estimate that between 40% to 50% of irrigated land is irrigated with mechanized systems, market penetration of mechanized irrigation in the rest of the world is relatively low, estimated to be below 2% of irrigated crop land. The continued need to improve farm efficiency and food production will drive expansion of the mechanized irrigation market globally.

Infrastructure revenues rose to $32 million, up 50% from the fourth quarter of last year. For the full year infrastructure revenues were $100.2 million, up 53% over the previous year. During the quarter we realized revenue increases from Barrier Systems' range of crash cushions and movable barrier, our diversified manufacturing business and from Snoline in Milan, Italy. Our Infrastructure segment has grown significantly since the acquisition of BSI and Snoline, and in recent months we have implemented numerous operational and personnel changes to strengthen the business and further improve performance.

Gross profit rose 103% to $37.4 million for the fourth quarter versus $18.4 million in the same quarter of last year, on the higher revenues. Gross margin improved to 25.4% versus 25% for the fourth quarter last year. Gross margin on Irrigation products increased during the quarter over the same time last year, and gross margin on infrastructure decreased due to unfavorable product mix, manufacturing variances and higher fuel costs.

As mentioned earlier, organization and operational changes have been implemented to improve the gross margin performance of the Infrastructure segment. For the full fiscal 2008 year, gross profit was $123.8 million compared to $69.7 million in the prior year. Gross margin for the year rose to 26.1% compared to 24.7% in fiscal 2007.

During the year we moved further in our journey to implement lean practices in our organization. I believe the implementation of lean aided us in meeting the significantly expanding irrigation market demand in fiscal 2008, and we expect to see future costs and capital efficiency benefits in fiscal 2009 and beyond.

Total operating expenses for the quarter were $18 million versus $12.5 million in the same quarter last year, primarily due to the inclusion of Watertronics, Inc., acquired in January of this year, and higher personnel-related expenses. For the quarter operating expenses were 12.2% of sales compared to 17% in the prior-year fourth quarter. Operating margin rose to 13.2% for the quarter versus 8.1% in the fourth quarter last year.

For the full fiscal 2008 year, operating expenses were $61.6 million or 13% of revenues compared to $46 million and 16.3% in fiscal 2007. Operating margin for the year was 13.1% compared to 8.4% in fiscal 2007.

Our order backlog rose to $92.3 million on August 31st, 2008. This compared to $84.4 million at the end of the third quarter and $49.4 million a year ago, on August 31st, 2007. The Irrigation equipment backlog was up $48 million from the same time last year. In Infrastructure, backlog decreased $5 million. Irrigation backlog typically represents less than one quarter's worth of revenue and represents a strong start for fiscal 2009.

Our balance sheet is in excellent condition with cash and cash equivalents of $50.8 million and $31.8 million of debt. During the year we increased cash and marketable securities by $2.1 million while funding acquisitions of $21 million. Accounts receivable increased $41.4 million from the same time last year, due to the higher revenues, averaging 53 days sales outstanding in accounts receivable compared to 57 days at this time last year. Inventories increased $12.3 million over the same time last year and supported the higher backlog and averaged 5.9 turns, up from 4.4 turns last year.

In summary, strong agricultural commodity prices continued to support strong demand for efficient, yield-enhancing irrigation equipment. We experienced robust demand for our irrigation equipment globally, driven by high economic returns for farmers, global food requirements, agricultural development and water use efficiency demands.

During the past few weeks there has been a significant reduction in agricultural commodity prices and concern regarding the availability of financing, which may impact potential customers' ability to buy and finance irrigation equipment. These changes have occurred during a seasonally low sales period for the US market, so their impact on our markets in the coming months is indeterminable at this time.

In our Infrastructure segment we're very pleased with the strength of demand and interest in Barrier Systems' unique movable barrier product line and the growth we have experienced in their other road safety products. We continue to see many domestic and international opportunities for growth in our Infrastructure business, including leveraging across our international platform.

The recent financial market issues have created uncertainty regarding funding that will be available for activities, including infrastructure investments, agricultural development and general equipment purchases by farmers. We will continue to monitor market conditions and make adjustments within our business as appropriate.

I would now like to open it up for your questions.

(OPERATOR INSTRUCTIONS). Joe Giamichael, Rodman & Renshaw.

