Lindsay Corp (LNN) 2009 Q1 法說會逐字稿

Good morning, ladies and gentlemen. My name is Tina and I will be your conference operator today. At this time, I would like to welcome everyone to the Lindsay Corporation first quarter 2009 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 risk 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.

I would now like to turn the call over to Mr. Rick Parod, President and Chief Executive Officer. Please go ahead, sir.

Good morning, and thank you for joining us today. Revenues for the first quarter of fiscal 2009 rose 49% to $113.1 million as compared to $75.9 million for the same prior year quarter. Net earnings were $6.3 million, or $0.51 per diluted share compared with $4.4 million, or $0.36 per diluted share in the prior year's first quarter. In the domestic irrigation market, revenues were $53.6 million for the first quarter, increasing 55% over the same quarter last year. Revenues on the quarter benefited from the sizable backlog accumulated during the fourth quarter of fiscal 2008 prior to the change in economic conditions.

Economic conditions for US farmers changed unfavorably within the quarter driven by the worldwide economic crisis. The current USDA projections are for net farm income to be essentially flat for the '08 crop year, yet still at near record levels. Since June, we've experienced a dramatic change in conditions for US farmers. Commodity prices for corn and soybeans have dropped about 50%. Wheat is down about 40%, while input costs have not fallen has rapidly. It's estimated that the most current corn price is below the break-even level for US farmers. Demand for US corn remains solid and ending stocks for the '08-09 year are estimated to be 9 to 15% below the previous year, so supply and demand relationships would indicate corn prices rising. Farmers' balance sheet remain strong; however, it's likely they will continue to remain cautious until there are clear indications of improving farm economics.

International irrigation revenues were $32.3 million for the first quarter, up 47% over the same period last year. Exports were up in all regions, driven by continued agricultural development and yield improvement initiatives, and the high year end backlog. Revenue from our international irrigation business units in Brazil, South Africa and France were also significantly higher in the first quarter of fiscal 2007. Our irrigation operations outside the US continued to maintain high order activity during the quarter. The pressure on increasing food production, demand for biofuels has increased investment in agricultural development, including expanding efficient irrigation globally.

Our infrastructure segment revenues rose to $27.2 million, up 40% from the first quarter of last year, with revenues rising in each of our infrastructure businesses. The largest revenue increases in this segment were from Snoline's lower margin products and from our diversified manufacturing, both of which earned lower gross margin than barrier systems proprietary movable barrier products, resulting in a less favorable product mix. Overall, gross profit rose $28.6 million for the first quarter versus $19.3 million in the same quarter last year on the higher volume. Gross margins declined slightly to 25.3% compared to 25.4% for the first quarter last year. Gross margin on irrigation products increased during the quarter over the same time last year, offset by a decrease in infrastructure margins due to the unfavorable shift in product mix and factory efficiency variances. Total operating expenses for the quarter were $16.9 million versus $12.8 million in the same quarter last year, primarily due to the inclusion of Watertronics acquired in January of last year, $700,000 of incremental expenses for additional monitoring and remediation of an EPA workplan and higher personnel-related expenses.

For the quarter, operating expenses were 14.9% of sales compared to 16.8% in the prior year's first quarter. Our order backlog decreased to $40.1 million on November 30, 2008 as compared to $51.2 million on November 30, 2007. The irrigation equipment backlog decreased $6.1 million and infrastructure backlog decreased $5 million. Recently, barrier systems was awarded a $19.6 million contract for movable barrier and barrier transfer machines to be installed in Mexico City. This project, which was not in our backlog at quarter end, will assist Mexico City in their efforts to mitigate traffic congestion, while providing positive barrier protection from oncoming traffic during peak traffic periods. Work on this project is currently under way and is scheduled to be completed in January 2010, with the largest percentage of the revenue expected to be recognized in the second half of fiscal 2009.

Accounts receivable increased $23.7 million from the same time last year due to the higher revenues and inclusion of Watertronics. Inventories increased $17.5 million over the same time last year. Our consolidated inventory turns were approximately 5.7 times improving over the same time last year. Current initiatives are focused on working capital efficiency improvement. Our balance sheet remains strong, with $28.3 million of cash and $30.2 million of debt. In addition, we have a $30 million revolver currently unused.