Congratulations on the quarter. I just wanted to be clear about the language used in the release and what you mentioned earlier just regarding the backlog. So on Irrigation side, that was up $48 million over last year, which I assume was almost exclusively just Irrigation backlog. So, of the $92 million, it's fair to say that 90% or more of that, is just purely related to irrigation; correct?

I don't recall the exact backlog number of Irrigation (multiple speakers) and it is in the slide deck as well.

The actual numbers, Joe -- this is Mark Roth -- it's $71.7 million of Irrigation backlog and $20.6 million of Infrastructure backlog at the end of the quarter, and those numbers are in the slide deck.

Can you talk a little bit about what you're seeing on the Infrastructure side? At least in the US, there seems to be a lot of projects and no funding. I know you talked about that briefly. I know there has also been several potential opportunities for you in the international side. Can you just sort of talk about what you're seeing in the demand environment and the funding environment there?

Yes. On the Infrastructure side the business, and we'll speak primarily for Barrier Systems, movable barrier type projects and road construction type projects, they are still seeing quite a bit of activity. In fact, did add in an additional barrier project in the fourth quarter and had shipments of quick move barrier in the fourth quarter and a fairly sizable project, a little under $10 million. So that was added in, in the fourth quarter, and there's significant additional projects that they are working on to date that would add into the future periods.

Right now, funding does appear to be a potential issue, primarily in the US market. And, I would say it's more likely to affect the road construction projects and things like the crash cushion business and the buildout of the infrastructure in general. There still seems to be a bit of a differentiation in most areas between the, let's say, quick move barrier projects, which are more traffic mitigation oriented, versus the crash cushion type projects that are really tied more to highway building.

To shift gears to the Irrigation side, in Q3, you had talked about some supply constraints you had been seeing with some of your inputs. Is it safe to say that the slowdown has freed some of that up, and just obviously being a lower-volume quarter than Q3, has also freed that up? And if not, where are there shortages still?

I think there's a combination of things that happened in the fourth quarter regarding those supply issues. One is a little bit lower quarter in some respects, and the other is the suppliers have been working through those supply issues to either bring online capacity or make modifications and processes to be able to expand capacity in some way.

So we did see that most of those issues were worked through in the fourth quarter. We really didn't see supply issues.

Just in the previous quarter, what had some of the shortages been coming in, in terms of products?

In the third quarter, we were seeing issues with tires. Occasionally, it could be sprinklers or cable, just a variety of things. It did vary, but I think tires was probably a pretty frequent one.

Just one last question on some of the larger international markets. China has been pretty active recently in its attempt to boost grain output. Has that approach been similar to how Brazil went about incentivizing farmers wanting to purchase irrigation equipment in an attempt to raise output?

And then, following that, can you just touch upon India? That seems like, certainly, the next frontier, but also a place that I don't think any of us know about, have that great a handle on what the opportunity is at this point.

Yes. Well, to talk about China first, I would say that we've seen some real good progress there in the last few years in terms of the government recognizing the benefits of efficient irrigation. The government has stepped in and offered subsidies to farmers to add in efficient irrigation. Primarily, it has gone into the more potato growing region of the country. But we've definitely seen, let's say, the understanding now of what it really does in terms of overall crop production and yield enhancement to add in efficient irrigation. So I would expect to see that continue to expand throughout China.

But I also think that there's some expansion or, let's say, consolidation of land that needs to take place to continue to facilitate and fuel that, and I think we'll see that over time as well. But I think it's definitely making very good progress. Our sales in China are significantly up from what we would have seen a couple of years ago. I think we expect to continue to see that growth, barring funding issues and things of that nature. But certainly, government support is there.

India, as you said, is one that we are not as knowledgeable about ourselves. Also, I'd say that we see it as a vast market with a lot of growth opportunity, but again, more small landholdings and some consolidation needs to take place. But I think we're just scratching the surface in terms of India, in terms of really getting in there. We really haven't seen much progress or, really, much of anything at this time. But it is, I think, a great potential. But it's going to take a few years to really start to see that materialize.

I assume you are not committing too much effort to trying to force that market open as well, while they wait for it to develop and come to you.

Correct. Well, I wouldn't say -- wait for it to develop. I think it requires development activity, but I would come back to the point you made first, which is we are not committing much in terms of resources to that.

Congratulations on the quarter.

Mike Cox, Piper Jaffray.

This is Alex Potter; I'm calling it for Mike, who is traveling today. Just a couple of questions here if we could, stay on this international topic for a second. I don't know if you have any updates on the manufacturing facility in China. Is that still expected to be a 2009 event?

Yes, it is.

And then, kind of a follow-up to some of the topics we were talking about just a second ago. What international markets are particularly strong for you? Which ones have been weaker in the past quarter?

Well, looking at this past quarter, the markets that were strong; certainly Brazil was a strong market for us. Mexico has remained a pretty strong market. I have a little more concern about Mexico going forward, just in terms of what is happening with the peso and economic conditions there. But it has been a very strong market. We have seen strength still in South Africa and recently in the Middle East, also recently in Eastern Europe. So we've seen some good growth there. So those are some of the primary markets, as well as China, where we've seen good growth through the past quarter.

Okay, perfect. And then, how about here domestically? Are you seeing any geographic areas of particular strength here in the states?

Not really. Looking at this past year and even the past quarter and past year, it's been pretty, I'd say for the most part, across the board through all geographical regions.

Okay, so pretty much everywhere?

And I'd say, through all the primary irrigated geographical regions. Again, I'd come back to, if you look at where the primary irrigated acreage is, it's mostly in the -- we'll call it the Midwest or Western states. And the growth has been pretty much across the board through those markets.

I also have a question here regarding dry land conversion. Are you seeing more of that, or are people accelerating with respect to dry land conversion, especially in the face of these higher input costs that farmers are facing?

Historically, what we have seen when we have looked at the whole goods going out the door is about an equal split in our sales going to replacement, flood conversion and dry land. What we saw in '08 was a little larger percentage going into dry land. I wouldn't say it was a very significant increase, but certainly a little bit bigger increase, which was not surprising given the commodity prices and the high potential yield the improvements that are available for dry land farmers moving to irrigated land. So there has definitely been a step up in this past year of conversion of that dry land acreage.

And you saw that trend continue in this last quarter?

We did.

Okay, perfect, that does it for me. Thanks a lot, guys.

(OPERATOR INSTRUCTIONS) Ryan Connors, Boenning & Scattergood.

First off, I just had a factual question, a numbers question. Are you able to provide us with either the operating income breakdown and/or the operating margin percentage breakdown by segment?

This is Tim, and I can give you that information. On the Irrigation segment, what you'll see in the 10-K is 20.2% on the Irrigation side this year. And on the Infrastructure side, you will see 16.7%. I would like to add additional commentary to that. In fiscal year '08, we had some allocation changes between Infrastructure and Irrigation, and that meant an improvement to Irrigation of less than 1% on the operating margin line and a decrease in the operating margin percent on the Infrastructure line of slightly more than 2%.

Excluding the allocation changes, we are seeing a decrease in operating margin on the Infrastructure side, and that is primary due to BSI. We're seeing some unfavorable product mix, manufacturing variances and higher steel costs now.

Okay, that's good, that's very helpful; thanks, Tim. On Irrigation, it seems that domestic Irrigation revenue in particular sort of accelerated very nicely and reversed a trend we had seen the last few quarters where international was the faster growth area. I wonder if you could just give us some color and talk about that for a minute, Rick. What is it that was driving that?

I think there's a couple of things that would drive that. One is, in the fourth quarter, we would have seen some of the storm-damaged machines that we talked about in the third quarter that would have moved out in the fourth quarter, and that probably could have been as much as 10% to 15% of the total North American Irrigation revenue, could have been tied to the storm damage. That would be machines and/or parts. So that would certainly have aided that fourth quarter for North America.

Another one is, there's the -- as you know, with the economic stimulus package, there's the accelerated depreciation in that package that's beneficial to farmers. I think that there is some awareness now that there is a benefit to -- by the farmers, that there is a benefit to buying this equipment this year and being able to take that accelerated depreciation. So I think we may have seen a bit of that in the fourth quarter, when typically, that would be a slower quarter for the US market than what we saw this past year.