In summary, the first quarter of fiscal 2009 was relatively strong, working off a good backlog of orders. The overall global economic conditions did impact our orders received during the quarter. However, the long-term drivers for our irrigation business reading positive in spite of the current downturn. In our infrastructure segment, we're pleased with the strength of demand and interest in our unique movable barrier product line and we continue to see many domestic and international opportunities for growth in our infrastructure business and we expect that, if there's an increase in government investment in infrastructure, our business is likely to benefit.

Globally, we're dealing with the challenging economic environment that's changing rapidly, making it very difficult to predict future demand. During this time, we remain positioned with a strong balance sheet, a strong global market position, and we will continue to make appropriate modifications within our business in response to market conditions. In spite of the near-term challenges, we're confident that increasing agricultural yields to boost food supply, improving water use efficiency, biofuel demand and transportation safety, will remain global priorities and will be long-term drivers for our markets.

I would now like to open it up for questions.

(Operator Instructions) Our first question will come from the line of Michael Cox with Piper Jaffray.

Thank you for the question and congratulations on the quarter.

Thank you.

My first question is on timing from a seasonal perspective. When do, on a normalized year, when do you expect farmers to sort of revisit a capital decision?

Mike, we expect to, generally se demand start to pick up and orders start to pick up in the January time period, usually it's January - February time period, depending on what else is happening in the market. Just to explain our typical revenue split for irrigation, this is from a more historical perspective, typically we would see a revenue split for the irrigation business of about 20% of revenues in the first quarter, 25 in the second, 35 in the third, and 20 in the fourth quarter. It's kind of a traditional split. Now, we do, however, see many times when that will change due to things like whatever is happening in the economic environment that may affect farmers, commodity pricing, for example, or a drought can impact that in terms of timing, so there's a number of things that can impact that flow, but that's the typical timing of our revenue recognition in irrigation.

Okay, that's helpful. Can you comment on the pricing dynamic in the irrigation segment now that steel prices have fallen significantly?

Yes. During the first quarter and through all of last year, we saw pretty good pricing discipline in the sense that as steel prices were rising, we were generally, or often leading in terms of passing through price increases and saw competition following good pricing discipline in terms of maintaining pricing in the market. And we saw most of that through this first quarter. However, since then, we have seen some movement down by one of our major competitors, not a huge amount, but probably in the range of about 3% and what I've said to our dealers and would say is that we will be competitive in this business in irrigation and we will do what's necessary to remain competitive in it, but we will not lead with pricing reductions.

Okay. That's very helpful. And then just one last, again, big picture question in terms of farm credit conditions, there's been a lot of discussion around this. Hoping you could maybe address this on a domestic, as well as your key international markets.

Well, what we've heard is that the farmer is still relatively healthy. Their balance sheets are in good position. And that's domestic and for the most part, foreign as well. Our international markets. In the international markets, we're seeing more of the large farmers will typically have some bank financing that may be tied into their farming practices. But that could be more impacted by some of the economic conditions. But we're really not seeing a lot of that yet. Anecdotally, we're hearing that there's some. Generally, and I would say on a broad, global basis, we're hearing that farmers are still in a strong position. I do believe that the farmers facing some difficult questions or challenges in terms of planting decisions this next year, given things like corn prices near break-even levels, around that break-even level. So the farmer's going to have to make some tough choices in terms of what he will do for this next season.

Okay, great. Thanks.

You're welcome.

Our next question will come from the line of Joe Giamichael with Rodman Renshaw.

Good morning, Rick. How are you?

Good morning, Joe. I'm doing fine. How are you?

Good, I just wanted to start out by talking about the infrastructure business. Do you have a sense for the addressable opportunity in the infrastructure spending plan as it relates to you business and, I guess with that, can you walk us through the potential timing and competitive environment as you vie for those dollars?