In addition to that, the dealers certainly knew that we were coming off of a strong year and were interested in having some stock on hand. So we had some dealers stock units, not a significant amount, but some dealer stock that would have gone into -- that the dealers would have actually ordered to go into their inventory in anticipation of demand during the fall time period, plus prior to the winter time period, to have one or two units on hand. I'd say, that would never be more than one to two units for any dealer. So those would be the primary things, as well as just still very good overall domestic demand.

In terms of the pricing angle, obviously you've given some cautious commentary about the market in general and so forth. I wonder if you could just update us on what pricing looks like. And I guess one aspect of it, in particular, would be the pass-through pricing that you've got in the last few years, couple of years, as steel and other input and zinc and so forth have gone up, you have passed some of that through. How sticky do you think that pricing is with some of those input costs coming down now? And then, outside of the pass-through, just how is the pricing environment? Still fairly firm?

We haven't really seen a change in the pricing environment at this time, Ryan. I think that things are holding fairly well, certainly, as of the end of the fourth quarter. If you look at what we were seeing through the fourth quarter and the fiscal year, basically about three quarters of the growth was unit growth and about -- this is on a global basis -- that about a fourth would have been price overall. It would have been a slightly different mix in the US market, but that's on a global basis.

But I would say, overall, there has been a general stickiness in terms of price. We hope that that's going to continue. And I'd also add, I don't think we've seen significant change in manufacturing input costs that would warrant a change in pricing at this stage.

Rick, your commentary on the financing environment -- obviously, it seems like you are fairly pessimistic there. That seems to run counter to some of the things that we're hearing on the checks that we do and then people saying that the banks that do a lot of farm lending aren't involved in a lot of this esoteric stuff that has gotten the money center banks in so much trouble and that, therefore, the financing environment is better on a relative basis, at least, in the farm belt than it is on the coast.

So I wonder if you could just give us a little more color about what exactly is driving you to be what seems like very, very cautious on that financing commentary.

I hesitate to call it pessimistic, because I'm not pessimistic. In fact, we spoke to one of the primary lenders that support the growers in buying or financing the purchase of our equipment, just on this past Friday, to verify what their status was and their availability of funds, which everything seemed to be okay. The interest rates have moved up a little bit, but in general financing seems to be flowing fine. So I wouldn't call it pessimistic; I would call it more cautionary from the standpoint of many of the things that we are seeing today in the financial markets we wouldn't have necessarily predicted two weeks ago.

So in terms of what the spillover is or what implications those have down stream, I wouldn't want to really guess or speculate on that or mislead anyone. But I'd say that, based on what we know, there's not a reason -- we don't have, necessarily -- we are not pessimistic about this or have a specific caution on it. It's just we think that there's a lot going on in the financial markets today that has implications, and those implications are really not determinable at this point in both the domestic and international markets.

Okay, that makes sense, understood. And then one last one, Rick. In the press release you mentioned share repurchases as a potential avenue for cash deployment. Is that something that's under active consideration, or should we read that more as a generic comp type comment?

We have an outstanding share repurchase authorization, and it is always a consideration. We weigh that against other investment options or other options that we would consider similar to acquisitions or organic growth investments. It is always a consideration. It will continue to be one.

Ryan Connors That's all, very helpful, thanks much.

[Michael Holman], Sterne Agee.

In the fourth quarter, what was the effective tax rate in the fourth quarter? It looked like it was a little bit higher. Can you clear that up for me?

That is through -- the effective tax rate in the fourth quarter was 40.1%. A couple of international specific issues drove that effective tax rate up in the fourth quarter.

Okay. And, going forward, do you expect that to continue, or do you look at -- I think historically, you've been in the 34%-35% range?

That's what I would expect going forward.

For the fourth quarter -- I know you gave percentages for the year on the operating income by segment, or the operating margin. Do you have fourth-quarter dollars in terms of your operating income by segment?

I do. On the Irrigation side, the revenue dollars would be $52.2 million, and the Irrigation side would be $115.2 million. On the Infrastructure side, the revenue dollars would be $21.4 million for prior year and $31.9 million for the current year.

What I meant was, the operating income by segment for the fourth quarter, not the revenue.