I'll give you my view on it, which is the best I could do. It's difficult to know what changes or demand improvements we could see from what's been discussed in terms of economic stimulus and infrastructure by the new administration coming in. And the reason I say that is because if the investment were in things like just typical road repavement that, would have one implication. If it's building new roads and new bridges, that has other implications, but we believe in general, investments in any road work infrastructure will be beneficial to our business, particularly in things like crash cushions and our TMAs, Truck and Trailer Mounted Attenuators. When it comes to investments in traffic mitigation, we also believe that we will benefit, and that is globally in projects that would involve our quick move barrier system, the movable barrier, like we've seen in the Mexico project. So we think any of these investments that will be tied to trying to stimulator or create jobs and stimulate some demand in that infrastructure segment will potentially be beneficial to us. The second part of the question that you asked is really regarding the timing. I believe for an administration coming in and making changes in terms of infrastructure spending, it's likely to be a period of, could be 6 months before we see real change coming from that, but in the meantime, we still have good projects and demand for our infrastructure business with projects like Mexico and other road works projects involving crash cushions and TMAs.

And just I guess to follow on that, I know that the Mexico opportunity had been kind of publicly discussed by, by officials, much sooner than they had actually approached you. So you sort of had a sense that there was a demand for that project out there. On an international standpoint, do you see other opportunities like Mexico that are sort of, I would say, sort of percolating now where they could turn into orders in the near-term?

We do. There are many opportunities like that and they do take time to process through and I think Mexico was a good example of that. I was thinking back this morning and I think I saw the newspaper article from Mexico City, probably the first time, might have been a year to year and a half ago when they discussed doing this quick move barrier project or traffic mitigation project on the front page of the newspaper. They do take time to go through the gustation period and come out-- we anticipated the Mexico project really much earlier than what it came in. In fact, to the point where we've even built, or prebuilt some inventory anticipating that when the project did land, we would have a pretty short fuse or delivery time in terms of production. So the fact that it's in is excellent. It also will help us in terms of some of our inventory reduction because we know we have prebuilt some of the components for that barrier. But we do see many projects like that, that are at stages of various discussion or completion or analysis.

Got it. Just a few more quick questions and I'll get out of the way. On the irrigation side, what sort of order of magnitude have you seen in terms of decline to your input costs, largely just steel and zinc? My thought being, trying to gauge what your ability will be to maintain your gross profit dollars, even if your revenue -- even if you decide to decrease prices to some extent.

Well, there's really two parts to that equation, and I think one that I would comment on is that at any point in time in any quarter, we typically will look at prebuying or having a buy that will cover somewhere in the range of 70, 75% of our steel needs and requirements. That would be a typical process for us. The fourth quarter of '08 was a little bit different because we could see some declines in steel prices, so we did purchase a little bit more on the spot market rather than prebuy. However, we did have a prebuy in place. That said, we also had a prebuy-- let's say a forward buy that we had in place in the first quarter and it usually takes a couple of months to burn through whatever is on hand at any point in time. So the current price of steel is probably about roughly 30% below where we were buying steel, say, two or three months ago. And that's the kind of reduction that we've seen, which has been a pretty rapid reduction in the steel market in the last few months.

And just remind us, steel as a percentage of your cost of goods on the irrigation side?

Steel has been roughly a third of cost of goods sold, so 30 to 33%.

Okay, great. And just one last question. I just want to focus on the balance sheet and cash flows for a second. You've tied up a lot of the cash in inventory in the quarter. Could you walk us through the composition and the rational there. I know you talked about having built inventory in anticipation of the Mexico project.

Yes, there would have been some that would have been built-in in anticipation of the Mexico project. There also is a fair amount of irrigation related inventory, or irrigation inventory in that number. In fact, the majority of it would be irrigation inventory in terms of the increase, probably year-over-year. And one of the reasons for it is certainly looking back to where we were sitting in the July-August time period and building our plans for this next year, and this would also be a fairly typical process, we'll look at the coming year and make decisions in terms of production levels and whether we will have some dealer stock inventory that we will encourage dealers to take and how much we will build or prebuild in anticipation of the season. So we did prebuild and do have some inventory on hand in anticipation of the season.

Got it. And this is one sort of means you can avoid some sort of a capacity utilization issues around a Q3 bubble in demand, right?

Yes, that's right. And as we experienced last year at the peak of the season, during that, say, May through June time period, it became very difficult for us to respond quickly to orders received and we decided it was more beneficial to, one, have dealers have some stock, which was minimal, and also for us to have more stock to be able to respond to that demand quickly.

Okay, great. Thank you for taking all the questions. I'll jump back in queue.

Yes, thank you.

Our next question will come from the line of Ryan Connors with Boenning & Scattergood.

Good morning, Rick.

Good morning, Ryan.

Couple questions on irrigation, then a couple on infrastructure. Last year there was some real discrepancies between the growth at domestic irrigation business and the international. International, they were both growing very nicely, but international growing exceptionally well. Now that it seems like the market is rating to some extent, I would be interested to get your thoughts on how you think those two markets will fare relative to their growth rate or maybe lack thereof in the near-term. I mean will, will the international side still sort of outperform, so to speak, or do you think that could change in the near-term?

It's difficult to predict which will have -- what growth rate or decelerate, as you said, at what rate at this point, Ryan. The way I would look at this, if you look at our fourth quarter backlog and performance in the first quarter, I think it was showing that both we're performing very well at that time. And what we've seen and what I said a couple minutes ago is we've seen still strong order rates in our international markets. I think it would also be fair to say that the economic I think it would also be fair to say that the economic crisis or downturn that has been experienced in the US is probably a little delayed in terms of its impact in more of the international markets that we participate in. So I think that there's a delay factor in terms of what that impact would be, but there's also different market dynamics in each of those international markets versus the United States. And by different dynamics, I'm referring to things like in Brazil, most of the purchases are financed under the Government's [Funomnie] Program, which is currently funded for this next season. Also, input costs and commodity prices are different for those farmers, with many commodities are really denominated or based on dollars in terms of the sale and input costs are in local currency.

So the dynamics are different in each of the markets, whether we're looking at Brazil or Africa or Asia or any of the -- or anywhere around the world. So it's difficult to characterize that as any one growth rate or deceleration rate, whichever you want growth rate or deceleration rate, whichever you want to look at. And I would say that what we will see is during this next few months and probably the next three to four months, what, what all of these variables, how all of these variables impact those specific markets.

Okay. That's helpful. Thanks, Rick. And you mentioned -- you made reference in your press release to the staffing reductions with regard to, getting ready for an environment that will still be good, but maybe not as good as 2008. I would be interested to get your -- any input you could give us on how those discussions played out in terms of what were the big factors you looked at in order to, you know, determine that those steps had to be taken and then at what magnitude they had to be taken and whether it was the number of reductions or the shifts or what have you.

Let me start out by saying that due to the seasonality of the irrigation business, we typically have work force reductions in the June or July time period in the Lindsay, Nebraska factory in our domestic operation. This year, we retained that work force as we worked through the big backlog we had at the end of the fourth quarter. Today, our hourly work force in Lindsay is down approximately 14% from, say, the low period of fiscal '08. So we are down from that time period and the reductions were based on what we saw in terms of current orders on hand and also what we felt was going to be the most efficient operation as we worked through that backlog. So that's where we sit today, which is not an unusual period in the sense that we typically have made these reductions much sooner than we did this year, but it's, it's the low part of our year, low part of the season, so reductions normally would have taken place by now.

Okay, and then shifting over on the infrastructure side, just had two questions to follow up on the things you've already discussed with the previous callers here. First off, I wonder just from a capacity utilization perspective where does the Company stand in order to be able to capitalize on the opportunities? In other words, is there enough capacity there to sort of capitalize on that without having to, say, build new plant and equipment and that sort of thing? And then the second question being, is there any reason to believe that the influx of federal dollars would impact profitability for you and for the industry as a whole? In other words, sort of the single payer problem that you hear about in healthcare that has a major buyer, the government sort of drives the hard bargain and margins may become, depressed on some projects. Is there any -- is that, a valid way to think about that, or what are your thoughts on that?

Let me take that second question first, Ryan. I would say that -- I wouldn't see that having an impact on our business and the primary reason for that would be we're dealing with some highly proprietary type products that are fairly unique without many suppliers of those kinds of products. And I say many. In some cases we're the only one. For example, the quick move barrier type system. But even when it comes to things like crash cushions and TMAs, I think we're in a strong market position and there are not a lot of suppliers to this. I really don't see that being a specific issue in terms of government leverage by increasing spending in their infrastructure area. Coming back to the first question, which was regarding the capacity, I would say that he we have the capacity in a fairly variable capacity plan that would allow us to be able to take advantage of those opportunities as they come along. I would add, however, if we do see that the federal spending is significant and the kinds of products that we build and supply, and our proprietary products, we would consider expanding capacity, which may be more in the form of manufacturing equipment than, say, brick and mortar. So I would look at capacity expansion if the opportunity were significant, but we have quite a bit of variable capacity that we can apply to this infrastructure business.