$7.8 million for the operating income number for Irrigation for the fourth quarter, and $23.4 million for the fourth quarter of fiscal year '08. And on the Infrastructure side, the operating income that will show is $4.2 million, and operating income for fiscal year '08 on the Infrastructure side will be $5.2 million.

Okay. There was a proceed from a settlement of a net investment hedge. Is that a currency hedge, or is there materials? Could you talk about that, please? On the cash-flow statement, for the year.

We have effectively hedged our foreign business units' FX exposure through currency hedges. So through the quarter, we would have kept those hedges and then would have had transactions on those hedges also.

And that's something new that you are doing this year?

This is something new that we've done in this fiscal year with regards to protecting our foreign business units and the strength of the dollar. (multiple speakers).

So you are hedging against dollar strength; correct, just to be clear?

That's correct. We would have hedged in the quarter against dollar strength (multiple speakers) yes.

In terms of the international Irrigation, with respect to China and Brazil, can you just update the time line and what you expect to spend and whether you need to add personnel for those markets?

I would answer it this way. What we expect in total CapEx for '09 at this stage is going to be roughly about the same as '08. So we are looking in that $15 million to $20 million CapEx range, which would include a piece for China. The amount of CapEx that we are looking for for a China operation is initially quite small; it's probably in the $5 million range, so it's not a very significant amount in terms of CapEx. There was no specific additional CapEx that was required for Brazil. We have ongoing investment we will make there, but nothing specific in terms of a major expansion there.

Putting aside the current credit situation, or maybe including it, could you talk about your acquisition program or whether you are reviewing more companies today, or fewer, and what that looks like at the moment?

Yes. I would say that we continue to review companies, as we have in the past. I wouldn't call it more or fewer. Maybe, to some extent, our review is stepping up a little bit. I also think that this current situation may create some opportunities from an acquisition standpoint. It has some challenges as well, but it may create some interesting opportunities and possibly some more attractive pricing on some of the acquisition candidates.

So I think there's some good opportunities that could come from that. Now, we've tended to look at acquisitions that would be in irrigation or infrastructure, probably in the revenue ranges of $30 million to $50 million revenue. I think we would consider ones larger. We also consider ones smaller that could be product line or product add-ons within those segments. We continue to see quite a few attractive candidates in both Irrigation and the Infrastructure segments.

I want to go back to the domestic Irrigation. With revenues up 140% in the quarter, how -- as you look out, just in terms of bracketing that and realizing you do not provide formal guidance, what kind of bracketing expectations on the domestic market? Would you expect your Irrigation, your international Irrigation, to again exceed the domestic growth and the domestic to revert to a more normal level? And what do you think that normal level is?

I think you are getting very close to what I would consider to be guidance on this. I would add that we are dealing with a situation where a time of uncertainty here in terms of what's happening with financial markets and commodity prices and a number of factors that will influence our business going forward. So I'm not going to speculate on what those growth rates will be for the domestic and international markets at this time. I would say that we've seen very good growth. We've done some excellent market development in the international markets. We expect both of the markets, both international and domestic markets, have excellent long-term growth opportunities for, still, additional dry land conversion, flood irrigated land conversion and replacement, primarily in the US markets. So, we see very good long-term drivers for those, but I really don't want to get into speculating and to giving guidance, really, on where we think those markets are going to go in the next year.

Michael, before you jump off, I do want to clarify one thing and make sure the group is solid on this information. Going forward, the effective tax rate that we expect is between that 34% to 35% tax rate. So I didn't want there to be any misunderstanding there.

Okay, sounds good, thank you.

Bill Waite, SMC Capital.

Congrats. Most of my questions have been answered. I just wondered if you could talk briefly and provide any color on how the margins vary with regard to international businesses and the different countries and markets.

Yes. I'll do it in fairly broad terms because, for competitive purposes (multiple speakers) we dot not break out specifically. But I would say that if you were to look at international export markets, which are the units that we're exporting from the US, generally they are going to be a few points lower than domestic margins. Part of that will be due to market conditions where we may have some local competition, where we are obviously having to add cost in terms of freight to get it to market. So we'll deal with some lower margins in those cases.

In the internationally -- or the international production markets where we have factories in Brazil, France, Africa, our margins will be typically lower than US margins, mostly due to the composition of our manufacturing cost structure. I think I've explained this a bit in the past, but just to give a little more color to it -- in the US factory, we buy hot-rolled coiled steel and make our tubing. We do all the welding. We galvanize internally, so it's a very vertically-integrated production process.