Okay, great. And then just one final housekeeping item, either for you or Mark if he's there. The other income line on the income statement showed fairly sizable negative number. Can you just give some color around what exactly, what are the components of that?

Ryan, I can certainly cover that. This is Tim Paymal.

Okay, great.

Ryan, in the quarter, we experienced significant devaluation in the Euro and Rial of approximately 15% on the Euro and 39% on the Rial. That created FX losses in the quarter.

Okay.

And approximately 40% of those were realized. We have now subsequently seen the Euro strengthening again and those are -- that would help the unrealized side of that. So that explains the significant number that you're seeing there.

Great. Well, thanks, Tim and Rick, for your time.

Thank you.

Our next question will come from the line of Torin Eastburn with CJS Securities.

Good morning. It's actually Arnie Ursaner from CJS Securities. The American Association of State Highway and Transportation Officials or ASHTO, just put out a survey talking about 5000 projects ready to go, meaning they could be on the contract within 180 days totaling 64 billion. Do you have any sense of how many of these your products are designed into? Or--

Arnie, I have not seen that survey, or I'm not aware of the details of that, so I really can't say how much of that would involve our product, but I will definitely look into it.

Okay. My second question is a follow-up regarding your steel inventory costs. You mentioned that the current cash prices are roughly 30% below where they were a while back. Should we assume your steel inventory costs are materially above market and how would that likely impact your margin over the next month or two, three months, as you manufacture equipment?

I think you could assume our steel inventory is somewhat above market. I would not call it drastically above or use any extreme term in terms of defining that. I would say it's somewhat above market, and as I said, it's typical for us to have a month or two to burn through the inventory that would be on hand to whatever current market changes have taken place. And this has been a pretty rapid changing environment in terms of steel on hand -- or the steel pricing, rather. The second part of your question is how does that affect our margins going forward. And I think the answer is that in a fairly stable pricing environment, there really is not an impact. In fact, there could be some potential benefit because our overall steel on hand would be lower priced than what we would have seen, say, four months ago. So there could be some potential benefit in a stable environment of pricing in a competitive environment where we've seen some price reduction. We will be reducing some pricing. I don't expect that to have a significant impact on selling margins. I think the thing that could be more impactful of margins is really what happens to volume in the, at the peak of the season, in the next couple months.

That leads right into my third and final question. A former Iowa Governor Tim Vilsack is expected to be announced the next Secretary of Agriculture. He's been a very strong supporter of renewable energy, has pushed for ethanol in Iowa. How do you view him, if he is in fact put in place, how do you envision that perhaps impacting the commodity side of the equation for you?

Yes, I saw that also and I thought that's pretty favorable for farmers and farm economy and agra-business in general. As you said, he is pro biofuels, pro ethanol and I think that's very beneficial and obviously it's very important for Iowa, but it's also important for all of agra business and farm economies. And the ethanol has been -- has played a pretty big role in the rural communities and rural agricultural communities, so I consider that favorable. I consider that positive in terms of hopefully maintaining demand for ethanol, which will be positive for corn pricing, positive for farmer economics.

Look forward to you joining us at our January conference. Thank you very much.

Very good. Look forward to seeing you. Thank you.

(Operator Instructions). We do have a question from Michael Coleman with Sterne, Agee.

Wanted to go back to the seasonality of the backlog and whether the potential of the prebuy this season disproportionately affected the decline in the backlog from the August to the November quarter.

If I understand your question, I believe it's tied to the fact that we did have some dealer stock inventory or cases where dealers would have taken on some inventory and that would show up, by the way, in our accounts receivable. And this was in anticipation of a strong peak period in, for our irrigation business where we wanted our dealers to have some stock on hand. dealers to have some stock on hand. And your question is really did that in some way distort that, either the backlog in the first quarter, is that correct?

That's correct.

Yes, I would say that the type of dealer stock inventory program we had was fairly typical to ones we've had in previous years and I believe not much different than the one from the year before. I don't recall the specific details of that, Michael, but I think it's very similar. So I would say it would not have distorted it. I think there is one other factor that probably came into play towards the tail end of fiscal '08 and that would have been the economic stimulus package that had tax incentives, or basically -- well, basically tax incentives for farmers. I think that did play into some demand towards the end of the year and into that backlog, but it's very difficult to know to what extent.

Okay. And do you think those dealer inventories have been worked through, or do you think they are still maybe have some inventory on hand?

Well, dealers probably have been moving -- I don't know the exact amount, but they have been moving that inventory. I do know that they are moving it. The inventory that a dealer would take on would be typically one to two units, so it's fairly small communities for any specific dealer, but I believe that they are moving those units and I couldn't tell you offhand how many are there today.

Okay. In your prepared remarks, you reference that the current corn prices are below break even and just for a point of reference, are you referring to current cash prices, or are you referring to the, the 2009 new crop futures?

Current cash prices.

Okay. The Mexico -- the award with Mexico City, maybe you've disclosed this, but the number of miles or kilometers that covers?

No, we haven't disclosed that, and for competitive reasons, we're really not disclosing much more about that project. But we have not disclosed that.

If -- does that represent a -- I mean is there potential follow-on orders that could come with this, or is that -- I mean it seems relative to the size of Mexico City that, that would represent a relatively small contract. Is that -- am I thinking about that right, or is that potentially maxed out in that marketplace?

You're absolutely thinking about that right. I would think of it in terms of as we are doing this project in Mexico, there could be additional projects, this size, bigger or smaller, that will follow on. I think that as they see the benefits from a traffic mitigation standpoint, it's very likely we will see additional projects. And we found that in other markets as well.

You reference last couple of quarters the lower margin Snoline products versus the quick move barrier. What approximately is the spread between and how large is that spread on the margin basis?

Well, I don't want to specifically define a margin amount. I would just say that there is one element in the Snoline's product line -- sorry, one product line in their business which is the road marking tape business that is lower margin than what we would like to see in general in our infrastructure business. It's a lower margin product line and that one is the one that tends to drag down Snoline's margins from an overall product mix standpoint.

I think that's it. Thanks for your time. Oh, one more time.

Thank you.

One follow-up. On the steel, your image steel inventory costs are on a LIFO basis, is that correct?

Yes.

Okay. So did you see a charge in the past year on LIFO and could you see a credit in the next quarter or so?

At year end, we did not have a charge on LIFO, and we evaluate that on a quarterly basis and we continue, due to the seasonality of the business and inventories picking up in the middle of the year. We track it on a quarterly basis, but we have full intentions of getting the inventory levels back to intentions of getting the inventory levels back to prior year levels and minimizing that potential charge.

Okay, great. Thank you.

Thank you.

Our next question will come from the line of Steve Gambuzza with Longbow Capital.

Good morning.

Good morning.

I just wanted to clarify or follow up on one of the earlier questions asked regarding the impact of lower steel prices on margins. And I think you said earlier that steel is approximately 30% of cost of goods sold.

Yes.

Is that correct?

30, 33 -- about a third of cost of goods sold, yes.

In general, should we assume, all things being equal, that whatever the difference between, any decline in steel prices is generally passed on roughly dollar for dollar to your customers?

We have not -- well, I'll back up. As steel was going up, we were passing on increases. Yes, that's correct. And what we -- I would say that what we've seen in the market today is not dollar for dollar passing decreases. And I also would caution of going too far with that because we also hear indications from steel mills that steel may be rising. So I anticipate that we could see steel prices coming back up some, so I'm certainly cautious about taking actions that are going to reduce pricing significantly and the only reason that we would do that at this point is to meet competitive conditions.

Sure. So it sounds like things on the way down so far, pricing has been stickier on the way down in terms of, in terms of average selling prices versus spot steel prices?

Through the first quarter, that is correct.

Okay.

We have seen some movement in the last few weeks with one competitor. However, it has been a fairly sticky in general as steel moved down.

And in your experience running this business in prior cycles, has the -- obviously we haven't had maybe as much volatility in steel prices, but, has that generally -- has that dynamic kind of generally played out throughout the cycle?