And, in most of the international markets, in our international factories, we are buying tubing from outside, and we send our materials outside for galvanizing. So we'll have less vertical integration in our manufacturing processes. So we recognize that our cost margin structure will be a little less optimized in those markets than the US one would be. However, our policy and strategy all along has been to change that cost structure as those markets develop and mature. So, when the markets warrant broader production capabilities, broader production processes, we'll add those in.

So in a sense, we'll tend to run lower margins in those markets in the short-term until those markets develop further.

Do you see those markets, after they do develop and you are able to recognize some cost synergies, do you see those becoming approximately equal or equivalent to the US? Or, do you see them being substantially better?

I think they have the opportunity to be equal, or in some cases better, in some cases a little worse, and it will vary by region. And the reason I say that is, in some of the international markets we may have one basic competitor. Some markets -- for example, Europe is a particularly interesting one where we have maybe six or seven competitors, mostly small companies, that we're competing against. So it will vary, depending on specific market conditions. But I think that the opportunity is there in each of the markets to have margins comparable to US-type margins.

Joe Giamichael, Rodman & Renshaw.

Just one question, focused on the Irrigation domestic market. As you look at Q1, with an upcoming presidential election, you have one candidate who has been pretty public about ending ethanol subsidies. Knowing that the irrigation equipment demand is to some extent sentiment-driven, do you get the sense from speaking with dealers that buyers may be sitting on their hands until after the elections?

No, I would say, we haven't really gotten that sense. I would say that buyers right now would probably have a little more of a concern or caution regarding what's happening in financial markets, plus commodity prices. But I haven't really heard anything regarding sitting on their hands until the election. I think there will be definitely buyers in the domestic market that will be interested in making purchases to take advantage of the accelerated depreciation and tax advantages that they can get, and I believe that their decisions will be primarily economic-driven, based on what they believe they can do in terms of enhancing their returns.

Ari Raivetz, RNK Capital LLC.

Actually, my questions already have been answered. Thank you, great quarter.

[Dick Kendig], [Keeley] Asset.

I got cut off briefly and missed some of the Q&A. Did you talk about share repurchase and currency translation problems?

We did talk about share repurchase, Dick, and basically what we talked about on that was that we do have an outstanding share repurchase authorization. We do still consider it to be one of the options or one of the tools that we have to work with, and we will continue to view it that way. We view that, along with acquisitions and other investments in organic growth opportunities, as all opportunities to create shareholder value. And, we did not discuss, necessarily, the foreign exchange. So I'll let Tim discuss that.

The foreign exchange impact for the full fiscal year, getting down to the operating income line, added operating income of less than 1%.

And how do you see the weakness in the euro relative to the dollar; or, contrary wise, the strength in the dollar is going to -- impacting you going forward?

Mark, if you wanted to comment on the balance sheet in terms of what we've done, and then we can talk about the market (multiple speakers) --

Yes, there's really two aspects. First of all, on the balance sheet, we had in the quarter been hedged from our balance sheet exposure with regards to the euro. So we immunized our balance sheet from that standpoint. And there's obviously market effects I think Rick can adjust.

The interesting thing with the European market is, as you know, we have an operation in Europe and we have not been producing pivots in that market. We have produced hose reels in that market for the European market, but pivots we have been primarily exporting from the US to Europe, for most purposes. There has been a few exceptions -- because of the value of the euro versus the dollar, and we monitor it and we know that there's a time at which we will switch back to local production versus exporting from the US. But the good point is that we do have that option. The option was put in place. We've produced in Europe in the past, and we can turn it back on as needed.

There are no further questions at this time. I will now turn the call back over to Mr. Parod for any closing remarks.

For our business overall, the global long-term drivers of water conservation, food requirements, environmental concerns, biofuels and improvements in infrastructure remain very 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 continue to have the financial flexibility to create shareholder value by pursuing the balance of organic growth opportunities, strategic acquisitions, share repurchases and dividend payments.

We thank you for your questions and participation in this call this morning. Thank you.

Thank you for participating in today's conference call. You may now disconnect.