I honestly could not define that, Steven, because we have not seen a dynamic like this. What we have seen is very stable steel prices up till about 2004 when steel doubled and then doubled again in about 2008 time period. So we really haven't seen a period of steel dropping like it has recently, at least not in my tenure with the Company.

And in terms of, just so I can get a better feel for the competitive dynamic and the irrigation side, is it pretty much kind of an oligopoly, in terms of it's only kind of four or five major competitors you're going against on any large order?

For the most part, yes. If you look at the domestic market, there's really three or four players. In the international markets, it does change a bit and some markets will have 6 to 8 and other markets, it may be three. So it will vary in the international markets, but in general, yes.

Okay, thank you.

Thank you.

Our next question will come from the line of Jeff Moore with Hunter.

Thank you for taking my questions. Actually I have two questions. Actually I have two questions. The first, at year end 2008, you had a $13 million of your backlog that represented dealer inventory. I'm wondering how much of the current backlog is dealer inventory.

First of all, I don't know if that, if that number is correct. For 2008 representing dealer inventory, I couldn't say that that is correct. That sounds high, but I would doubt that there is much -- well, first of all, we don't have dealer inventory in our backlog unless it's a dealer stock order, hard order that they are going to place to put into stock. And in our current backlog, we have many dealer orders, but they are primarily for specific customers.

Okay. I'm just reading off Page 22 in your 10(K). Maybe I'm misreading it, where it says that approximately $13 million of the order backlog represents orders from dealers for inventory.

Okay. No, I just don't have that--

Is that a different--

No, that's very possible. I don't have that in front of me.

Okay.

But that would mean that that was the dealer stock orders at that point in time where they were going -- where dealers had placed orders to take into stock in anticipation of the season. Now, that would have been pre-season kind of build. We wouldn't have much, if any dealer stock orders in our backlog at this time that I'm aware of.

Okay. Thank you. And my second question is kind of a follow-on. I'm just trying to understand your accounts receivable in their cycle.

Yes.

Going back to that statement, it said that payment is collected by the earlier of 30-days after the units are sold to growers, or February 28 of 2009. I guess I'm wondering when I look at your accounts receivable, and it looks like they are up about 80% from the fourth quarter of '07, I'm just wondering if you could talk through kind of how those receivables work and why they have gotten so large on a relative basis.

Yes. Well, first, I'll let Tim describe our general payables terms, but I would sad that that reference that you are referring back to, or that comment is in regard to the dealer stock inventory piece only, which means when dealers take, or place orders for dealer stock, the terms are it's an actual sale. We don't own the inventory, but we do give them extended terms or dating on the receivable and that would amount to them paying for the dealer stock 30 days after they sell it or at the latest, the end of February. And that's on dealer stock units only. Now, the typical order that we receive, which is for a general customer and specified to a customer, those terms would not apply.

Those terms are 30-day terms. And then that's when you would see the quick recycle of generating the cash.

So there is a portion of that receivable that would stay on our books until, say, that February time period if it is a dealer stock unit that has not been sold yet.

Okay, so the 84 million that you have in receivables at the moment, could you just -- could you just speak more generally about that. How much of that goes to irrigation versus infrastructure and is all of that 30-day payable and then what are the terms on that?

While Tim is looking for some detail to be able to split that out, I don't have that offhand. That may be a question we could help you with in follow-up.

Yes, that would be great.

Tim, do you have a split-out on the receivables between, say -- just for irrigation, how much of that is irrigation in total?

Irrigation piece--

Just roughly. We don't need to get defined. This is not a part of what we split in the segment reporting, but just kind of an approximate basis, is it 80/20?

Approximately 50 million.

Of the 84.

84 million, yes.

So approximately 50 of the 84 is irrigation and I couldn't tell you how much of that is specifically related to, say, the dealer stock that's going to be paid at the end of February. I don't know that offhand.

Okay. Thanks, thanks for your time.

Yes, thank you.

And we have no further questions at this time. You may continue with your presentation or any closing remarks.

For our business overall the global long-term drivers of water conservation, population growth, increasing importance of biofuels, and improvements in infrastructure 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. I would like to thank you for your questions and participation in this call today. We wish you all an enjoyable holiday season and Happy New Year. Thank you.

Ladies and gentlemen, this does conclude today's Lindsay first quarter 2009 conference call. You may all disconnect.